TUPE: Can an employment contract be split between multiple new employers?

In a surprising decision, the European Court of Justice (ECJ) has held that the answer is yes.

Giving its view on the Belgian case of ISS Facility Services NV v Sonia Govaerts and Atalian NV the ECJ ruled that where an undertaking is fragmented and transfers to multiple transferees, an employee’s contract can also be split up, and employment divided between several new employers.

It should be noted, however, that this decision applies to good old fashioned business / undertaking transfers and not to the “new” (2006!) entirely UK-domestic construct of Service Provision Change transfers, which do not specifically appear in the European Directive. See “Comment” below for further reflections on this differential.

What happened?

The claimant, Ms Govaerts was employed by ISS to project manage the cleaning and maintenance of public buildings in the city of Ghent. The work was divided up into three lots. Lot 1 comprised the museums and historical buildings; Lot 2 comprised the libraries and community centres; and Lot 3 comprised the administrative buildings. Ms Govearts worked on all three lots.

When the services were put out to retender, ISS was unsuccessful. Lots 1 and 3 were awarded to one contractor (Atalian) while Lot 2 went to a different contractor (Cleaning Masters NV).

Ms Govaerts was assigned approximately 85% to Lots 1 and 3, and 15% to Lot 2. Her employer ISS informed her that she would transfer to Atalian, but the contractor disputed this.

The Belgian domestic court sought a view from the ECJ on what should happen to Ms Govearts’ employment contract.

The decision

The ECJ agreed with the Belgian Courts that a relevant transfer had taken place. However, it noted that the Acquired Rights Directive (the relevant piece of EU law that governs business transfers) does not specifically envisage a situation involving multiple transferees.

It considered that the purpose of the legislation is to safeguard employees and provide continuity of employment. However, a fair balance must be struck with the rights of the transferee, which needs to carry on business and needs to make sure that any transfer is commercially viable.

The ECJ held that, for Ms Govaerts to transfer solely to Atalian, because she performed her principal tasks for them, would not be fair to that contractor, which would be inheriting a full-time employee, but only inheriting part of her work. On the other hand, is she failed to transfer at all, to either Atalian or Cleaning Masters, Ms Govearts would lose her employment.

Instead, the ECJ arrived at a compromise position. Ms Govaerts’ employment should transfer to both Atalian and Cleaning Masters in proportion to the tasks she performed for them. Her employment rights were safeguarded, and each contractor only assumed responsibilities proportionate to the amount of new work they had taken on. The ECJ stated that national courts should decide exactly how, and according to what criteria, that division should take place.

What does this mean for me?

This unorthodox decision immediately raises a number of problematic practical issues. If, for example, a full time contract is split up in to a number of separate part time contracts for different employers, how in practice will the employee split their time? Working for multiple employers is unlikely to be an attractive prospect for the transferring employee, and in most cases will be detrimental to his or her working conditions.

In these circumstances, the ECJ suggests that the employee could refuse the arrangement by resigning, and that the transferees would then, in accordance with the transfer of legal obligations provisions of the Directive, bear responsibility for the termination but, says the ECJ, only to the extent of the relevant proportion of the employment they would have otherwise inherited. Alternatively, the transferee(s) could dismiss the employee. In either case, this seems a heavy burden for the transferee(s), who would potentially be liable for notice payments, redundancy payments and the cost of any unfair dismissal claims.

Comment

It is important to note that this approach is very different from the position taken by the UK courts, which have previously rejected such a dividing up of employment upon transfer. The current position in UK law is that either;

• the majority of the work passes to one employer ( who thus becomes the transferee) and so the employees who are assigned to that work transfer to that transferee; OR
• the majority of the work does not go to one employer or the employee is not assigned to that work and so does not transfer at all (likely being made redundant by the transferor).

It will be interesting to see how the UK courts apply and interpret this ECJ decision going forward, especially in relation to transfers which satisfy both definitions of a business / undertaking transfer and a service provision change. Of course, any government decisions or agreements on the status and applicability of EU law in the UK, following the end of the Brexit transition period on 31 December 2020 are likely to impact this.

In the meantime, it seems, we return to the familiar TUPE state of affairs: flux, complexity and uncertainty! It is more important than ever for transferee employers to make sure that their contractual agreements with the transferor include adequate protection against any liabilities they may inherit as a result of a transfer.

Read the full decision of the ECJ.