C-340/01

3. This case is connected with previous rulings of the Court in which the appli- cation of Directive 77/187 in relation to the 2. The main proceedings raise the question contracting-out of services was the princi- whether there is a transfer of an undertak- pal issue. Nevertheless, there are clear ing within the meaning of Directive 77/187 differences between the factual situations where an undertaking provides meals for in judgments such as Sitzen 3and Temco. 4 patients and staff on behalf of a care For example, the new undertaking has establishment and these activities were taken over none of the staff of the old previously exercised by another undertak- undertaking. Nor have the operational ing. The new undertaking makes use of resources been transferred directly from facilities such as gas, water and energy and the old undertaking to the new operator. service premises and the necessary kitchen Only some of the operational resources equipment that was used by the previous made available by the contracting authority operator and is made available by the are used both by the old and the new contracting authority. However, the new undertaking.

1 — Original language: Dutch. 3 — Case C-13/95 [1997] ECR I-1259. 2 — OJ 1977 L 61, p. 26. 4 — Case C-51/00 (2002) ECR I-969.

I - 14025

OPINION OF MR GEELHOED — CASE C-340/01

I I— Legal background 6. The directive has been amended twice. Council Directive 98/50/EC of 29 June 1998 clarified certain terms in particular in the light of the case-law of the Court. 5 In order to rationalise the wording the Coun- cil repealed Directive 77/187 on 12 March 2001 and replaced it with Council Direc- tive 2001/23/EC on the approximation of A — Community law the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, busi- nesses or parts of undertakings or busi- nesses. 6

5. Article 2(a) provides that for the pur- poses of this directive 'transferor' means any natural or legal person who, by reason of a transfer within the meaning of 'Subject to subparagraph (a)..., there is a Article 1(1), ceases to be the employer in transfer within the meaning of this directive respect of the undertaking, business or part where there is a transfer of an economic of the business. Under Article 2(b), for the entity which retains its identity, meaning an purposes of the directive 'transferee' means organised grouping of resources which has any natural or legal person who, by reason the objective of pursuing an economic of a transfer within the meaning of activity, whether or not that activity is Article 1(1), becomes the employer in central or ancillary.' respect of the undertaking, business or part of the business. Under Article 3(1), the transferor's rights and obligations arising 5 — Council Directive of 29 June 1998 amending Directive from a contract of employment or from an 77/187/EEC on the approximation of the laws of the Member States relating to the safeguarding of employees' employment relationship existing on the rights in the event of transfers of undertakings, businesses or parts of businesses (OJ 1998 L 201, p. 88). The period for date of a transfer within the meaning of implementation of Directive 98/50 was extended to 17 July Article 1(1) are, by reason of such transfer, 2001. to be transferred to the transferee. 6 — OJ 2001 L 82, p. 16. Unless stated otherwise, reference is made below to the wording of the original directive.

11. In 1990 the authority of an unspecified hospital (hereinafter 'the hospital auth- ority') concluded with Sanrest, a canteen- kitchen operating company, an agreement under which the latter took over the management of catering services, consisting of full catering for patients and staff, at a price calculated on the basis of a day of 9. In Austria Directive 77/187 was imple- catering per person. In addition, it was mented by the Arbeitsvertragsrechtsanpass- required to adhere to a specified range of ungsgesetz (AVRAG). Paragraph 3 of the meals (various dietary foods). The produc- AVRAG provides that where, for example, tion of meals was to take place on the a part of a business is transferred to another hospital's premises. The operations employer, the latter takes over, as the assigned to Sanrest included drawing up employer, all rights and obligations deriv- menus, purchasing, storage, production, ing from the employment relationships portioning and transporting the portioned existing on the date of the transfer. Accord- meals to the wards (but not distributing ing to the settled case-law of the Oberster them to the patients), serving meals in the Gerichtshof, that provision must be inter- staff dining room and cleaning the dirty preted in conformity with the directive, crockery and premises used. The premises having regard to the decisions of the Court themselves, as well as gas, water and energy of Justice on Directive 77/187, as amended. and the necessary large and small equip- ment, were made available by the hospital authority. Any damage to that equipment 7 — See the fourth recital in the preamble. was to be compensated for by Sanrest.

