In Securitas — Serviços e Tecnologia de Segurança SA v ICTS Portugal — Consultadoria de Aviação Comercial SA, Arthur George Resendes and Others (Case C-200/16) the European Court considered the application of the rules under the Acquired Rights Directive to a situation where a client terminated a security contract and awarded it to a new provider, but where the new provider declined to take on the old employer’s employees.

In UK law, as we know, under Regulation 3(1)(b) of TUPE, a service provision change TUPE transfer occurs simply when activities previously carried out by one legal person are taken over and are carried out, instead, by a different legal person. Thus, in UK Law, provided that there is, before this change-over, an organised grouping of employees, the principal purpose of which is to carry out the activities concerned on behalf of the client, the mere loss of a contract and the taking over of that contract by a new contractor amounts to a transfer of an undertaking. This is irrespective of whether assets are transferred from the old employer to the new employer and irrespective of whether the new employer wishes to take on the old employer’s workforce. Under European Law, it is different. Under the principle in Ayse Süzen v Zehnacker Gebäudereinigung GmbH Krankenhausservice (Case C-13/95), there will only be a transfer of an undertaking for the purposes of the Acquired Rights Directive if there is a transfer of significant tangible or intangible assets from the old employer to the new employer or, failing that, a voluntary taking over by the new employer of a major part of the workforce in terms of numbers and skills. If the service is asset reliant, whether there is a transfer, under European Law, will depend on whether the assets used by the old employer are transferred to the new employer. Conversely, if the service is labour intensive, whether there will be a transfer will depend, largely, on a transfer of a major part of the workforce in terms of numbers and skills.

In Securitas the facts were that ICTS was a contractor performing security guard services on behalf of its client, Portos Dos Açores (located in Ponta Delgada in Portugal). The security services required, were to look after the facilities in the port, including its dock and marina. The services included monitoring the entry and exit of persons and goods by means of radio surveillance devices. The security personnel employed by ICTS were also provided with uniforms and radio equipment. In January 2013 Portos Dos Açores decided to retender the security services and, in April, awarded the contract to Securitas in place of ICTS. The employees of ICTS were informed that they would be transferring to Securitas. A material fact was that one of the employees of ICTS surrendered the radio equipment used by ICTS in the port facilities having received instructions from ICTS to do so. Apparently Securitas then surrendered that equipment to the client. Securitas then began performing security guard services but it informed the ICTS employees, including Mr Resendes, that they were not required, and that they were still employees of ICTS. The employees brought an action before the local labour tribunal asking for clarification. The tribunal held there had been a transfer of a business between the two contractors and the employment contracts of the ICTS employees had been transferred to Securitas. Accordingly, they were successful in achieving a financial claim for their wrongful dismissal. Securitas appealed, first to the Court of Appeal in Lisbon and, secondly, to the Supreme Court in Portugal, which referred the issue of whether there had been a transfer to the European Court for an opinion.

Another issue for consideration is that the national collective agreement in the security industry purported to reject the idea of a transfer of an undertaking on the loss by a contractor of a contract in favour of a new contractor. Thus, clause 13(2) of the collective agreement, concluded by the Association of Private Security Undertakings, the National Association of Security Undertakings and various trade unions stated that: “the loss of a customer by an operator following the award of a service contract to another operator shall not fall within the concept of a transfer of an undertaking or business”.

Was this provision in breach of European Law?

In considering the transfer of undertakings point, the Court confirmed that the directive does not rule out a transfer of an undertaking on a service provision change, since there need be no direct contractual relationship between a transferor and a transferee. But whether there is a transfer of an undertaking in all the circumstances depends on the usual factors relied upon by the Court and will depend on the type of undertaking or business concerned. Where, for example, the activity being carried out is essentially based on manpower, the identity of the economic entity cannot be retained if the majority of its employees are not taken over by the putative transferee. But where the activity is based essentially on equipment, the fact that former employees of the undertaking are not taken over by the new contractor (as was the case here) does not preclude a transfer of an undertaking where assets, or use of those assets, are transferred from the transferor to the transferee.

In this case, therefore, it would be for the national court in Portugal to determine whether ICTS did transfer to Securitas, directly or indirectly, equipment or tangible or intangible assets for the purposes of carrying out the security guard activities in question. If they did, and they were taken over, directly or indirectly by the new provider, a transfer of an undertaking would occur. The Court pointed out however, that it would only be the equipment that was actually used in order to provide the security guard services that would be relevant in this regard and that would exclude the facilities themselves that were the subject of the security services. In other words, if a new contractor comes in to replace a former contractor in a building, the fact that the contractor is now “using” and protecting the building will not be the deciding factor. It is a question of whether there is equipment necessary to carry out those security services which has been transferred from the former provider to the new provider. If therefore, in this case, the national court determined that equipment necessary to carry out security services was transferred directly or indirectly from the old provider to the new provider, a transfer of an undertaking would occur, irrespective of whether the staff were taken over.

On the question of whether the provision of the national collective agreement excluded such a possibility, the Court ruled that it could not. It is true that the mere loss by the contractor of a customer, to another customer did not of itself fall within the concept of a transfer of an undertaking. However, as the Court explained in this case, all of the facts characterising the transaction in question have to be taken into consideration, including whether the service is asset reliant. In such circumstances there could be a transfer of an undertaking on the loss of a contract. Therefore, the provision in the collective agreement which purported to exclude the transfer provisions in all cases of loss of a contract was not permissible and the terms of the directive could not be excluded by such a provision.