C-234/98
ECLI:EU:C:1999:383
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ALLEN AND OTHERS
OPINION OF ADVOCATE GENERAL RUIZ-JARABO COLOMER delivered on 8 July 1999 *
1. The Leeds Industrial Tribunal, United ment with the respondent, Amalgamated Kingdom, has referred to the Court of Construction Co. Ltd (hereinafter A C C ) . Justice under Article 177 of the EC Treaty To that end, the Tribunal has to decide (now Article 234 EC) two questions on the whether the Transfer of Undertakings (Pro- interpretation of Directive 77/187/EEC 1on tection of Employment) Regulations 1981, the safeguarding of employees' rights in the the purpose of which is to bring national event of transfers of undertakings (herein- law into line with the Directive, is applic- after 'the Directive'). In essence, the issue is able in the case before it. whether there can be a transfer for the purposes of the Directive where an opera- tion takes place between two companies which not only belong to the same corpo- rate group but also have common owner- ship, management and premises and are engaged, in part, in the same activity.
3. According to the findings in the order for reference, following the nationalisation of the coal industry, most deep mining was carried out by British Coal. Initially, the construction and civil engineering work required to enable the mine owner to get I — Facts at and extract minerals was carried out by the mine owner itself using its own work- force. Subsequently, it began to use outside contractors. 2. This question on the interpretation of Community law arose from an application made to the Leeds Industrial Tribunal by a group of workers for a declaration, under Section 11 of the Employment Protection (Consolidation) Act 1978, as to what were the terms and conditions of their employ-
4. ACC is one of those contractors. It has * Original language: Spanish. been involved in the mining industry for 1 — Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to some 25 years, having worked in the main the safeguarding of employees' rights in the event of for British Coal and, subsequently, for RJB transfers of undertakings, businesses or parts of businesses (OJ 1977 L 61, p. 26). Mining (UK) Limited (hereinafter 'RJB'),
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when that company acquired some of the pit closures, such as shaft filling. It was not assets of British Coal following its privati- intended that it would carry out driveage sation in 1994. ACC is a wholly-owned work of the sort undertaken by ACC. It subsidiary of AMCO Corporation PLC began to operate as a distinct legal entity, (hereinafter 'AMCO'). AMCO has another with its own workforce, offering its own wholly-owned subsidiary, AM Mining Ser- terms and conditions of employment. It vices Limited (hereinafter 'AMS'). There enjoyed a certain success in obtaining and are some ten other companies within the performing new contracts and, in 1993, it AMCO Group. There is a Group head- provided employment for approximately quarters which performs certain functions, 150 people. such as personnel, payroll and accoun- tancy, on a central basis for the subsidiary companies.
7. The duration of the work was laid down in the specific contracts in each case. When a contract was awarded, its time span was known and redundancy notices were issued to the workforce on a protective basis. 5. ACC's activities consist essentially in the Some of the applicants had been working construction of underground roadways and under these precarious terms for several the driving of tunnels. It is a competitive years. industry, in that contracts are almost always awarded following invitation to tender, without any guarantee that the mine owner will award further contracts to the same firm on expiry of the current In the autumn of 1994, a number of contract. However, it is clear that contracts contracts were due to come to an end and tend to be awarded on a rolling basis, if ACC notified the competent authority of only because the mine owner is familiar 92 potential redundancies. Notification of with the contractor in situ and knows that, those redundancies was also given to the in that way, there will be no transition National Union of Mineworkers 2 (herein- period between contracts, so that continu- after 'the NUM'), which was the Trade ity of the work is ensured. The Industrial Union which represented the majority of Tribunal found that there was no occasion the employees concerned. when ACC lost a contract under a compe- titive tender procedure.
8. In August 1994, British Coal announced an invitation to tender for a contract for
6. In contrast, the history of AMS, the 2 — The national court states in its order that, although neither ACC nor the AMCO Group purports to recognise the other subsidiary involved in these proceed- NUM, it is satisfied that over a number of years the NUM has been treated, for all practical purposes, as being ings, is much shorter. It was established in recognised. It states that it is unable to understand why 1993 for the purpose of competing with the respondent would have thought it appropriate to give notice of the redundancies in the statutory form to the NUM other contractors for work associated with unless it was recognised as a union.