13. Sanrest decided that this was a case of a transfer of part of a business. However, Sodexho's manager refused to take over Sanrest's materials, stock and employees. It also received no accounting data, menu 15. This view is disputed by Sodexho. In plans, diet plans, recipe collections or brief, it bases its view on the fact that it did general records. The only items which it not take over from Sanrest any tangible or took over from Sanrest's other customers intangible assets such as stock, menu plans, were some 6 to 10 menus for the nursery diet plans, recipe collections, accounting situated near the hospital. data or general records, or any part of the workforce. The service premises, together with the equipment, which alone were taken over, did not constitute a work organisation unit for the purposes of a transfer of a business. In some cases the 14. The plaintiffs in the main proceedings, equipment taken over from the hospital who were recruited by Sanrest in the even had to be supplemented. It manages catering operation or in the cafeteria in the kitchens on the basis of its own the hospital, seek a declaration of the organisation, accounting and know-how, continuing existence of their employment and also draws up its own meal plans. relationship with Sodexho. They base their Consequently, there has been, in its view, claim, in which they are supported by merely a change of contractor.

I - 14028

ABLER AND OTHERS

16. The first-instance court dismissed the undertaking which does not take over the plaintiffs' claim and concluded that there assets (staff, stock, accounting material and was no transfer of a business. The court menu, diet, recipe or general records) hearing the appeal did not share this view brought in by the first catering undertaking and amended the judgment accordingly. itself?'

'Is there a transfer of part of a business within the meaning of Article 1 of Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the 19. Sodexho takes the view that there is no Member States relating to the safeguarding transfer of an undertaking. It argues that of employees' rights in the event of there was no direct contact with the former transfers of undertakings, businesses or operator of the kitchens and the cafeteria parts of businesses where a hospital auth- and that it did not take over any tangible or ority, which has previously employed a intangible assets from that operator. catering undertaking to supply meals and beverages to patients and hospital staff at a price based on a day of catering per person, and to that end has made available to that undertaking water and energy as well as its service premises (hospital kitchen) together with the necessary equipment, transfers, 20. Sodexho does not dispute the fact that after giving notice of termination of that the hospital kitchens and cafeteria are an contract, those operations and the assets organised grouping of persons and tangible previously made available to that first and intangible assets facilitating the exer- catering undertaking to a second catering cise of an economic activity.

I - 14029

OPINION OF MR GEELHOED — CASE C-340/01

23. Sodexho draws a distinction between the various sectors under which the dining room and the cafeteria could come. They 26. If the hospital dining room and cafe- are the sectors in which manpower is the teria belong to the sector in which man- principal factor, the sectors in which tan- power and tangible assets are both gible assets are the decisive factor, and regarded as factors important to the activ- sectors in which both these factors are of ity concerned, there can, in the view of equal importance to the activity concerned. Sodexho, likewise be no transfer of an Sodexho itself does not go on to state to undertaking because no staff and assets which sector, in its view, the hospital have been transferred from the previous to dining room and cafeteria belong. the present contractor.

I - 14030

ABLER AND OTHERS

27. The Commission takes the view that 31. Secondly, in the view of the Commis- there is a transfer of an undertaking in the sion the hospital kitchens and other facil- present case. It arrives at this conclusion on ities, which are regarded as tangible assets the basis of the arguments set out in brief which contribute significantly to the per- below. formance of the activity, were taken over by Sodexho. However, the new undertak- ing took over none of the operational resources — stock, accounting material and menu, diet, recipe or general rec- ords — brought in by the old operator. However, the Commission considers that 28. Like the other parties that have sub- these assets are of less importance. mitted observations, the Commission con- siders that this case concerns a stable economic entity whose activity is not limited to performing one specific works contract.

38. Where a new contractor does not take over significant tangible assets or a major part of the staff, there is no transfer of an 35. The observations submitted by the undertaking as set out in the directive. The United Kingdom Government show that it objective of the new contractor in taking regards catering as a labour-intensive sec- over the staff or otherwise is not relevant to tor. In such a sector it is possible for a new whether there is a transfer within the contractor to evade application of the meaning of the directive. This answer directive if it takes over very few assets or provides legal certainty but consequently part of the staff of the old contractor. In enables new contractors to circumvent the such a labour-intensive sector it is generally directive. the vulnerable employees with relatively few skills who are affected where it is decided that there is no transfer of an undertaking.

