Can employees assigned to an undertaking which is fragmented upon transfer be transferred to multiple transferees?
In ISS Facility Services v Govaerts the European Court of Justice (ECJ) have revisited the issue on what happens to an employee where a services contract is split between multiple employers.
We have been guided by the principle that an employee assigned to an undertaking will transfer to the transferee awarded the bulk of the activities which the employee carries out. Where the services become too fragmented, TUPE does not apply.
Facts in this case
ISS was responsible for the cleaning and maintenance of various buildings in Ghent. These were divided into three lots. Ms Govaerts was project manager for all three lots.
Following a tender process ISS lost the contracts. Lots 1 and 3 were awarded to Atalian NV (to which Ms Govaerts was 85% assigned), and Lot 2 was awarded to Cleaning Masters NV (to which Ms Govaerts was 15% assigned).
ISS informed Ms Govaerts that her employment would transfer to Atalian; being the majority of where she was employed. Atalian disputed this.
Ms Govaerts issued proceedings. The Belgian courts took the view that the transfer qualified as a transfer of an undertaking and asked the ECJ to rule on whether Ms Govaerts’ employment should be split between both new contractors or whether it should transfer to Atalian, who acquired the lots on which she was mainly employed.
Surprisingly, the ECJ held that the Acquired Rights Directive (ARD) did not prevent an employee’s contract of employment being split into part-time contracts, each in proportion to the tasks performed by the employee. However, this will only occur if such a division is possible and does not result in the working conditions of the employee becoming worse.
The ARD is transposed into UK national law by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (commonly known as TUPE). This case therefore potentially has significant implications for employers. It may lead to a change in the UK Employment Tribunal’s approach to similar cases in the future.
This approach will create potential logistical issues and may well give rise to an increase in disputes amongst transferring outgoing contractors and new transferees contractors. Given that the true transferees would be liable if the employment contract is terminated by reason of the transfer, whoever terminates the employment, so extra care will be needed. Any such dismissal of an employee with at least two years’ service would be automatically unfair, unless there is an economic, technical or organisational reason that also entails changes to the workforce.
Transferee employers involved in outsourcings and business acquisitions should factor in potential “split” employee liabilities and investigate carefully, and if possible negotiate adequate indemnity protection.
Should you wish to discuss anything covered in this article, please contact any member of the Employment Team.