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substantial driveage work at the Prince of carried out by its own employees, was Wales collieries. ACC took the view that it coming to an end, and the appropriate would not be able to compete with other notice of redundancies was given to the contractors if it did not submit a tender Department of Employment and the based on considerably lower labour costs NUM. 6 At that time, RJB awarded ACC than those applicable to earlier contracts. It new contracts on the basis of tenders submitted a tender on the basis that the reflecting AMS terms and conditions of contract would not be carried out by its employment. As before, the workers who workforce but by employees of AMS, had received redundancy notices from ACC whose terms of employment were more in were taken on by AMS, without any break, line with those of the employees of compe- under AMS terms and conditions of titors. 3 employment, and those who were eligible received redundancy payments from ACC. This time too, although the change was connected with the contracts which were to be carried out, the nature of the under- ACC was awarded the contract and sub- ground work was the same, so that there contracted the work to AMS. 4 Because of was not a genuine break between the two this, there was insufficient work for all employments. 7 ACC employees and some of them were given notice that they were to be made redundant and were informed that they could be taken on by AMS after a weekend break. 5
10. After some time, RJB expressed con- cern about the terms and conditions of employment which various contractors, 9. Towards the end of March 1995 another including AMS, were applying and the contract awarded to ACC, which was being deterioration of those terms. It took the view that, in general, their employees lacked motivation, which might be attribu- 3 — Both British Coal and RJB were aware of the intention of table to the fact that the terms and ACC to subcontract the contract to AMS. There had been conditions under which they were now discussions prior to tenders being submitted and it appears that, although neither British Coal nor RJB had any working were much less favourable than objection to AMS being a subcontractor, they preferred that ACC should itself be the tendering contractor. those to which they had previously been 4 — It appears that, in the mining industry, substantial elements of plant and equipment are provided by the mine owner. Once it became the subcontractor, AMS had the use of all the equipment which had previously been provided for ACC 6 — Long gone are the days when Sir Harold Macmillan, 1st and was also able to use other items of plant and equipment Earl of Stockton and British Prime Minister from 1957 to which were the property of ACC, without any charge being 1963, was able to say: 'There are three bodies no sensible made for such use. man directly challenges: the Roman Catholic Church, the 5 — On that point, the Industrial Tribunal is satisfied, on the Brigade of Guards and the National Union of Minewor- basis of the evidence before it, that the employees were kers', The Observer, 22 February 1981. advised of this change simply by being told that they were 7 — The Industrial Tribunal observes that, whatever the start moving from ACC to AMS. There was no formal re- and finish dates of the contracts, the reality was that the engagement by way of job interview, nor were there any of preparatory and tidying-up work at the beginning and end the other procedures which might have been expected if of contracts would overlap so that, during that period, it there had been a genuine break between the two employ- was difficult to say whether an employee was working ments. However, those who moved from ACC to AMS under the old contract or the new one and thus whether he received redundancy payments calculated according to their was working for ACC or AMS, particularly as the day-to- total length of service with ACC, and began to work with day management in that colliery was undertaken by ACC AMS under that firm's terms and conditions, which were managers, who used labour according to the needs of the significantly less favourable that those enjoyed with ACC. day.
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accustomed. Consequently the colliery 12. The applicants in the main proceedings owner sent a circular to all contractors are 23 of the miners who worked for ACC recommending that they give their employ- until they were made redundant, were ees a minimum period of paid leave and taken on by AMS under less beneficial improve certain other aspects of their terms and conditions of employment and, conditions of employment. These changes on being made redundant by that company, reduced the competitive edge which some were taken on again by ACC. of the mining contractors competing with ACC had, and RJB suggested that, in future, ACC should carry out the contracts rather than AMS.
II — The questions referred for a prelimin- ary ruling
13. In order to resolve the case, the Leeds Industrial Tribunal decided to suspend proceedings and refer the following ques- 11. ACC submitted further tenders for tions to the Court of Justice for a prelimin- work in the same colliery. Its tenders ary ruling: reflected the changes in the terms and conditions of employment, but there were no plans to subcontract work to AMS. None the less, a workforce was required, as a large part of the workforce had been made redundant when previous contracts '1. Is the Acquired Rights Directive were subcontracted to AMS. It did not (77/187/EEC) capable of applying to attempt to recruit externally but took on, two companies in the same corporate under the then applicable terms and condi- group which have common ownership, tions, those who had been working for management, premises and work, or AMS and whose employment was coming are such companies a single undertak- to an end. Those terms and conditions were ing for the purpose of the Directive ? In better in certain respects than those of AMS particular, can there be a transfer of an but were not as beneficial as those offered undertaking for the purposes of the by ACC before 1994. 8 Directive when Company A transfers a substantial part of its labour force to Company B in the same corporate 8 — As Adam Smith observed, as long ago as 1776, 'What are group ? the common wages of labour, depends everywhere upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little as possible. The former are disposed to combine in order to raise, the latter in order to lower the wages of labour. It is not, however, difficult to foresee which of the two parties must, upon ali ordinary occasions, have the advantage of the dispute, and force the other into a compliance with their terms.', An 2. If the answer to Question 1 is in the Inquiry into the Nature and Causes of the Wealth of Nations, Ed. A. Skinner, Pelican Classics, 1979, p. 169. affirmative, what are the criteria for
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deciding whether there has been such a Company Β and the beginning and/ transfer ? In particular, has there been a or end of the contracts under transfer of undertaking in the following which the work was performed. circumstances:
(i) Over a period of time the workers (v) Company A and Company Β share involved have been dismissed from the same management and pre Company A, purportedly for mises. redundancy, and offered employ ment with associated Company Β carrying out a geographically dis tinct undertaking or part of the undertaking of Company A, namely the driving of mine tunnels. (vi) After being employed by Company Β the employees carry out work for both Companies A and Β as needed by the local management who are responsible for both companies.
(ii) No transfer of premises, manage ment, infrastructure, materials or assets occurred between Company A and Β and the majority of significant assets used by both (vii)The work undertaken was contin companies in the work of driving uous, there was no suspension of main tunnels is supplied by a third activities at any time or any change party, the mine operator. in the manner in which they were conducted?'
(iii) Company A remains the sole con tractor with the third party client which engaged it to work on construction projects which were undertaken on a "rolling" basis. ΠΙ — The Community legislation
14. The Leeds Industrial Tribunal does not (iv) There was little or no contempor seek an interpretation of any specific pro aneity between the movement of vision, although it refers to Directive the workers from Company A to 77/187 in a general way. In view of the
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substance of the questions, the Court must Article 4 consider the following provisions:
Article 1 ' 1 . The transfer of an undertaking, business or part of a business shall not in itself constitute grounds for dismissal by the transferor or the transferee. This provision shall not stand in the way of dismissals that ' 1 . This Directive shall apply to the transfer may take place for economic, technical or of an undertaking, business or part of a organisational reasons entailing changes in business to another employer as a result of the work-force. a legal transfer or merger.
