Five month cessation of economic activity does not preclude the existence of a TUPE transfer

Five month cessation of economic activity does not preclude the existence of a TUPE transfer

In Colino Sigüenza v Ayuntamiento de Valladolid and others (Case C-472/16), the European Court of Justice (ECJ) found that a relevant transfer within the meaning of the Acquired Rights Directive had potentially occurred despite a five month cessation of economic activity.

 

Facts

Ayuntamiento de Valladoid (“Ayuntamiento”) ran a municipal music school in Spain. The running of the school was outsourced to Musicos y Escuelas (“Musicos”). Following a sharp decline in pupil numbers and the school becoming unprofitable, Musicos dismissed all of its employees in April 2013, including Mr Sigüenza.  Ayuntamiento terminated its contract with Musicos and awarded a new contract to run the school to In-Pulso Musical Sociedad Cooperative (“In-Pulso”) with effect from September 2013, when the school reopened using the same facilities and equipment but hiring entirely new employees.

Mr Sigüenza brought a claim for unfair dismissal against Musicos, Ayuntamiento and In-Pulso on the grounds that there had been a relevant transfer from Musicos to In-Pulso and that transfer was the reason for his dismissal, making his dismissal automatically unfair.  The local court dismissed his claim and ruled that there had not been a relevant transfer because the activities had not recommenced until five months after the dismissals had occurred.  Mr Sigüenza appealed the decision.

Decision

The ECJ found that the circumstances were still capable of being a relevant transfer.  While the closure of the school for such a long period of time was relevant to the question of whether there had been a relevant transfer, because it may indicate the absence of an organised grouping of employees, it was not determinative.  It was significant that the school would have been closed for three of those five months in any event as a result of the annual school holidays.

Given that Mr Sigüenza’s dismissal took place a significant time before the alleged transfer, and the primary reason for the dismissal had been that Musicos could no longer afford to pay its employees, it was likely that there was a genuine economical, technical or organisational reason for Mr Sigüenza’s dismissal entailing changes in the workforce.  As such, the ECJ found that, even if there had been a relevant transfer, Mr Sigüenza’s dismissal was probably not automatically unfair, although the Spanish Courts will make the final decision.

Comment

Although the ECJ applied the Acquired Rights Directive in this case, the same principles can be applied to domestic situations governed by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).  The case serves as a reminder that a temporary cessation in activities, and even a delay of a number of months, does not necessarily prevent there being a relevant transfer under TUPE.  

Contact our experts for further advice

View profile for Sarah TaylorSarah Taylor

Search our site