40. The Court could, thirdly, rule that the 43. The United Kingdom Government con- intention of the new contractor not to take siders that this inconsistency should be over any employees is one of the factors to defined as follows. Where essential assets be taken into consideration in determining are transferred directly from the old con- whether or not there is a transfer. How- tractor to the new contractor, this is a ever, the national court must examine all decisive factor as to whether or not there is the factors in assessing whether or not there a transfer. However, where essential assets is a transfer. are made available to the new contractor by the contracting authority and it is customary for the most important assets necessary for the performance of the activ- ity to be provided by it, such an arrange- ment is not decisive as to whether or not there has been a transfer. 41. The second question which must be considered arises from the fact that the new contractor puts to use significant fixed assets (such as kitchen equipment and facilities) which were used previously by the old contractor but in both cases these 44. The United Kingdom Government asks facilities were made available by the con- the Court to rule on how this conflict is to tracting authority. be resolved in the present case.

I - 14033

OPINION OF MR GEELHOED — CASE C-340/01

actions relating to the contracting-out of 48. Furthermore, the Court has repeatedly services. In my view, this steadily expan- ruled that: 'The decisive criterion for estab- ding case-law provides a significant basis lishing the existence of a transfer within the for answering the question submitted for a meaning of the directive is whether the preliminary ruling. entity in question retains its identity, as indicated inter alia by the fact that its operation is actually continued or resumed.' 1 0Thus, two fundamental con- ditions must be satisfied for there to be a transfer of an undertaking, business or part of a business.

46. It is clear from the wording of Article 1(1) of the directive that its appli- cability is subject to three conditions: the transfer must result in a change of employer; it must concern an undertaking, a business or part of a business; and it must 49. Firstly, the transfer must relate to a be the result of a contract. 9 stable economic entity whose activity is not limited to performing one specific works contract. The term 'entity' thus refers to an organised grouping of persons and tangible and intangible assets facilitating the exer- cise of an economic activity which pursues a specific objective. 11

(a) the type of undertaking or business;

B — Must the change of contractor be regarded as the transfer of an undertaking? (b) whether or not its tangible assets, such as buildings and movable property, are transferred;

52. Before considering whether or not the entity in question retains its identity, I (c) the value of its intangible assets at the would first like to draw attention to the time of the transfer; circumstances under which one contractor was replaced by another.

(d) whether or not essential staff are taken over by the new employer; 53. In the present case the hospital con- tracted out to a catering undertaking the catering which it is required to provide for the staff as an employer and for the patients as a care establishment. The hospital is the (e) whether or not its customers are trans- recipient of services and must therefore be ferred; classified as the customer of the caterer. To receive the services it makes essential oper- ational resources available to the service provider. In such a situation there is a one-on-one relationship with the contrac- (f) the degree of similarity between the tor. Following the termination of the activities carried on before and after contract with the old contractor, a new the transfer; and contract was concluded with Sodexho after a call for tenders. Sanrest continued to exist as a business.

(g) the period, if any, for which those 12 — Spijkers, cited in footnote 10 above, paragraph 13; Süzen, cited in footnote 3 above, paragraph 14; and Temco, cited activities are suspended. in footnote 4 above, paragraph 24.