5
Article 3
IV — Procedure before the Court of Justice
c
15. The applicants and the respondent undertaking in the main proceedings, the French Government, the United Kingdom 2. Following the transfer... the transferee Government and the Commission pre- shall continue to observe the terms and sented written observations within the conditions agreed in any collective agree- period prescribed for that purpose by ment on the same terms applicable to the Article 20 of the EC Statute of the Court transferor under that agreement, until the of Justice. date of termination or expiry of the collec- tive agreement or the entry into force or application of another collective agree- ment.
At the hearing on 16 June 1999, the representatives of the applicants and of the respondent undertaking in the main proceedings, the representative of the Gov-
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ernment of the United Kingdom and the 77/187 in circumstances in which the representative of the Commission presented purported transfer was between companies their oral observations. belonging to the same corporate group has been referred to the Court of Justice.
V — Examination of the questions referred for a preliminary ruling Apart from the respondent undertaking, all those who submitted observations in these proceedings agree that the fact that the 16. By the two questions it has referred, transfer of an undertaking, business, or which I believe should be dealt with part of a business is between companies together, the Leeds Industrial Tribunal is belonging to the same corporate group does asking whether there can be a transfer of an not preclude the applicability of Directive undertaking, business or part of a business, 77/187. I should say here and now that I within the meaning of Article 1(1) of share that view, if only because the Direc- Directive 77/187, between two companies tive does not exclude it and because, since belonging to the same corporate group, these companies can be the subject of a which have common ownership, common legal transfer or merger like any other, there management and premises and undertake is no reason to exclude their employees the same work, when one such company from the protection afforded by the Direc- transfers a substantial part of its labour tive. However, as I will have occasion to force to the other; what the criteria are for explain below, those are not the only determining whether there has been a reasons. transfer; and whether there has been a transfer in the circumstances of the present case.
19. Directive 77/187 was adopted by the Council on the basis of Article 100 of the 17. I must make clear at the outset that it is EC Treaty (now Article 94 EC), to guaran- not for this Court to determine whether or tee continuity of employment for workers not there was a transfer in the present case. in the event of a change of employer and, in That is a task which falls to the national particular, to ensure that their rights are court, which must decide the case on its safeguarded. merits and, in order to do so, must take account of the criteria for interpretation which the Court will provide in its judg- ment.
Its preamble highlights the differences between the Member States as regards the 18. This is the first time a question con- extent of the protection of employees in cerning the interpretation of Directive this respect and the need to reduce these
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differences, as they can have a direct effect 21. The Directive is applicable, according on the functioning of the common market. to Article 1(1) thereof, to transfers of Its adoption was proposed in the Council undertakings, businesses or parts of busi- Resolution of 21 January 1974 concerning nesses to another employer as a result of a a social action programme. 9 Its objective is legal transfer or merger. However, it does set out, in the main, in Article 3(1), which not contain a definition of undertaking, provides for the transfer to the transferee of business, part of business, employer or legal the transferor's rights and obligations aris- transfer. It has been the Court of Justice ing from an employment relationship exist- which, in its many judgments, has provided ing on the date of a transfer, and in a Community definition of these terms. 12 Article 4(1), which provides that the trans- fer is not in itself to constitute grounds for dismissal by the transferor or the trans- feree.
22. Directive 98/50/EC, which made sig- nificant amendments to the wording of Directive 77/187, 13 does contain some definitions, including that of 'transfer', 14 that of 'undertaking', 1 5 and that of 'worker', 16 which enhance and supplement its content and which codify the case-law of 20. The Court has confirmed, in its case- the Court of Justice. However, the Member law, that the purpose of the Directive is to States have until 17 July 2001 to incorpo- ensure that the rights of employees are rate its provisions into their national law. safeguarded in the event of a change of employer by enabling them to remain in employment with the new employer on the 12 — The Court has given 29 rulings on Directive 77/187 in references for a preliminary ruling and in actions against terms and conditions agreed with the Member States for failure to fulfilobligations. transferor.10 However, it is not intended 13 — C o u n c i l Directive 98/50/EC of 29 June 1998 amending Directive 77/187/EEC on the approximation of the laws of to establish a uniform level of protection the Member States relating to the safeguarding of employ- ees' rights in the event of transfers of undertakings, throughout the Community on the basis of businesses or parts of businesses (OJ 1998 L 2 0 1 , p. 88). common criteria. So, the Directive can be 14 — The fourth recital of that directive states that considera- tions of legal security and transparency require that the relied on only to ensure that the employee legal concept of transfer be clarified in the light of the case- is protected in his relations with the law of the Court of Justice but that such clarification does not alter the scope of Directive 77/187/EEC. The definition transferee to the same extent as he was in of transfer within the meaning of Directive 77/187, as amended, is given by Article l ( l ) ( b ) : '... a transfer of an his relations with the transferor under the economic entity which retains its identity, meaning an legal rules of the Member State con- organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity cerned. n is central or ancillary'. 15 — According to Article l ( l ) ( c ) of Directive 77/187, as amended, its provisions are to apply to public and private undertakings engaged in economic activities whether or not they are operating for gain. An administrative 9 — OJ 1974 C 13, p. 1. reorganisation o f public administrative authorities, or the 10 — Case 287/86 Ny Mølle Kro [1987] ECR 5465, paragraph transfer of administrative functions between public admin- 12, and Case 324/86 Daddy's Dance Hall [1988] ECR istrative authorities, are expressly excluded from its scope. 739, paragraph 9. 16 — According to Article 2(l)(d) of Directive 77/187, as 11 — Judgment in Daddy's Dance Hall, cited above in footnote amended, any person who, in the Member State con- 10, paragraph 16, and Case 105/84 Danmols Inventar cerned, is protected as an employee under national [1985] ECR 2639, paragraph 26. employment law is to be considered an employee.
