Employees assigned to an undertaking which is fragmented upon transfer can be transferred to multiple new employers under TUPE

Employees assigned to an undertaking which is fragmented upon transfer can be transferred to multiple new employers under TUPE

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Summary

In the case of ISS Facility Services NV v Sonia Govaerts & Atalian NV, formerly Euroclean NV, the Court of Justice of the European Union (CJEU) has held that where an undertaking is transferred to multiple transferees, the employment of the employees who work in that undertaking can transfer pro-rata to multiple new employers.

Background

The Claimant was a project manager for ISS Facility Services NV (ISS) which provided cleaning services to the city of Ghent. The work was divided into three ‘lots’ and the Claimant worked across all three. The contract was put out to tender and ISS lost the work. Lots 1 and 3 were awarded to Atalian NV (Atalian), and Lot 2 was awarded to Cleaning Masters NV. ISS determined that the Claimant’s employment would transfer to Atalian, as they were taking on the majority of the work, but Atalian disputed this and stated that the Claimant’s contract of employment had not transferred to them.

The Claimant brought claims against both ISS and Atalian which were heard first in the Ghent Labour Court and then in the Higher Labour Court. The Higher Labour Court asked the CJEU to determine what should happen to an employee's contract of employment when the undertaking in which they work transfers to multiple transferees.

Decision

The CJEU determined that an employee’s contract of employment can transfer to each transferee in proportion to the tasks performed by that employee, provided that such a division is possible and that the individual’s rights and/or working conditions are not adversely affected. If division is not possible or the individual’s rights and/or working conditions are adversely affected by the change then the contract may be terminated. Any claims resulting from such termination will be the responsibility of the new employer(s) even if it is the individual who brings their employment to an end. 

Comment

This decision directly contradicts the leading UK judgment on this point, which stated that where there are multiple transferees, the employees should transfer to the employer that has taken on the majority of the work. The implications of this decision could be significant for UK employers, as it may lead to a change in the tribunal's approach to similar cases in future.

Fragmentation on a service provision change is already a thorny issue. This case potentially makes this situation even more tricky. It is not always going to be straightforward to identify which employees have transferred to which new employer and in what proportion. It also seems highly likely that an employee’s rights and working conditions would be adversely affected by having their employment split between different employers. The ECJ said that in this case, the employee’s employment would terminate. In the event that an individual’s employment terminates, such termination may be automatically unfair under TUPE. However, it may be possible for the new employer(s) to defend such a claim if they can establish an economic, technical or organisational reason for the termination, which can include redundancy.

In the event that an organisation is taking on employees via a TUPE transfer where, as in this case, the services are being divided between multiple transferees, it will be important for the new employer(s) to consider this issue early on. Ideally, new employer(s) should try to reach an agreement prior to the transfer on which employees will transfer and in which proportions. If their negotiating position permits, they should seek to obtain appropriate indemnities to protect themselves in the event of claims. Where an employer is taking on the majority of the services, they could use this case to seek to negotiate a reduction in their post-transfer employment-related liabilities.

 

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