TUPE: Splitting a contract post transfer may mean splitting the employee’s hours between multiple transferees

In ISS Facilities Services NV v Govaerts and Atalian NV case C-344/18 CJEU the European Court of Justice (ECJ) revisited the question as to what happens to an employee when a services contract is split between multiple transferees.

Previous position

Since 2008 (Kimberley Group Housing Ltd v Mr D Hambley and ors [2008] IRLR 682) we have been guided by the principle that an employee assigned to a contract will transfer with to the transferee awarded the bulk of their activities. If, however, the services are too fragmented so it is not clear where the employee’s work will be transferred, TUPE does not apply (Clearsprings v Ankers and others [2009] UKEAT 0054-08-2402). The main disadvantage of this position is that a transfer is burdened with potentially a full-time employee with a contract and income to cover only a fraction of their time.

The facts in this case

Ms Govaerts was employed by ISS as project manager of the three areas of work corresponding to three Lots. When the city of Ghent re-tendered the three Lots in 2013, Lots 1 and 3 were awarded to Atalian, while Lot 2 was awarded to Cleaning Masters NV.

As 85% of Ms Govaerts’ work was managing Lots 1 and 3, ISS informed Ms Govaerts that, because she was principally employed to work on Lots 1 and 3, she would transfer with that work to Atalian. Atalian disagreed that TUPE applied and Ms Govaerts’ employment terminated on transfer.

Questions for the Court

The matter progressed through the Belgian Labour courts and the ECJ was asked to consider the following questions as to the effects of the transfer of undertaking on Ms Govaerts’ contract of employment:

  • Transfer in proportion: should liability for the employee transfer to each of the transferees in proportion to their work acquired by each of the transferees; or
  • Transfer to transferee where employee is principally employed: should the employee transfer to the transferee acquiring the part of the undertaking in which the employee was principally employed; or
  • No transfer: should there be no transfer to any transferee of the employee, which would also be the case if it is not possible to determine separately the extent of the employee’s employment in each of the transferred parts of the undertaking.

Judgment

The ECJ stated that the principal purpose of Directive 2001/23/EC (the Directive) is to safeguard the employee’s rights. The ECJ also emphasized that those employee rights should be balanced with the interests of the transferee and its right to make changes necessary to run its business.

The ECJ held that:

  • Article 3(1) of the Directive must be interpreted as meaning that the rights and obligations arising from a contract of employment are transferred to each of the transferees, in proportion to the tasks performed by the employee concerned, provided that the division of the contract of employment is possible and neither causes a worsening of working conditions nor adversely affects the safeguarding of the rights of employees.
  • The rules on dividing the employee’s role are to be determined on national level. Consideration may be given to the economic value of the lots to which the employee is assigned or the time that the employee devotes to each lot.
  • Dividing the employee’s role could result in splitting one full-time contract into several part-time contracts.
  • A transfer in proportion makes it possible to ensure a fair balance between protection of interests of employees and protection of interests of transferees since the employee’s rights are safeguarded and the transferee is not burdened with obligations greater than those entailed by the transfer to them of the undertaking in question.
  • The caveat is that if the division of the contract of employment proves impossible or is detrimental to the employee’s rights, that contract may be terminated and the termination must be regarded as the responsibility of the transferee(s), even when that termination has been initiated by the employee.

How will this affect the UK?

The decision has considerable implications. Apportioning rights and obligations between transferees may be practicable in some service level agreements where the employees are performing hourly paid roles or, for example, roles which are easy to apportion in terms of hours worked such as cleaning jobs. This will not, however, be easily achievable in, for example, managerial roles and the transferees may often find themselves liable for the consequent termination of the employment relationship.

Even if the hours of service can be easily split, other practical difficulties are likely to arise such as reconciling part-time working schedules or annual leave entitlement which may differ across the transferees.

It is likely in practice that in most cases where there is a transfer to multiple parties, the resulting attempts to apportion the employees hours across the parties will be detrimental to employee rights.

Careful consideration of potential employee liabilities should be factored into any tender for a contract, which is likely to or has the potential to be split across several parties.

The full ECJ judgment is available here.

This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any of the issues raised in this [article][blog], please contact us today by telephone or email  enquiries@sharpepritchard.co.uk.

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