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For that reason, I must base my answers to same or similar activities, is of crucial the questions referred for a preliminary significance. ruling by the Leeds Industrial Tribunal on the case-law rather than on that new text.
25. The Court refined its definition of economic entity in subsequent decisions. In its judgment in Rygaard18 it held that in order for the Directive to be applicable, the 23. The Court of Justice did not attempt to transfer had to relate to a stable economic define separately the terms used by the entity whose activity was not limited to Directive to describe the entities which performing one specific works contract, could be transferred to another employer, and went on to rule, in its judgment in namely 'undertakings', 'businesses' or Siizen,19 that the term entity thus referred 'parts of businesses'. Instead, it devised to an organised grouping of persons and the term 'economic entity'. assets facilitating the exercise of an eco- nomic activity which pursues a specific objective.
24. In its judgment in Spijkers,17 the Court 26. The definition of worker whose held that the Directive is intended to ensure employment relationship is covered by the the continuity of employment relationships Directive in the event of a transfer of the existing within a business, irrespective of economic entity for which he works is any change of ownership and that the given in the judgments in Danmols Inven- decisive criterion for establishing whether tar20 and Redmond Stichting.21 It covers there is a transfer for the purposes of the all employees who enjoy some, albeit Directive is whether the business in ques- limited, protection against dismissal under tion retains its identity. It added that, in national law. Under the Directive, that determining whether the business was dis- protection may not be taken away from posed of as a going concern, the fact that its operation was actually continued or resumed by the new employer, with the 18 —· Case C-48/94 Rygaard [19951 ECR 1-2745, paragraph 20. 19 — Case C-13/95 Süzen [1997] ECR I-1259, paragraph 13. 20—Judgment in Danmols, cited above in footnote 11, paragraph 27. 17 — Case 24/85 Spijkers [19861 ECR 1119, paragraphs 11 and 21 — Case C-29/91 Redmond Stichting [1992] ECR 1-3189, 12. paragraph 18.
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them or curtailed solely because of the of the Directive concerning protection of transfer. 22 employees from dismissal as a result of the transfer. 24
27. In its judgment in Botzen, the Court considered whether the scope of the Direc tive extends to a transferor's rights and obligations arising from a contract of employment or employment relationship 29. The Court has held that, in view of the existing on the date of the transfer and differences between the various language entered into with employees who, although versions of Article 1(1) of the Directive and not belonging to the part of the under the divergences between national legisla taking which was transferred, carry on tion on the concept of legal transfer, its certain activities using the assets assigned scope cannot be appraised solely on the to the transferred part. Since an employ basis of a textual interpretation. 25 In its ment relationship is essentially character judgment in Bork International,26 the ised by the link existing between the Court interpreted that concept fairly flex employee and the part of the undertaking ibly to meet the objective of the Directive, or business to which he is assigned to carry which is to protect workers in the event of a out his duties, in order to decide whether transfer of their undertaking, and declared the rights and obligations under an employ that the Directive is applicable wherever, in ment relationship are transferred under the context of contractual relations, there is Directive No 77/187 by reason of a trans a change in the legal or natural person who fer, it is sufficient to establish to which part is responsible for carrying on the business of the undertaking or business the and who incurs the obligations of an employee was assigned. 2 3 employer towards employees of the under taking.
28. As regards the requirement that the employment relationship should exist at the time of the transfer, the Court has held that, unless otherwise expressly provided, the Directive may be relied on solely by work ers whose contract of employment or 30. For the purposes of illustration and employment relationship is in existence at without seeking to draw up an exhaustive the time of the transfer. Whether or not list, the Court has held that the Directive is such a relationship exists must be assessed applicable to a transfer of undertaking on the basis of national law, subject to compliance with the mandatory provisions 24 — Judgment in Ny Mølle Kro, cited above in footnote 10, paragraph 25, and Case 101/87 Bork International [1988] ECR 3057, paragraph 17. 22 — Case 237/84 Commission ν Belgium [1986] ECR 1247, 25 — Case 135/83 Abels [1985] ECR 469, paragraphs 11 to 13. paragraph 13. 26 — Judgment in Bork, cited above in footnote 24, paragraph 23 — Case 186/83 Botzen [1985] ECR 519, paragraph 15. 13.