54. In these circumstances there is only the 58. A unilateral legal transaction, such as loss of a contract by the original service the termination of a lease agreement, is also provider and the acquisition of a contract effected within the context of a legal by the new service provider. A catering agreement and can therefore fall within business will provide services to several the scope of the directive. In Redmond customers at various locations. Therefore, I Stichting 13 a Netherlands municipality consider that the loss of only one customer decided to change its policy on subsidies cannot be equated with the transfer of an for the provision of assistance to drug undertaking. addicts. The municipality withdrew its subsidy from one foundation and then awarded it to another. In assessing the applicability of Directive 77/187 the Court attached importance to the fact that the new and the old foundation arranged the transfer of the patients, accommodation, knowledge and resources by mutual agree- 55. As will be demonstrated below, there is ment. In that judgment the Court held that support for this view also in the case-law of the requirement of a legal agreement had the Court. In this case-law the Court places been satisfied in that case: 'In that con- a broad interpretation on the term 'trans- nection, it is inappropriate to take account fer' but also restricts the scope thereof. of the nature of the subsidy, which is granted by a unilateral act coupled with certain conditions in some Member States and by subsidy contracts in others. In every case, the change in the recipient of the subsidy is carried out in the context of contractual relations within the meaning of the directive... .' 56. The directive is applicable wherever, in the context of contractual relations, there is a change in the natural or legal person responsible for carrying on the business and entering into the obligations of an employer towards employees of the undertaking. 59. In Merckx and Neuhuys 14 the old and the new motor vehicle dealers had reached, by amending a dealership agreement, a mutual settlement on the costs incurred in transferring staff which confirmed the existence of a legal transfer within the meaning of the directive. In Collino and 57. An undertaking must be transferred Chiapperò 15the transfer was based on the and 'as a result of a legal transfer or law. In this case too the Court found that merger' (Article 1(1)(a)). The fact that this term is not to be construed as meaning that the transfer must be effected pursuant to a 13 — Case C-29/91 [1992] ECR I-3189. legal agreement is already clear from the 14 — Cited in footnote 10 above. Court's previous case-law. 15 — Case C-343/98 [2000] ECR I-6659.

61. However, the Court has also stated that the scope of the term 'transfer of an undertaking' is not without limitation. The lower limit of this broad interpretation 63. In the light of Süzen I therefore con- is formed by the Court's ruling in Siizen: 16 clude that there is no transfer of an under- '[t]he mere fact that the service provided by taking in the present case because there is the old and the new awardees of a contract only the loss of a contract. The position can is similar does not therefore support the be different only if it is nevertheless clear conclusion that an economic entity has that the undertaking in question retains its been transferred.... The mere loss of a identity. This is so if the contract between, service contract to a competitor cannot in this case, the hospital and the new therefore by itself indicate the existence of a contractor lays down certain conditions, such as inter alia the obligation to take over the staff, or other factors show that (part 16 — See Süzen, cited in footnote 3 above, paragraphs 15 and 16. of) the undertaking has been transferred.

I - 14037

OPINION OF MR GEELHOED — CASE C-340/01

C — Retention of identity not there is the transfer of an undertaking. I should also point out that these factors must be considered jointly. 17

61. It is conceivable that catering for a care establishment such as a hospital also meets a number of particular quality specifi- cations on account of the specific health requirements imposed at the workplace. 65. As stated above, this case turns on the They can consist of extra attention to second condition, that is to say whether it is matters of hygiene and specific require- possible to determine from other facts ments placed on meals for particular whether or not the undertaking in question groups of patients (diets etc.). Nor can the retains its identity and is thus continued (see point 50 above). I will consider below the factors which the Court takes into 17 — Spijkers, cited in footnote 10 above, paragraph 13; Süzen, cited in footnote 3 above, paragraph 14; and Temco, cited consideration in determining whether or in footnote 4 above, paragraph 24.

I - 14038

ABLER AND OTHERS

70. The case-law, which is based on the 18 — See Süzen, cited in footnote 3 above, paragraph 21; Joined sectors in which an economic unit is able to Cases C-127/96, C-229/96 and C-74/97 Hernandez Vidal and Others [1998] ECR I-8179, paragraph 27; and Temco, function almost exclusively on the basis of cited in footnote 4 above, paragraph 26.

I - 14039

OPINION OF MR GEELHOED — CASE C-340/01

are, in addition to the labour factor, of assets are decisive as regards the identity of greater importance. Secondly, skills, an undertaking and constitute an important knowledge, planning and organisation are competition factor on this market. considerably more important than in the case of cleaning and security operations.

Tangible assets

72. In view of the particular characteristics of catering it is necessary primarily to consider the intangible assets, the tangible assets and the staff in order to demonstrate 75. The operational resources made avail- that identity is retained. able by the contracting authority are, together with the intangible assets, import- ant to the performance of the activity concerned.

