Employment Law Speed Read – 03/09/18
3rd September, 2018
This week we look at a European Court of Justice decision concerning the Acquired Rights Directive.
In Colino Sigüenza v Ayuntamiento de Valladolid and others the European Court of Justice (ECJ) decided that a transfer of an undertaking for the purposes of the Acquired Rights Directive (the ARD) (2001/23/EC) had potentially occurred where there had been a five month closure of the school before it was taken over by another entity.
The Claimant, Mrs Sigüenza, was a music teacher who worked for a public music school in Spain.
In April 2013, the company contracted to run the school, Musico, dismissed all of the school’s staff and ceased all activities.
In September 2013, a new contractor, In-Pulso, took over the running of the school. In-Pulso hired new staff but ran the school using the same resources and in the same premises.
Mrs Sigüenza brought an unfair dismissal claim against both companies and the public authority. However the Spanish court held that there had been no transfer of undertaking as there was a five month gap between the dismissal and the music school’s activities resuming.
Mrs Sigüenza appealed with the appellate court referring the question on whether there had been a transfer of an undertaking to the ECJ.
European Court of Justice
The ECJ held that the facts of the case meant that it could fall within the definition of a transfer of an economic entity under the ARD.
In coming to this decision, the ECJ recognised that all of the resources that Musico and subsequently In-Pulso had used, were an essential part of conducting the economic activity of the management of the school.
The ECJ held that it was irrelevant that the local authority retained ownership of the tangible assets and that the undertaking was temporarily closed at the time of the transfer.
Of particular note to the ECJ was that out of the 5 months that the school was closed, 3 of these fell over the summer holidays when the school would have been shut in any event.
However, despite the ECJ finding that on the facts of the case it was possible that there was a transfer, Mrs Sigüenza’s dismissal appeared to be for an Economic Technical or Organisational (ETO) reason.
The ECJ noted that Mrs Sigüenza was dismissed because Musico could no longer pay its staff and that her dismissal had happened well before the transfer. On this basis, the reason for Mrs Sigüenza’s dismissal was not the transfer itself but because of an ETO reason entailing changes in the work force.
Consequently, Mrs Sigüenza’s employment was not protected by the ARD.
However, the ECJ left the question of whether there had been a deliberate delay in In-Pulso taking over the contract to avoid the effects of the ADR for the Spanish Courts to determine.
Although this case did not deal with our domestic law, the ECJ’s approach is consistent with how the domestic courts would have decided the case.
The Employment Appeal Tribunal has previously held that a temporary cessation of activities before a service provision change does not preclude an employee from being found to be in an “organised grouping of employees” which is necessary for TUPE protection.
However, the length and nature of the cessation may be relevant in determining whether this organised group of employees continued in existence after the service provision change, and consequently whether they are protected by TUPE.
If you have any questions on the above and how it will affect you, please do not hesitate to get in touch with a member of our employment team.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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