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which takes place in the course of a continue trading for as long as that decision procedure such as a 'surséance van betal- remains in force; 32 to a situation in which ing' (judicial leave to suspend payment of a public authority decides to terminate the debts); 27 where the owner of a leased subsidy paid to a foundation set up to assist undertaking takes over its operation fol- drug addicts, which is its only source of lowing a breach of the lease by the lessee; 28 income, as a result of which its activities are where, upon the termination of a non- fully and definitively terminated, and to transferable lease, the owner of an under- transfer it to another foundation with a taking leases it to a new lessee who carries similar aim; 33 to a situation in which one on the business without interruption with businessman, by a contract, assigns to the same staff, who had been given notice another businessman responsibility for run- on the expiry of the initial lease; 29 to the ning a facility for staff, which was formerly transfer of an undertaking pursuant to a managed directly, in return for a fee and lease-purchase agreement and to the various advantages, details of which are retransfer of the undertaking upon the laid down by the agreement between termination of the lease-purchase agree- them; 34 to a situation in which an under- ment by a judicial decision; 30 where, after taking holding a motor vehicle dealership giving notice bringing the lease to an end or for a particular territory discontinues its upon termination thereof, the owner of an activities and the dealership is then trans- undertaking retakes possession of it and ferred to another undertaking which takes thereafter sells it to a third party who on part of the staff and is recommended to shortly afterwards brings it back into operation, which had ceased upon termina- tion of the lease, with just over half of the staff that was employed in the undertaking by the former lessee; 31 when, in accor-
dance with a body of legislation such as that governing special administration for large undertakings in critical difficulties, it has been decided that the undertaking is to 32 — Case C-362/89 d'Urso and Others [1991] ECR I-4105, paragraph 34. In contrast, it does not apply to transfers of undertakings made as part of a creditors' arrangement procedure of the kind provided for in the Italian legislation on compulsory administrative liquidation to which the Law of 3 April 1979 on special administration for large undertakings in critical difficulties refers, given that, as in the case of bankruptcy, the purpose of the procedure is to wind up the assets of the debtor with a view to repaying all
creditors. 33 — Judgment in Redmond Stichting, cited above in footnote 2 1 , paragraph 2 1 . 34 — C a s e C-209/91 Watson Rask and Others [1992] ECR 27 — Judgments in Abels, cited above in footnote 25, paragraph I-5755, paragraph 2 1 . The agreement between Philips and 30; Case 179/83 FNV [1985] ECR 5 1 1 , paragraph 7; and ISS provided that ISS would assume responsibility for Botzen, cited above in footnote 2 3 , paragraph 9. However, managing Philips's canteens (including menu planning, the Directive does not apply to transfers made in insol- purchasing, preparation, dispatch and all administrative vency proceedings in which the assets of the insolvent functions, together with staff recruitment and training), transferor are wound up under the control of the taking over Pnilips's permanent canteen staff on the same competent judicial authority. terms and conditions as regards wages and seniority. 28 — J u d g m e n t in Ny Mølle Kro, cited above in footnote 10, Philips agreed to pay ISS a fixed monthly fee to cover all paragraph 1 5 . . ordinary operating expenditure and the costs of various 29 — Judgment in Daddy's Dance Hall, cited above in footnote products, such as disposable plates and packaging, servi- ettes and cleaning materials.
In addition, Philips made 10, paragraph 11. available to ISS without charge approved sales and 30 — Joined Cases 144/87 and 145/87 Berg [1988] ECR 2559, production premises, the necessary canteen equipment, paragraph 20. electricity, hot water and telephones, and carried out 31 — Judgment in Bork, cited above in footnote 24, paragraph general maintenance of the premises and equipment and 20. refuse removal.
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customers, without any transfer of 32. In its judgment in Schmidt39 the Court assets; 35 in the event of the transfer of an held that the application of the Directive undertaking which is being wound up by covered a situation in which an undertak- the court if the undertaking continues to ing entrusted by contract to another under- trade; 36 and where a company in voluntary taking the responsibility for carrying out liquidation transfers all or part of its assets cleaning operations which were previously to another company from which the performed by its own staff, even where, worker then takes his orders which the prior to the transfer, such work was carried company in liquidation states are to be out by a single employee. Here it confirmed carried out. 3 7 that the decisive criterion for establishing whether there is a transfer for the purposes of the Directive is whether the business in question retains its identity, which is indi- cated inter alia by the actual continuation or resumption by the new employer of the same or similar activities.
The Court took 31. In contrast, the taking over, with a view the — to my mind quite radical — view to completing, with the consent of the •that neither the fact that the activity awarder of the main building contract, transferred was, for the transferor, only an works started by another undertaking, of ancillary activity not necessarily connected two apprentices and an employee, together with its objects, nor the fact that the with the materials assigned to those works, activity in question was performed, prior does not constitute a transfer of an under- to the transfer, by a single employee, nor taking, business or part of a business, the absence of any transfer of tangible within the meaning of Article 1(1) of the assets, was sufficient to preclude the appli-
Directive. Such a transfer could come cation of the Directive. within the terms of the Directive only if it included the transfer of a body of assets enabling the activities or certain activities of the transferor undertaking to be carried on in a stable way. In its judgment in Rygaard, the Court made clear that the transfer of an undertaking, a business or part of a business within the meaning of the Directive presupposes that the transfer relates to a stable economic entity whose activity is not limited to performing one specific works contract and that such is not the case of an undertaking which transfers to another undertaking one of its works with a view to its completion. 38 39 — Case C-392/92 Schmidt [1994] ECR 1-1311.
