Outsourcing is usually defined as the process of contracting an existing business function which an organization previously performed internally to an independent organization, where the function is purchased as a service. At the opposite, when a company ceases to contract a business process and begins to perform it internally, it is called insourcing.

There are rules which protect employees if the business in which they are employed changes hands. The European Directive of 14 February 1977 on the harmonization of employees’ rights in case of transfers of undertakings, businesses or parts of businesses (the ‘Acquired Rights Directive’) has been transposed under Belgian law in the Collective Bargaining Agreement no. 32bis of 7 June 1985 (‘CBA 32bis’).

In the event of a transfer of undertaking within the meaning of CBA 32bis, the rights and obligations of the transferring employer arising from the employment contracts existing on the date of transfer are automatically transferred to the new employer. In other words, the new employer must take over those staff on their existing employment conditions (including remuneration, job status, acquired length of service, place of work and working conditions), without any specific formalities having to be complied with.

The applicability of the CBA 32bis is subject to the following conditions: (1) the transfer must result in a change of employer, (2) it must be the result of a contract, and (3) it must concern a transfer of an undertaking, a business or a part of an undertaking or a business. The first two conditions are very broadly interpreted by the European Court of Justice (‘ECJ’) and usually do not create any application problems. The fulfilment of the third condition, however, gives rise to a lot of case-law.

Pursuant to Article 1(1) (b) of the Acquired Rights Directive, a transfer is defined as ‘a transfer of an economic entity which retains its identity, meaning an organized grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary.’

On 7 May 2012, the Court of Cassation found that there is a transfer within that meaning when the catering activities of a business school were first outsourced and then brought in again. The fact that most of the assets used for the catering activities remained the property of that business school has no impact thereon.

On 20 November 2003 (C-340-01), the ECJ already ruled that the catering activity could not be regarded as an activity based essentially on manpower since it requires a significant amount of equipment. The Court, however, continued that the transfer of actual ownership of assets is unnecessary for the transfer of an undertaking to be deemed to have occurred. The mere use of ‘substantial parts’ of the tangible assets previously used by the first contractor and subsequently made available by the contracting authority to another one, sufficed for a transfer to fall under the Acquired Rights Directive. (NRO)

The case can be found on http://www.juridat.be