The effect of TUPE is to transfer all of the transferring employee’s rights to the transferee. But the GB Employment Appeal Tribunal has, in Metroline Travel Ltd v D’Auvergne, reminded us that only rights which are contractual in nature transfer in this way.

The European Court has, inReiner Grafe and Jürgen Pohle v Südbrandenburger Nahverkehrs GmbH, OSL Bus GmbH boldly departed from the seminal Oy Liikenne case on the transfer of a seemingly asset reliant undertaking.

And the Court has, in ISS Facility Services NV v Sonia Govaerts, Euroclean NV, delivered an intriguing judgment on the fate of the employment contract where there are multiple transferees and the employee works across all parts transferred. It has agreed with the Opinion of Advocate General Szpunar, which we noted in the January 2020 issue of this Bulletin.

A “Meal Relief Payment” Was Capable Of Being Enforced Against A Transferee, But Only If Contractual

The received wisdom is that non contractual elements of the employment relationship do not transfer to a transferee under TUPE. Under this heading we might include policies and procedures which are not contractual, truly discretionary benefits, and terms in a collective agreement which are not considered apt for incorporation into the individual employment contract.

In this regard, in Metroline Travel Ltd v D’Auvergne UKEAT/0214/19 the claimants were bus drivers, originally employed by Arriva.  With Arriva they received “meal relief payments” if they had to take meals breaks away from a recognised relief facility. Until about mid 2010, Arriva paid meal relief payments to drivers who took their meal breaks at Hampstead Heath as that facility was not recognised.  The bus route was transferred to Metroline in 2015. TUPE applied and the drivers transferred to Metroline. Metroline had an agreement with its recognized trade union recognising the Hampstead Heath facility so Metroline refused to pay the meal relief payments.  An employment tribunal held that the claimants had a contractual entitlement to the meal relief payment when taking their breaks at Hampstead Heath as evidenced by the payments made prior to mid-2010.  There was nothing, it said, to indicate that terms and conditions had been changed and therefore the claimants retained that contractual entitlement.

However, the EAT (Lewis J) found fault with the employment tribunal’s approach. The critical question for the employment tribunal, it considered, was how a facility came to be recognised under the terms of the contract of employment.  In the absence of such a finding, it could not be established whether the facility had been recognised in accordance with the provisions of the contract.  Further, the tribunal had not addressed the question of whether, if the process for recognition was included in a collective agreement, those provisions were apt for incorporation into the contract of employment of the individual claimants. Of course, if the meal relief payment at Hampstead Heath were contractual, Metroline would have to honour this benefit under TUPE. But the employment tribunal’s approach to whether the payments were contractual was flawed. Metroline’s appeal was allowed and the matter remitted to the employment tribunal for reconsideration.

However, although it seems that non contractual terms do not transfer, under reg 4(9) of TUPE, the employee may treat the contract as being terminated by the employer upon any substantial change of working conditions to his material detriment. This implements Article 4(2) of the Acquired Rights Directive. The importance of this provision is that an employee may initiate termination of employment and make a claim against an employer in relation to changes in working conditions short of actual breach of contract.

European Court’s decision in Reiner Grafe and Jürgen Pohle v Südbrandenburger Nahverkehrs GmbH, OSL Bus GmbH

In Reiner Grafe Pohle v Südbrandenburger Nahverkehrs GmbH, OSL Bus GmbH Case C‑298/18 ECJ the Court of Justice has departed from the famous case of Oy Liikenne Ab v Pekka Liskojärvi and Pentti Juntunen C-172/99.

SBN held a contract with the local authority commencing on 1 August 2008 to operate the local public bus transport system in the locality. In September 2016 the local authority retendered the contract. SBN did not tender and ceased business. All its employees were given notice of termination of employment.  In January 2017, SBN agreed on a social plan with its works council. This provided that if employees did not receive an offer of re-employment from the new operator or if they suffered financial loss upon re-appointment, they were to receive severance payments of various amounts.

The new contract to provide local public bus services was awarded to Kraftverkehrsgesellschaft Dreiländereck mbH (‘KVG’) a wholly owned subsidiary of Rhenus Veniro GmbH & Co. KG. The latter set up a new wholly owned subsidiary, OSL Bus, to provide the transport service. OSL Bus recruited many of the bus drivers and some of the management staff from the former operator, SBN. But OSL informed SBN that it would not purchase lease or otherwise need SBN’s assets, which included buses, depots, workshops and operating facilities.

Mr Grafe was a bus driver who joined OSL Bus. But OSL declined take account of his previous periods of service with SBN. He was therefore classified at the entry level of the collective wage agreement with OSL Bus, as though he were a newly appointed employee. He argued that OSL had to take into account his earlier period of service. This was because, he argued, his employment relationship was transferred to OSL Bus by way of a transfer of an undertaking.

Mr Pohle had been employed since 1979 by SBN as a bus driver and foreman. SBN terminated his employment before the new OSL service started. OSL did not offer Mr Pohle a job. He also challenged the position.