The applicant was employed by a bank to clean the premises of one of its branches. She was dismissed because the cleaning was in future to be carried out by a specialist firm which already undertook the cleaning or most of the bank's offices. The 35—Joined Cases C-171/94 and C-172/94 Merckx and Neu- cleaning firm offered to employ the applicant for a huys [1996] ECR 1-1253, paragraph 32. monthly wage which was higher than that which she had 36 — Case C-319/94 Dethier [1998] ECR 1-1061, paragraph 32. previously been receiving. However, she was not prepared to work on those terms, as she calculated that her hourly 37 — Case C-399/96 Europièces [1998] ECR 1-6965, paragraph wage would in fact be lower as a result of the increase in 36. the surface area to be cleaned, and brought an action 38 — Cited above in footnote 18, paragraphs 20 to 23. challenging her dismissal.
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33. However, that case-law was qualified, led the Court to conclude that the Directive from 1997 onwards, by the judgments in does not apply to a situation in which there Süzen, 40 Hernández Vidal 41 and Sánchez is no concomitant transfer, from one under- Hidalgo, 42 in which the Court placed taking to the other, of significant tangible greater emphasis on the need for the or intangible assets or taking over by the transfer to relate to a stable economic new employer of a major part of the entity, the term entity referring to an workforce, in terms of their numbers and organised grouping of persons and assets skills, assigned by his predecessor to the 43 enabling an economic activity which pur- performance of the contract. sues a specific objective to be carried on.
In its judgment in Hernández Vidal, con- cerning an undertaking which employed another undertaking to clean its premises and decided to end the contract and there- In its judgment in Süzen, the Court stated after carry out the work itself, the Court that, where a contract for cleaning services, made it clear that, whilst such an entity concluded with an outside undertaking, is must be sufficiently structured and auton- cancelled and awarded to another outside omous, it need not necessarily have signifi- undertaking, the mere fact that the service cant assets, tangible or intangible. Indeed, provided by the old and the new awardees in certain sectors, such as cleaning, these of a contract is similar is not sufficient to assets are often reduced to their most basic support the conclusion that an economic and the activity is essentially based on entity has been transferred: an entity can- manpower. Thus, an organised grouping of not be reduced to the activity entrusted to wage earners who are specifically and it. Its identity also emerges from other permanently assigned to a common task factors, such as its workforce, its manage- may, in the absence of other factors of ment staff, the way in which its work is production, amount to an economic organised, its operating methods or indeed, entity. 44 where appropriate, the operational resources available to it. That reasoning
40 — Cited above in footnote 19. Advocate General La Pergola observed in point 10 of his Opinion in this case '...the fact that the majority of workers engaged in a particular activity may subsequently have been employed, with corresponding duties, by another undertaking, is not in my view the decisive criterion (or controlling test) for establishing whether the activity in question exhibits the The questions referred in Sanchez Hidalgo characteristics of organisational independence which dis- concerned public bodies which had con- tinguish the concept of undertaking There is a transfer of an undertaking, business or part of a business within the tracted out a home-help service for persons meaning of the Directive only if the activity is being pursued and at the same time one undertaking has in need and a surveillance contract to two transferred tangible and intangible assets to the other'. 41 — Joined Cases C-127/96, C-229/96 and C-74/97 Hernandez Vidal [1998] ECR I-8179. 42 — Joined Cases C-173/96 and C-247/96 Sánchez Hidalgo and 43 — Cited above in footnote 19, paragraphs 15 and 23. Others [1998] ECR I-8237. 44 — Cited above in footnote 4 1 , paragraph 27.
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private undertakings and decided, on the obligations of an employer towards expiry of the contracts, not to renew them employees of the entity; the economic with the same undertakings but to conclude entity must retain its identity, which is contracts with other undertakings. In that marked both by the continuation by the judgment, the Court observed in addition new employer of the same activities and by that the presence of a sufficiently structured the continuity of its workforce, its manage- and autonomous entity within the under- ment staff, the way in which its work is taking awarded the contract is, in principle, organised, its operating methods or the not affected by the circumstance, which operational resources available to it. occurs quite frequently, that the undertak- ing is subject to observance of precise obligations imposed on it by the contract- awarding body. Although the influence which the contract-awarding body has on the service provided by the undertaking concerned may be extensive, the service- providing undertaking nevertheless nor- mally retains a certain degree of freedom, albeit reduced, in organising and perform- ing the service in question, without its task being capable of being interpreted as sim- ply one of making personnel available to 35. According to the order of the Leeds the contract-awarding body. 45 Industrial Tribunal, that court is satisfied that ACC had been active for many years in driveage work in the mining industry and that it decided to stop doing the work itself because of the high cost of its workforce. It seems that its workforce was dismissed as the works contracted for were completed 34. It is clear from the judicial reasoning and, at the same time, in response to RJB's set out above that the criteria identified tenders, it submitted bids based on the hitherto by the Court for determining labour costs of AMS to which it intended to whether there has been a transfer within subcontract and to which it did subcontract the meaning of Article 1(1) of Directive the performance of the contracts with the 77/187 are the following: there must be an consent of the colliery owner. The redun- economic entity, defined as an organised dant workers, who were paid the compen- grouping of persons and assets for the sation due to them, were taken on, without exercise of an economic activity which any break in continuity but under less pursues a specific objective; that entity favourable conditions than those they had must be organised in a stable manner and previously enjoyed, by AMS, which not limited to performing one specific required manpower to carry out the con- works contract; there must be a change, tracts. This state of affairs, which went on in terms of contractual relations, in the for several years, did not appear temporary legal or natural person who is responsible but could be described as stable, particu- for carrying on the business and who incurs larly bearing in mind that it only changed when the colliery owner insisted that the working conditions of the employees con- 45 — Cited above in footnote 42, paragraph 27. cerned be improved. From that moment
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ACC took back control of performance of ownership, management and plant and are the works and the workforce who were engaged in the same activity, greatly com- promptly dismissed by AMS. plicates the task of the national court, but it is not decisive so as to preclude a transfer within the meaning of Article 1(1) of Directive 77/187.
