by Breda O'Malley August-22-2019 in Employment Law
Has a transfer occurred? The Spijkers Criteria
In the Spijkers decision[1], the ECJ set out factors to enable parties to determine the existence of a transfer of an undertaking which included:
- the type of undertaking/business concerned;
- whether the undertaking’s tangible assets (such as buildings and equipment) transferred;
- the value of its intangible assets at the time of the transfer;
- whether the majority of its employees were taken over by the new employer;
- whether its customers were transferred;
- the degree of similarity between the activities carried on before and after the transfer; and
- the period, if any, for which those activities were suspended.
Do the Transfer Regulations apply to a change of service providers?
The Süzen[2] case provided that a change of service providers does not automatically result in a “transfer” under the Directive.
However, the Directive can apply to a change of service providers in the following circumstances:
- Where the undertaking transferring is labour intensive, the determining factor is whether a major part of the workforce, in terms of numbers and skills, is to transfer.
- If the undertaking is asset reliant, the determining factor is whether the majority of significant assets transfer. It is unnecessary for ownership of such assets to transfer. Transfer of the use of the assets alone may be sufficient.
In addition, Süzen established that all of the circumstances of the transfer should be considered when determining whether an undertaking retains its identity.
Difficulties with the principles established by Süzen
Although the guidance set out in Süzen might appear straightforward, it can produce results which are at odds with the aim of the Transfer Regulations.
In an asset reliant undertaking, if there is no transfer of a majority of significant assets, the Directive has been deemed not to apply. In Oy Liikenne,[3] the ECJ found that the activity of bus transport was asset reliant and in the absence of a transfer of tangible assets, which contributed significantly to the performance of the activity, the undertaking transferring did not retain its identity and the Directive did not apply.
Where an undertaking is labour intensive, the new service provider might decide that no employees are to transfer, which can result in the disapplication of the Transfer Regulations. This was followed recently in Ireland in A Security Officer v A Security Company [4]. However, there can be risks where the refusal to accept the transfer of employees is motivated simply by a desire to deliberately avoid the application of the Transfer Regulations. In the UK case of ECM (Vehicle Delivery Service) v Cox,[5] the UK EAT found that the UK equivalent of the Transfer Regulations did in fact apply to a labour intensive undertaking, notwithstanding the fact that no employees were accepted by the new service provider.
The application of Süzen moving forward
A recent Advocate General opinion attempts to reframe the assessment of whether an undertaking retains its identity post transfer. Pohle[6]concerned the transfer of a contract to provide public bus services from one service provider, SBN, to another, OSL. OSL did not purchase, lease or use any of SBN’s buses or other assets.
The complainant bus drivers argued that their employment ought to have automatically transferred from SBN to OSL. OSL argued that the Oy Liikenne case should be followed, and that therefore the Directive ought not to apply as the undertaking in question was asset reliant and no tangible assets transferred.
The Advocate General indicated that the following factors should be considered in determining whether an undertaking retains its identity:
- full account should be taken of the main objective of the Directive, being protection of employees’ rights;
- all facts and circumstances should be assessed including legal, technical and environmental constraints relating to the operation of the activity in question; and
- the fact that significant tangible assets have not transferred is relevant but, not necessarily determinative.
The Advocate General noted that the reason that buses did not transfer was that it was not commercially viable for OSL to take on SBN’s buses as they were unsuitable due to new legal requirements and more stringent environmental standards. In light of this, he stated the assets should be “disregard[ed]” in assessing whether the Directive applies.
The key learning from the Advocate General’s opinion is that even in an asset reliant undertaking, it is not just a question of whether the assets are being transferred to the new employer. Relevant too is the reason why key assets are not being transferred to the new employer.
Where to next
Pohle is yet to be determined by the CJEU and is a case to watch, as it may well impact transfers going forward.
[1] Jozef Maria Antonius Spijkers v Gebroeders Benedik Abattoir CV and Alfred Benedik en Zonen BV C-24/85 (1986)
[2] Ayse Süzen v Zehnacker Gebäudereinigung GmbH Krankenhausservice C-13/95 (1997)
[3] Oy Liikenne Ab v Pekka Liskojärvi and Pentti Juntune C-172/99 (2001)
[4] A Security Officer v A Security Company ADJ - 00013565 (2019)
[5] ECM (Vehicle Delivery Service) v Cox [1998] IRLR 416
[6] Reiner Grafe and Jürgen Pohle v Südbrandenburger Nahverkehrs GmbH, OSL Bus GmbH (Opinion of Advocate General Sharpston) C-298/18 (2019)
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About the Author
Breda O'Malley
Breda is a partner in the Employment Law Team at Hayes solicitors.
Breda advises on the full range employment issues across a broad range of sectors, for established business clients and senior executives.