Five month gap held not to prevent TUPE transfer

Summary

The Court of Justice of the European Union (CJEU) has held in Colino Siguenza v Ayuntamiento de Valladolid that a five month gap did not prevent a TUPE transfer. This case concerned the EU Directive which is implemented into UK law through TUPE, and so the principles are the same.

TUPE

The Transfer of Undertakings (Protection of Employment) Regulations 2006, more commonly known as TUPE, is the legal framework which protects employees when they are affected by a “relevant transfer”. The employees will automatically transfer to the transferee business on their existing terms, with a few exceptions. A relevant transfer may be a business transfer or a service provision change.

Business transfer

A transfer of a business, undertaking or part of a business or undertaking where there is a transfer of an economic entity that retains its identity.

Service provision change
  1. Where a client ceases to carry out work on its own behalf and assigns the work to a contractor;
  2. Where a client engaging a contractor to do work on its behalf, reassigns the contract to another contractor;
  3. Where a client engaging a contractor to do work on its behalf brings the work "in-house";

The employees shall automatically transfer and shall not be dismissed by reason of the transfer, unless the reason is an economic, technical or organisational reason.

Facts

The Claimant, a music teacher, was employed by the Respondent School in Spain. A contractor managed the Respondent School from 1997 and employed many of its employees including the Claimant. The contract between the Respondent School and the Contractor was terminated in 2013 after a dispute between the parties. Due to financial struggles, the Contractor decided to collectively dismiss its entire staff, including the Claimant, and then it was declared insolvent a few months later.

In the meantime, the Respondent School reassigned the management of the school to another contractor, In-pulso Musical, who took on the management five months after the Contractor ceased its services. In-pulso Musical did not employ any of the individuals dismissed by the Contractor. The Claimant issued a complaint, claiming that there was a “relevant transfer” to In-pulso Musical and that he was protected under the TUPE provisions.

Outcome

The CJEU determined that a “relevant transfer” had taken place i.e. a transfer of a business. The CJEU noted that the temporary suspension of a few months did not prevent a transfer as defined under TUPE and took into account that three out of the five months were in fact the school holidays.

The final decision will be determined by the Spanish Courts where the claim was initially heard.

Implications for employers

This decision is particularly relevant to schools, as it shows that a TUPE transfer may still take place where a gap between the cessation and reassignment of services is a considerable amount of time, but includes the school holidays. There is various case-law which relates to the temporary cessation of activities and whether or not the identity of the economic entity has been retained (which is a requirement under TUPE for a business transfer to arise). It is clear from previous case-law that, where there has been a temporary cessation of activities, the decision will turn of the individual facts of the case. However, it is important to stress, that in previous case-law the cessation is usually temporary and, after the change of owner, the undertaking retains its identity.

The law and practice referred to in this article or webinar has been paraphrased or summarised. It might not be up-to-date with changes in the law and we do not guarantee the accuracy of any information provided at the time of reading. It should not be construed or relied upon as legal advice in relation to a specific set of circumstances.

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