36. In determining whether or not there was a transfer of part of a business from ACC to AMS, the Leeds Industrial Tribunal will have to decide whether the driveage work in the Prince of Wales colliery, 38. The Court has been telling national originally carried out by ACC, which, in courts that, in determining whether the August 1994, ACC decided to begin sub- conditions for the transfer of an economic contracting to AMS, a company set up in entity are met, it is necessary to consider all 1993, constituted an identifiable economic the facts characterising the transaction in entity within ACC, organised in a stable question, including in particular the type of manner, defined as an organised grouping undertaking or business, whether or not its of persons and assets which pursues a tangible assets, such as buildings and specific objective; whether that decision to movable property, are transferred, the subcontract was temporary in being con- value of its intangible assets at the time of fined to the execution of specific works or the transfer, whether or not the majority of whether it was of an indefinite nature; its employees are taken over by the new whether the employees dismissed by one employer, whether or not its customers are undertaking and taken on immediately by transferred, the degree of similarity the other were precisely the ones who had between the activities carried on before been assigned permanently to the perfor- and after the transfer, and the period, if any, mance of that activity; whether, as a result for which those activities were suspended. of the subcontracting of the activity and However, all those circumstances are subsequent dismissal and re-engagement of merely single factors in the overall assess- employees, AMS assumed an employer's ment to be made and cannot therefore be obligations towards the workers assigned considered in isolation. 46 to that activity. Finally, if the driveage work in the Prince of Wales colliery constituted an economic entity, the national court will have to determine whether it retained its identity when it was subcontracted to AMS and when ACC took it on again having decided to end that arrangement. 39. As regards the seven facts which the national court puts before this Court in its
46—Judgments in Spijkers, cited above in footnote 17, paragraph 13, Ny Mølle Kro, cited above in footnote 10, paragraph 19, Redmond Stichting, cited above in footnote 21, paragraph 24, Merckx and Neuhuys, cited above in 37. It cannot be denied that the fact that footnote 35, paragraph 17, Sitzen, cited above in footnote ACC and AMS are companies in the same 19, paragraph 14, Sánchez Hidalgo, cited above in footnote 42, paragraph 29 and Hernández Vidal, cited corporate group, that they have common above in footnote 41, paragraph 29.
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second question, I have to say that none of normal feature of a transfer of undertak- them appears to me to be decisive in ings. ascertaining whether or not there was a transfer within the meaning of Article 1(1) of the Directive.
I cannot formulate an opinion regarding point (vi) of the second question referred for a preliminary ruling, according to which, after being employed by AMS, the employees carried out work for both ACC and AMS as needed by the local manage- ment who were responsible for both com- panies, as there is not sufficient informa- tion. If the work undertaken by ACC was the driving of tunnels in the Prince of Wales collieries and it ceased such work when it 40. For instance, the fact that there was no subcontracted it to AMS, presumably dis- transfer of assets between ACC and AMS missing the majority of its workforce, (point (ii)) may be due to the fact that it is which was taken on by AMS, I have to common in that industry for plant and ask to what activity ACC could be assign- equipment to be provided by the colliery ing the staff which AMS employed. owner. In any event, according to the order for reference, AMS had the use of equip- ment which previously ACC had used and the absence of any transfer of premises, management or infrastructure may be explained by the fact that both companies 41. It remains for me to consider point (i) shared them. Whilst there was no transfer of the second question, which deals with of customers (point (iii)), it is clear that the dismissal of the workers by ACC and there was a sole client and that the their subsequent engagement by AMS for operation took place with its consent. The the driveage work which ACC had been fact that there was little or no contempor- carrying out. aneity between the movement of the work- ers of ACC to AMS and the beginning or end of the contracts (point (iv)) may very well be due, as the Commission observes, to the fact that a transfer of undertakings is a complex legal operation which may take 42. As I have already said, Article 4(1) of some time to complete. The fact that ACC the Directive provides that the transfer is and AMS share the same management and not in itself to constitute grounds for premises (point (v)) does not preclude one dismissal by the transferor or the trans- transferring to the other an economic entity feree, although this provision is not to having the characteristics described. The stand in the way of dismissals that may fact that the work undertaken was contin- take place for economic, technical or uous and there was no suspension of organisational reasons entailing changes in activities or change in the manner in which the workforce. The applicants in the main they were conducted (point (vii)) is a proceedings were dismissed by ACC pur-
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portedly for precisely such economic rea- in which the dismissal took place and, in sons. particular, the fact that it took effect on a date close to that of the transfer and that the employees in question were taken on again by the transferee.47
However, this provision applies to a trans- fer of an undertaking within the meaning of the Directive, and ACC denies that such a transfer took place. In my opinion, that Similarly, the Court has held that employ- undertaking not only dismissed its work- ees unlawfully dismissed by the transferor shortly before the undertaking is transfer- force because, having the intention to red and not taken on by the transferee may subcontract the work to AMS, it would claim, as against the transferee, that their not need them any more, but apparently dismissal was unlawful.48 also in order to meet that company's requirement for a specialist workforce to carry out the contracts without having to go in search of it. It cannot, therefore, be ruled out that there was an intention to evade the obligations imposed by the Directive by transferring workers, accord- ing to the requirements of the works 44. If the Leeds Industrial Tribunal arrives contracts, from one undertaking to another, at the conclusion that there was a transfer reducing their salaries in order to bring within the meaning of Article 1(1) of the down labour costs. Directive, this will mean that the dismissal of the employees concerned by ACC was void and that their terms and conditions of employment should have been maintained by the transferee undertaking. Since the transferee is subrogated to the transferor's rights and obligations under the employ- ment relationship, that relationship may be 43. In any event, the Court has held that, if altered with regard to the transferee to the the employees of an undertaking are dis- same extent as it could have been with missed solely as a result of a transfer, regard to the transferor, provided that the contrary to Article 4(1) of the Directive, transfer of the undertaking itself may never those employees must be regarded as still in constitute the reason for that amendment. the employ of the undertaking, with the Nevertheless, the Directive does not pre- result that the employer's obligations clude an agreement with the new employer towards them are automatically transferred to alter the employment relationship, in so from the transferor to the transferee in far as such an alteration is permitted by the accordance with Article 3(1) of the Direc- tive. In order to determine whether the employees were dismissed solely by reason 47 — Judgment in Bork, cited above in footnote 24, paragraph of the transfer, it is necessary to take into 18. 48 — Judgment in Dethier, cited above in footnote 36, para- consideration the objective circumstances graph 42.
