TUPE: ECJ rules that employment contract can be split between multiple transferees on transfer

In a somewhat surprising decision, the European Court of Justice (the ECJ) has ruled that the employment contract of a transferring worker may be split between multiple transferees, in proportion to the tasks performed by that worker. This blog considers the case of ISS Facility Services v Govaerts in more detail.

Background

A company by the name of ISS provided cleaning services in the city of Ghent to the local Ghent authority. The service contract was divided into three lots. Ms Govaerts, the Claimant, was project manager for all three.

When the cleaning contract was put out to retender, two of the lots went to a company by the name of Atalian and the remaining lot was awarded to Cleaning Masters NV. ISS, who had just lost the contract, told Atalian that Ms Govaerts transferred to their employment pursuant to the Acquired Rights Directive (the ARD) (the Directive from which TUPE derives) because 85% of her work covered the two lots that they had taken over. Atalian did not agree that the ARD applied and asserted that they did not have a binding contract with Ms Govaerts. In November 2013, Ms Govaerts issued proceedings against both ISS and Atalian.

Decision

Having made its way through the Belgian Courts, the matter was referred to the ECJ. The ECJ held that Mrs Govaerts’ contract did in fact transfer on the retender on the basis that she would be 85% employed part-time by Atalian, and 15% employed part-time by Cleaning Masters NV. Transferring the rights and obligations arising from a contract of employment to each of the transferees, in proportion to the tasks performed by the worker, made it possible in principle to ensure a fair balance between the interests of the worker and the interests of the transferees.

However, the ECJ did note that the working conditions of the worker concerned should not become worse as a result of the transfer. In addition, where the division of the contract of employment proves to be impossible or entails a deterioration in the working conditions and rights of the worker, that contract may be terminated, and the termination must be regarded as the responsibility of the transferee(s), even if that termination was initiated by the worker.

Practical considerations

This is quite an extraordinary decision and, although not directly applicable in the UK, gives an indication of how matters may be determined in the future.

Under current UK case law, where there is a transfer involving multiple transferees, employment contracts are either transferred to the transferee which takes on the greater part of the activities carried out pre-transfer or there is no transfer as a result of the ‘fractionalisation’ of the services being performed. The decision in ISS Facility Services v Govaerts represents a departure from this view, with a shift towards splitting employment contracts between multiple transferees.

However, where splitting an employment contract entails a deterioration in the working conditions and rights of the worker (which is likely to be the case more often than not), the transferee(s) will be liable for the termination of that contract and consequently may find themselves facing an unfair dismissal claim.

In light of this decision, transferee employers should bear in mind their potential liabilities in respect of business transfers under TUPE.

If you wish to discuss this topic further or have any other questions, please contact Linky Trott or any member of the Employment team.

 

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