The following was clear. OSL Bus took over a public bus service from SBN. It took on some drivers, but not the buses. In Oy Liikenne the Court held that bus transport could not be regarded as an activity based essentially on manpower. In a sector such as scheduled public transport by bus, where the assets contributed significantly to the performance of the activity, the absence of a transfer of assets must lead to the conclusion that the entity does not retain its identity. On that basis were the claims of Grafe and Pohle bound to fail?

Advocate General Sharpston, in her opinion for the Court, was not however of the mind to slavishly assume that the present case automatically led to the conclusion (no transfer) reached in not dissimilar circumstances in Oy Liikenne. Here there was good reason not to take the assets. More stringent emissions requirements now applied. The vehicles had to be suitable for disabled access. Electric buses were the future. The new operator’s contract was for a 10-year period. So where the transfer of assets is, in practice, precluded by the existence of such legal, technical and environmental constraints, the national court should not regard that aspect of the transaction as necessarily determinative in deciding whether or not there has been a transfer of an undertaking.

Now the Court of Justice has agreed. The Court explained the decision in Oy Liikenne as follows. It considered that the Court in Oy Liikenne:

’’…was careful to point out that the fact that the tangible assets used for operating the bus routes were not transferred from the old to the new contractor constitutes a circumstance to be taken into account, it cannot be inferred from that point that the takeover of the buses must be regarded in the abstract as the sole determining factor of whether an undertaking whose activity consists in the public transport of passengers by bus has been transferred (emphasis added).”

It was necessary to take into account the circumstances of each case. The fact that, in this case, there was no transfer of operating resources, because of legal, environmental or technical constraints, did not therefore necessarily preclude the taking over of the activity concerned from being classified as a ‘transfer of an undertaking’ within the meaning of the Directive. The Court was particularly impressed by the continuity of service and also the invaluable expertise of the staff employed. In the latter regard:

“…the presence of experienced bus drivers in a rural area such as the district of Oberspreewald-Lausitz is crucial for the purpose of ensuring the quality of the public transport service concerned. It notes, in particular, that they must have sufficient knowledge of routes, timetables in the area served and fare conditions, as well as of other regional bus routes, railway routes and existing connections, in order to be able not only to sell tickets but also to provide passengers with the information they need to complete the planned journey.”

In one sense the decision is for TUPE anoraks: if the facts of the case arose in Northern Ireland, the employees would be protected by the Service Provision Change (Protection of Employment) Regulations (Northern Ireland) 2006. But the judgment is a welcome addition to the jurisprudence on transfers under the Acquired Rights Directive.

The European Court’s decision in ISS Facility Services NV v Sonia Govaerts, Euroclean NV : The fate of the employment contract where there are multiple transferees

How does the EU Acquired Rights Directive (and therefore TUPE) apply where the enterprise is split among multiple transferees and the employee works across all parts transferred? The Court of Justice has expressed a view in ISS Facility Services NV v Sonia Govaerts, Euroclean NV, C-344/18. The Court has followed the Opinion of Advocate General Szpunar (see my Bulletin of January 2020). But the judgment and its reasoning could cause difficulties in practice.

Ms Govaerts was originally employed as a maid by ISS Facility Services. She had three separate part-time work contracts. In September 2004, she signed a new employment contract with ISS. ISS was responsible for cleaning and maintenance of various buildings in the city of Ghent, divided into three lots. The first included museums and historic buildings, the second included libraries and community centres, and the third included administrative buildings. 1n 2013, Ms Govaerts was promoted to manager of these three sites.

The city of Ghent then re-tendered for this work. Following this procedure, in June 2013, ISS was not successful. The first and third lots were awarded to Atalian, while the second lot was awarded to Cleaning Masters. ISS informed Atalian that since Ms Govaerts was engaged  full time on all sites, and as Atalian’s share (two lots) amounted to approximately 85%, the Belgian law on transfers of undertakings (Collective Agreement No. 32 bis) had to be applied to it.. Atalian refused to accept this analysis. Nonetheless ISS informed Ms Govaerts that she would be transferring to Atalian. Atalian again responded, saying that it did not consider that there had been a business transfer.

As a result Ms  Govaerts brought claims against both ISS and Atalian before the arbeidsrechtbank te Gent (Labour Court of Ghent, Belgium) for notice, bonus and accrued holiday pay. But the Labour Court held that, as Ms Govaerts work was now supervisory, and not confined to work at one particular site, the Belgian law on transfers did not apply to her. The claims against ISS were upheld, but the claims against Atalian were dismissed. ISS had contended that Ms Govaerts had transferred to the extent of 85% of her time to Atalian and as to 15% to Cleaning Masters. The Labour Court rejected this.

The issue for The Court of Justice was whether, in cases like this, is (1) the employee transferred to each transferee pro rata, or (2) to the transferee taking that part of the undertaking where the employee was principally employed, or (3) is there no transfer to any transferee?

