In this Update we report on the automatic unfair dismissal TUPE case of Hare Wines Ltd v Kaur. And we take the opportunity to note activity at European Court level on the EU Acquired Rights Directive.

TUPE and automatically unfair dismissals

In Hare Wines Ltd v Kaur [2019] EWCA Civ 216 the Court of Appeal (Underhill and Bean LJJ) has upheld the decision of the employment tribunal and the EAT (noted in our TUPE Update in October 2018) that the dismissal of an employee (Mrs Kaur) shortly before the transfer (because the new employer wanted to avoid employing her in view of ongoing difficulties in her working relationship with another employee) was by reason of the transfer, and hence automatically unfair.

Bean LJ delivered the main judgment and he considered there were just too many obstacles to the employer’s case.

First, the reason the employer originally gave for the termination of Mrs Kaur’s employment was false. It claimed Mrs Kaur had objected to the transfer and left voluntarily. The employment tribunal did not believe this. She had plainly been dismissed. That was not a good start for the employer’s appeal.

Secondly, agreeing with the EAT’s approach to the meaning of the case law behind Article 4 of the Acquired Rights Directive (which prohibits dismissals because of a transfer), it was clear from the European Court case of P Bork International C-101/87 [1989] IRLR 41 that an important factor which may be taken into account in deciding the reason for dismissal is its proximity to the transfer. The Court of Appeal noted that although proximity to the transfer is not conclusive, it is often strong evidence in the employee’s favour. Mrs Kaur’s dismissal was just days before the transfer.

Although it was true to say that the ongoing work relationship difficulties could be described as “personal” to Mrs Kaur, the Court of Appeal was (as was the EAT) influenced by the fact that the difficulties were long-standing and ongoing. Her difficulties did not arise just on the point of transfer and were not going to end just afterwards. In a situation where an employer had not taken action to resolve an ongoing relationship difficulty prior to the transfer, but does so only at the point of transfer by dismissing one of the parties in that difficult relationship, it is open to the tribunal to conclude that the reason for the dismissal was the transfer.

The Court rejected the employer’s contention that the reason for dismissal was “purely personal”. Thus: “the law of unfair dismissal or of transfer of undertakings does not recognise such a category, and I am not sure what the phrase means anyway” (Bean LJ.)

Activity at the European Court – Acquired Rights Directive

Was there a transfer of an Economic Entity? Ellinika Nafpigeia AE v Panagiotis Anagnostopoulos

On 27 November 2017 the Areios Pagos (the Supreme Court of Greece) lodged a referral to the Court of Justice in Ellinika Nafpigeia AE v Panagiotis Anagnostopoulos and Οthers (Case C-664/17). The broad facts of the case are that ENAE, a former public sector enterprise, now privatised, carried out ship repair and construction activities. It was split into four production “divisions”. It subsequently created a subsidiary, Etaira Trochaiou Ylikou Ellados AE (EYTE) to transfer to it certain programmes and activities. This was anticipated to be time limited and the ultimate liquidation of EYTE was contemplated by the parties. The referral raises issues of whether there was a transfer of an economic entity and whether loss of organisational autonomy affected this (see Klarenberg v Ferrotron Technologies GmbH C-466/07 [2009] All ER (D) 133 (Feb)) and whether there had been a transfer of a “stable” economic entity (Rygaard v Strø Mølle Akustik A/S C-48/94 [1996] IRLR 54).

Advocate General Szpunar has now opined as follows:

“Article 1 , paragraph 1 (a) and (b) of Directive 2001/23 / EC of the Council of 12 March 2001 on the approximation of the laws of the Member States relating to the safeguarding of workers’ rights in the event of the transfer of undertakings, establishments or parts of undertakings or establishments, must be interpreted as meaning that, on the condition that the intention to pursue an economic activity is established during the transfer of the economic entity, that Directive may apply in a situation where the part of the business or business transferred does not does not maintain its organizational autonomy, provided that the functional link between the various factors of production transferred is maintained and that it allows the assignee to use them for the purposes of to pursue in a stable way an identical or similar economic activity, which it is for the national court to verify”.

Application of the Acquired Rights Directive in Insolvency Proceedings

Plessers v PREFACE NV

Article 5(1) of the Acquired Rights Directive 2001/23 states:

‘Unless Member States provide otherwise, Articles 3 [transfer of the employment relationship] and 4 [prohibition of dismissals on ground of the transfer] shall not apply to any transfer of an undertaking, business or part of an undertaking or business where the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of a competent public authority (which may be an insolvency practitioner authorised by a competent public authority)’.

Whether Articles 3 and 4 of the Directive are excluded therefore depends on the purpose of the insolvency proceedings. Is it a terminal procedure (such as a compulsory winding up) or a rescue procedure (akin to administration)? If the former, Articles 3 and 4 do not apply. If the latter, they do.

In D'Urso v Ercole Marelli Elettromeccanica Generale SpA C-362/89 [1992] IRLR 136 the European Court considered for this purpose the status of the Italian procedure for the special administration of major companies experiencing a crisis. The Court held that the Directive may apply in such a situation. The Directive did not apply to a transfer effected in the context of a procedure based on a creditors’ settlement of the type found in the Italian legislation on compulsory administrative liquidation. However, the Directive did apply where, within the framework of a body of legislation such as the legislation on the special administration of large undertakings in difficulties, the undertaking has been directed to continue trading, for as long as that decision remains in force. The Court held that the Directive did not apply to transfers effected in the context of insolvency proceedings which were intended to achieve liquidation of the assets of the transferor but the Directive did apply to a judicially controlled procedure where the primary aim is to protect the assets of the undertaking and to ensure that it continues to trade by means of an agreement to suspend payments of debts.

The insolvency regime in individual EU Member States can differ in terminology and purpose. The opportunity has now arisen to consider the law in Belgium. The Arbeidshof te Antwerpen (Antwerp Labour Court) referred a question to the Court of Justice in Plessers v PREFACE NV Case C-509/17 concerning the status of the Belgian “judicial reorganisation by transfer under judicial supervision”. The text of the question referred was:

“Is the right of option for the transferee under Article 61(4) (now Article 61(3)) of the Belgian Law of 31 January 2009 on the continuity of undertakings, as part of Chapter 4 of Title 4 of that law under which the ‘judicial reorganisation by transfer under judicial supervision’ is regulated, in so far as that ‘judicial reorganisation by transfer under judicial supervision’ is applied with a view to maintaining all or part of the transferor or its activities, consistent with Council Directive 2001/23/EC on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses, in particular with Articles 3 and 5 of that directive?”

Advocate General Szpunar has now delivered his opinion, taking the view that the Belgian judicial reorganisation procedure does not allow derogation from Articles 3 and 4. The purpose of the Belgian procedure is to ensure maintenance, or continuity, of the insolvent transferor company’s activities.

New referral to the Court of Justice

In German law, occupational pension rights are not excepted from transfer to the new employer following a transfer of an undertaking (see the Bürgerliches Gesetzbuch, section 613a (1)). On 30 October 2018 the Federal Labour Court (Bundesarbeitsgericht) in Germany lodged a referral to the Court of Justice in EM v TMD Friction GmbH (Case C-674/18). The case concerns pension rights on a transfer of an undertaking in Germany following the insolvency of the transferor.

Note: Legal Island is holding a half-day Understanding TUPE – A Practical Seminar on Thursday 13th June 2019 at the Grand Central Hotel, Belfast.