The European Court of Justice (ECJ) has decided that a transfer of an undertaking within the meaning of the Acquired Rights Directive (ARD) could have taken place notwithstanding a five-month gap in economic activity.
Colino Sigüenza v Ayuntamiento de Valladolid and others, ECJ (Case C-472/16)
The claimant, Mr Colino Sigüenza, worked as a music teacher at a Spanish music school, owned by the local authority but operated by a private company (Musicos). Following a fall in student numbers and a dispute with the local authority, in April 2013 Musicos dismissed all of its staff and ceased activities at the music school. Following a tender process, a contract to operate the school was awarded to In-pulso and the school reopened in September 2013. The same premises, instruments and resources were used but none of the previous teachers were recruited by In-pulso.
Mr Sigüenza and some of his colleagues brought claims for unfair dismissal against Musicos, In-pulso and the local authority, all of which failed. On appeal, the Spanish court referred the case to the ECJ to determine:
- whether there was a transfer of an undertaking for the purposes of the ARD
- if so, were the dismissals in April for ‘economic, technical or organisational’ (ETO) reasons entailing changes in the workforce, or were they caused by the transfer, and, therefore, void?
The ECJ has decided that the five month gap in economic activity did not preclude the existence of a transfer of an undertaking. The fact that an undertaking is temporarily closed and has no existing employees is a relevant factor but is not determinative, particularly as in this case, three of the five months were school holidays. Since this was an ‘asset reliant’ case (the musical instruments, facilities and premises being essential to the conduct of the economic activity), the fact that none of the workers had transferred did not mean that a transfer of an undertaking had not occurred. Whether there had been such a transfer was for the referring court to decide.
In relation to the question of whether the dismissals were for an ETO reason entailing changes to the workforce, it was necessary to take into account the objective circumstances of the dismissals. The reason for the dismissals was the fact that Musicos could no longer pay its staff, and the dismissals took place well before the date In-pulso took over the operation of the music school. In the ECJ’s view, these factors pointed towards the existence of an ETO reason for the dismissals.
In domestic case law, it is already well accepted that a temporary cessation of activities does not preclude the existence of a TUPE transfer. In the context of a service provision change, the ‘organised grouping of employees’ does not have to be engaged in the activity immediately before the transfer. It will depend on the circumstances in each case but the purpose, nature and length of the cessation are all relevant in determining whether or not the organised grouping of employees continues to exist.