In the case of ISS Facility Services NV v Sonia Govaerts & Atalian NV, formerly Euroclean NV, the ECJ has held that, where there is a relevant transfer of a business or undertaking to multiple transferees, the employees’ contracts of employment can be split so that the employees transfer to more than one employer.
Case Summary
ISS was contracted to clean and maintain certain buildings in Ghent, Belgium. The work was divided into three lots. Mrs Govaerts was the project manager for all three lots, although 85% of her workload related to Lots 1 and 3.
The contracts were retendered and awarded to two new contractors. Lots 1 and 3 were awarded to Atalian, with Lot 2 being awarded to a different contractor. ISS asserted that Mrs Govaerts would therefore transfer to Atalian, which Atalian disputed.
The Belgian courts considered that there had been a transfer of an undertaking under the Acquired Rights Directive, and as such Mrs Govaerts’ employment would transfer. However, they referred to the ECJ the question of whether her employment should be split between the two new contractors, or whether it should transfer only to Atalian (as it had acquired the Lots on which she was principally employed).
Judgement
Rather surprisingly, the ECJ held that where a transfer of an undertaking involves more than one transferee, the rights and obligations arising from a contract of employment will transfer to each of the transferees in proportion to the tasks performed by the worker. This could essentially result in splitting a full time contract into several part-time contracts.
The ECJ also found that if such a division of the contract is impossible, or if it adversely affects the rights or working conditions of the worker, then the transferee(s) would be regarded as being responsible for any consequent termination of the employment relationship (even if that termination was initiated by the worker).
Comment
This surprising and important ruling represents a significant departure from UK case law, which has previously rejected the concept that, where a business or undertaking is split into several parts following a relevant transfer, the rights and liabilities relating to employees who worked across more than one part of the business pre-transfer would be transferred to multiple transferees. Instead, it is generally the case that the employees will transfer with whichever part of the business to which they are most closely linked (which is ultimately a fact-specific question).
Whilst this case concerned the Acquired Rights Directive (which is implemented into UK law by the TUPE regulations), our courts and tribunals are required to interpret TUPE in such a way as to give effect to the general purpose of that directive (which is to safeguard employees' rights on the transfer of a business). This means that the ECJ’s decision may well lead to a change in how our courts and tribunals approach these cases. However, it is difficult to see how, on a practical level, an employee’s day-to-day work could be split between multiple employers without having an adverse impact on the employee. The ECJ offered little guidance on this point, stating that it would be up to the national courts to determine how such contracts would be divided.
Given the finding that transferees will be liable in the event of the termination of the employment contract (which would likely be automatically unfair on the basis that such termination was by reason of the transfer, unless an ETO reason could be successfully argued), it is important that transferees ensure that they have adequate indemnity protections in place.
Finally, it is arguable that the judgment is only relevant to “business transfers” under regulation 3(1)(a) of TUPE – service provision changes are likely to be unaffected by the judgment, as these are not covered by the Acquired Rights Directive (and are specific to UK law).
Insight from Debbie Fellows in Thorntons specialist Employment Law team. For more information contact Debbie or any member of the Employment team on 03330 430350.
