In this TUPE update, we cover two cases of interest, one in the European Court, and one in the UK Employment Appeal Tribunal.  In the former, the European Court considered the winding up of Air Atlantis and the taking over of its activities by its major shareholder, TAP.  As we will see from the commentary below, this was a classic business transfer for the purposes of the Acquired Rights Directive and, therefore, we suggest, for the purposes of TUPE.  In the latter, the EAT considered a case where an organised grouping of employees for the purposes of a service provision change TUPE transfer did not lose its status as an organised grouping of employees simply because employees were temporarily laid off in between subcontracts.

European Court of Justice decides a classic business transfer case

In Ferreira da Silva e Brito & others v Estado Português (Case C-160/14) the European Court considered the winding up of Air Atlantis and the taking over of its activities by its major shareholder TAP.  TAP disputed that there was a transfer of an undertaking.  But TAP took over the routes previously served by Air Atlantis and used significant assets, including four aeroplanes.  TAP also assumed responsibility for the payment of charges under the leasing contracts relating to those aircraft and took over the office equipment which belonged to Air Atlantis and which had been used at Air Atlantis' premises in Lisbon and Faro.  TAP also took on a number of former Air Atlantis employees.

The Portuguese Court had taken the view that TAP had simply taken over Air Atlantis' licence to operate.  The European Court, however, considered that there had been a transfer of an undertaking.

Of paramount importance was that this case concerned the air transport sector.  So the transfer of the assets necessary to operate Air Atlantis' business (the aircraft) was crucial.

Secondly, it was immaterial that Air Atlantis lost its autonomy following the TAP takeover.  Following the case of Klarenberg (Case C-466/07) the Court confirmed that a loss of autonomy does not prevent a TUPE transfer.  This is provided that the various elements of production remain the same and are used by the new employer to carry out the same or similar activities.

Temporary lay off did not affect an organised grouping of employees for the purposes of a service provision change TUPE transfer

In Inex Home Improvements Limited v Hodgkins & Others UKEAT/0329/14/JOJ the claimant employees worked on contracts which had been subcontracted to Inex, their employer, by another organisation.  The work was released by the main contractor in tranches, each with its own works number.  During November and December 2012 Inex completed works subject to work order no.8.  No new order had been issued.  It was anticipated that the next order would be issued in January 2013.  Temporarily, there was no work for the employees to do.  They were employed under the terms of the Construction Industry Joint Council Working Rule Agreement which allowed for lay off.  They were thus laid off and informed this was temporary pending the next order.  However this expected order was given to another subcontractor.  The employees claimed to transfer with that work.  An employment tribunal had considered that the employment of the individuals could not transfer because immediately before the date of the service provision change they were no longer an organised grouping of employees.  The employment judge's reasoning was that they could not be part of such a grouping because they were not working, having been temporarily laid off.  If no work was being carried out, there could be no organised grouping, as the activity had ceased.

The EAT (HHJ Serota QC) held that a temporary absence from work or cessation of work did not of itself deprive employees who had been involved in the relevant "activities" of their status as an organised grouping of employees.

The main point of interest in the case however is the judge's willingness to apply principles derived from case law on the construction of the Acquired Rights Directive notwithstanding that the service provision change rules do not derive from the ARD.  He considered nonetheless that a helpful analogy could be drawn from the cases on the ARD on temporary cessation of activities (see Bork International a/s v Foreningen Af Arbejdsledere I Danmark [1989] IRLR 41).  It would of course be odd if the position of employees on a service provision change was actually worse than in relation to a business transfer.

HHJ Serota QC considered that case law on service provision change favouring the literal or plain meaning of interpretation of the provisions concerned could not have been intended to exclude the well recognised canonsof statutory interpretation developed by English law.  Prima facie, the legal meaning of an enactment, when applied to particular facts, is presumed to be that which corresponds to the literal meaning of the enactment in relation to those facts.  But where an enactment is to remedy a particular mischief, it is presumed that the courts are expected by Parliament to find a construction which applies the remedy provided in such a way as to address the mischief.  This is the presumption that the court should find a construction which furthers every aspect of the legislative purpose.  So regulation 3(1)(b), although not derived from European law, was still primarily intended to protect employment and avoid redundancy; and it could not have been intended that in any case where there was a temporary cessation of work, including temporary lay off, the organised grouping could lose its identity.

Accordingly, applying the European Court case law on temporary cessation of work, a temporary lay off should not deprive employees from protection if there were a service provision change during the period of that temporary cessation of work.