Perhaps surprisingly the AG favoured option (1).  Principally this was because of the potential unfairness to Atalian of a transfer of the entire employment contract to it when it only had (albeit a large) part of the work. Acknowledging the difficulties this may cause in practice, he added that in the event that the splitting of the employment contract proved to be impossible between the two assignees, or prejudiced the maintenance of the rights of the worker, or if the worker refused, after the transfer, to go along with the splitting of his employment contract, the employment contract or the employment relationship in question could be terminated and this termination must be considered as having occurred due to the act of the assignee (s) under Article 4 (2) of the Acquired Rights Directive (TUPE, Reg 4(9). applicable where there is “a substantial change in working conditions to the material detriment of the employee”).

The Court of Justice essentially, in a judgment delivered on 26 March 2020, agreed with the Advocate General. The Court was also influenced by the unfairness to a transferee of the transfer to it of the entire employment contract of a worker in this situation, when the putative transferee has been awarded only part of the work on which the worker was working (see para 31). Otherwise this would have “the effect of disregarding the interests of the transferee, to whom there are transferred the rights and obligations arising from a full-time employment contract although the worker concerned is to perform his or her tasks with that transferee only part-time”. The Court stated (para 34):

“Further, such a transfer of the rights and obligations arising from a contract of employment to each of the transferees, in proportion to the tasks performed by the worker, makes it possible, in principle, to ensure a fair balance between protection of interests of workers and protection of the interests of transferees, since the worker obtains the safeguarding of the rights arising from his or her contract of employment, while the transferees do not have imposed on them obligations that are greater than those entailed by the transfer to them of the undertaking concerned”.

How was the proportion of the worker’s contract transferred to each transferee to be determined? The Court said this was a matter for the national court to determine on the facts, but (para 32):

“In that regard, the referring court may take into consideration the economic value of the lots to which the worker is assigned, as suggested by ISS, or the time that the worker actually devotes to each lot, as proposed by the European Commission”.

The Court agreed with the Advocate General (para 35) that there might be practical problems arising from the division of the employment contract between different employers. But these were for the national court to resolve, which might entail, as the Advocate General had suggested, consideration of the following factors (see para 37):

“Consequently, as stated by the Advocate General in point 79 of his Opinion, if the division of the contract of employment proves to be impossible or entails a deterioration in the working conditions and rights of the worker guaranteed by Directive 2001/23, that contract may be terminated, and the termination must be regarded, under Article 4(2) of Directive 2001/23, as the responsibility of the transferee(s), even when that termination has been initiated by the worker.”

Two criticisms can be made of this decision. First, the courts in Great Britain and Northern Ireland have rejected the concept that, on transfers involving a split of activities, the employee can be transferred to more than one employer. In simple terms, the approach has been this. Either the employee is sufficiently assigned to the undertaking or part transferred, in which case there is a transfer to the transferee employer taking it over (hypothesis A). Or the employee’s duties are spread across individual parts of the undertaking in a more disparate manner, such that the employee may be said not to be assigned to any part transferred, leading to no transfer of the employee and his likely redundancy with the transferor employer (hypothesis B).

For an example of hypothesis A see Kimberley Group Housing Ltd v Hambley UKEAT/0489/07 (discussed in McMullen: Business Transfers and Employee Rights at 5[251]-[251.1]). For an example of hypothesis B see Hassard v McGrath [1996] NILR586(discussed in Business Transfers and Employee Rights at 6[101]). In Hassard the Northern Ireland Housing Executive had outsourced maintenance of its housing stock to two contractors, Devlin and McGrath, in two modules. Hassard, the employee, had had spent 73.39% of his time in the previous year on the work taken by McGrath and Devlin was now responsible for the work on which Hassard had spent about 25% of his time. The Northern Ireland Court of Appeal stoutly rejected the notion that there could be a transfer to both employers, split as to the relevant percentage. Thus, if that proposition were accepted:

‘…it would follow that [the] contract of employment with the Executive became two contracts of employment and [Mr. Hassard] was after the transfer employed by both contractors in differing proportions. We do not consider that such a situation is envisaged by the Directive or the Regulations, and it seems to us wholly at odds with the Botzen decision. Indeed it might give rise to insuperable difficulties. If his employment was split in such a fashion, the new employers could find themselves unable to agree over the allocation of his time between them. One of them might terminate his employment and one would have to ask then whether that employer's proportion of the employee's time automatically passed to the other. These considerations seem to us strongly to support the proposition that an employee is only protected under the Directive or the TUPE Regulations if before the transfer he was assigned solely to one part of the undertaking transferred to a transferee’.

In this case Hassard was, on the facts, assigned to neither module and remained with the Executive.

Secondly, the impracticability of this approach is illustrated by the Court’s view that if the employee’s rights on a contract split were compromised, or if he simply objects, he considered there would be a dismissal under reg 4(2) of the Directive (TUPE, Reg 4(9)) and the transferee(s) (both, presumably) would be liable for that dismissal. Given the inevitable conclusion that such dismissal(s) would be by reason of the transfer the risk is that these would be automatically unfair (as it is hard to argue these were for an economic technical or organizational reason entailing changes in the workforce (indeed the Court’s decision does not offer that lifeline). This seems plainly unfair on the transferee employer(s).