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applicable national law in situations other 46. I cannot accept that analysis. It is true than the transfer of an undertaking. 49 that, in its judgment in Viho v Commis sion, 51 the Court of Justice held that a parent company and its subsidiaries form a single economic unit within which the subsidiaries do not enjoy real autonomy in determining their course of action in the 5 market, 2but carry out the instructions issued to them by the parent company controlling them. 53 However, this case-law was established in the field of competition I gather from the facts set out by the law, in which context the term undertaking national court that the British legislation must be understood as designating an does not allow an employer to alter the economic unit for the purpose of the terms and conditions of employment of its subject-matter of the agreement in question employees for the worse. 50 Otherwise ACC even if in law that economic unit consists of would not have needed to submit tenders several persons, natural or legal. 5 4 The based on AMS labour costs and subcon Court of First Instance has added that, for tract the work to that company. the purposes of the application of the competition rules, the unified conduct on the market of the parent company and its subsidiaries takes precedence over the for mal separation between those companies as a result of their separate legal personal ities. 5 5
45. Finally, the respondent in the main proceedings claims, in its observations, that the Directive is not applicable to two companies such as ACC and AMS, both subsidiaries of AMCO, which functioned as a single economic unit working together towards common commercial objectives 51 — Case C-73/95 Ρ Viho ν Commission [1996] ECR 1-5457, paragraph 16. and that, for the purposes of competition 52 — In these proceedings, it was found that the parent company law, they would be regarded as a single owned 100% of the capital of its subsidiaries established in various Member States and that the sales and marketing undertaking. Moreover, AMS did not have activities of the subsidiaries were directed by an area team which was appointed by the parent company and which real autonomy in determining its course of controlled, in particular, sales targets, gross margins, sales action in the market, being merely an costs, cash flow and stocks. That team also laid down the range of products to be sold, monitored advertising and instrument whereby the commercial objec issued directives concerning prices and discounts. tives of the group were realised. 53 — Case-law established in the judgments in Case 48/69 ICI ν Commission [1972] ECR 619, paragraphs 133 and 134; Case 15/74 Sterling Drug [1974] ECR 1147, paragraph 41; Case 16/74 Winthrop [1974] ECR 1183, paragraph 32; Case 30/87 Bodson [1988] ECR 2479, paragraph 19; 49 — Judgment in Daddy's Dance Hall, cited above in footnote and Case 66/86 Ahmed Saeed Flugreisen and Others [1989] ECR 803, paragraph 35. 10, paragraphs 17 and 18. 50 — This analysis was confirmed by the replies given by the 54 — Case 170/83 Hydrotherm [1984] ECR 2999, paragraph representatives of the applicants in the main proceedings 11. and by the Government of the United Kingdom to the 55 — Case T-102/92 Vibo ν Commission [1995] ECR II-17, questions I put to them at the hearing. paragraph 50.
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47. As can be seen, the definition of under- application of Directive 77/187, and is of taking applied in competition law for no assistance in deciding whether there was giving effect to Articles 85 and 86 of the a transfer of an undertaking, business or EC treaty (now Articles 81 EC and 82 EC) part of a business between two companies differs greatly from the definition of under- belonging to the same corporate group, taking as an economic entity developed by even where they are wholly-owned subsi- the Court of Justice for the purposes of the diaries of the same parent company.
VI — Conclusion
48. In the light of the foregoing arguments, I propose that the Court of Justice should reply to the questions referred for a preliminary ruling by the Leeds Industrial Tribunal as follows:
(1) Article 1(1) of Council Directive 77/187/EEC of 14 February 1977 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 businesses must be interpreted as meaning that the Directive is applicable to two companies which belong to the same corporate group, which have common ownership, management and premises and carry out the same work, provided that the transaction in question meets the criteria laid down by the Court of Justice for establishing that there has been a transfer of an undertaking.
(2) It is for the Leeds Industrial Tribunal to determine whether, in the present case, the relevant criteria have been fulfilled and whether, therefore, an economic entity has been transferred and has retained its identity.
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