Staff

78. The third point concerns whether or not essential staff were taken over by the 80. The second problem lies in the possi- new trader. In this case Sodexho took over bility of abuse cited by the United Kingdom no members of staff from Sanrest. Strictly Government and the Commission. New speaking, that indicates, in the light of the contractors can circumvent application of Court's case-law, the absence of any the directive in labour-intensive sectors by transfer. However, certain additional not taking over the staff of the old con- remarks are appropriate in this respect. tractor. I concur with the view of the United Kingdom Government and the Commission that if particular importance is attached to whether or not the new contractor intended to take over the staff of the old contractor, in order to be able to determine whether or not there is a 79. According to the Court's case-law, the transfer, the protection afforded by the takeover or otherwise of the staff is a factor directive will essentially depend on the which the national court must take into intentions of the parties concerned. consideration in assessing the transaction concerned. However, in this respect there are two problems which, moreover, are closely associated with one another. The purpose of Directive 77/187 is 'to ensure that the rights of employees are safe- guarded in the event of a change of employer by enabling them to remain in employment with the new employer on the terms and conditions agreed with the trans- 81. This is contrary to the objective of the feror'. However, the case-law assumes that Community legislature which seeks to pro- there is a transfer of an undertaking where tect workers in the event that the owner of a major part of the staff are taken over. The an undertaking changes. However, it must

82. Therefore, in my view the criterion of whether or not the staff were taken over by the new contractor cannot be taken into account as a decisive factor, firstly, because 85. A further criterion which the Court this case does not concern a sector which is uses as a possible indication of the transfer shaped solely by the use of staff but a sector of an undertaking is the takeover of the in which, as the national court has found, customers. Sodexho entered into a contrac- inter alia tangible assets and intangible tual obligation to operate the hospital assets are essential to the activity to be dining room and cafeteria. On the one performed and, secondly, because the ques- hand, the hospital is Sodexho's customer in tion of whether the staff should have been that it has contracted out to Sodexho taken over is precisely what is at issue in the certain services for its staff and patients. proceedings before the national court. On the other hand, the final customers of the dining room and cafeteria are the hospital staff and patients. Therefore, there is a closed group of customers. These customers remain the same before and after the transfer.

83. Therefore, it is necessary to use objec- tive grounds to establish whether the entity in question retains its identity. In this 86. In cases such as this, in which a connection the takeover of the staff cannot catering contract is concluded between a be a 'prerequisite' for the transfer of an contracting authority and a contractor for undertaking because if it is concluded that the provision of catering services con- the directive is applicable in this case the tracted out by an undertaking, it is inherent takeover of the staff is the logical con- in the nature of such catering services that sequence. the customers remain the same.

89. The case-law concerning transfer 91. In the present case the facts do not lead within the meaning of Article 1(1) of the to the conclusion that there is the transfer directive shows that the Court places a of an undertaking. It is clear from the facts broad interpretation on the retention of the identity of the economic entity but the identity must display a certain degree of 19 — See Sitzen, cited in footnote 3 above, paragraph 15; Case C-175/99 Mayeur [2000] ECR I-7755, paragraph 49; and organisation and stability and cannot stem my Opinion in Temco, cited in footnote 4 above, point 55. solely from a contract with only one 20 — Sitzen, cited in footnote 3 above, paragraphs 15 and 16, and Liikenne, cited in footnote 8 above, paragraph 34. customer. Identity must also emerge from 21 —Sitzen, cited in footnote 3 above, paragraph 18; Temco, other factors, such as its workforce, its cited in footnote 4 above, paragraph 25; and Hernández Vidal and Others, cited in footnote 18 above, paragraph management staff, the way in which its 26.

I - 14043

OPINION OF MR GEELHOED — CASE C-340/01

94. This opinion based on existing case-law is, in my view, also satisfactory. I have already set out in greater detail my view that the Court should, both for legal and 92. Nor do the other facts and circum- economic reasons, exercise restraint in stances lead to another conclusion. Only applying Directive 77/187 to sectors in the contract to provide certain services has which contractual relations are generally been transferred and that is in no way of a temporary nature and can change, as comparable to the transfer of a going has happened in the present case. 22 concern. The identity of the operator of the dining room and cafeteria has changed considerably. Following the termination of 22 — Opinion in Temco, cited in footnote 4 above. See, in the contract with Sanrest, Sodexho took particular, paragraphs 33 to 40.

I - 14044

ABLER AND OTHERS

VI — Conclusion

95. On the basis of the foregoing, I propose that the Court should answer the question submitted by the national court as follows: