The European Court of Justice (“ECJ”) has delivered a ruling on the issue of what happens when there is a transfer of an undertaking under the Acquired Rights Directive which involves multiple transferees.
In the case of ISS Facility Services NV v Sonia Govaerts and Atalian NV, ISS held cleaning contracts with the city of Ghent which were divided into three lots. Ms Govaerts was the project manager for all three lots. The contracts were re-tendered and awarded to two new contractors, with one of the contractors taking two of the lots (to which Ms Govaerts was 85% assigned) and the other taking the third lot (to which Ms Govaerts was 15% assigned). The Belgian courts took the view that the transfer qualified as a transfer of an undertaking under the ARD and so the employment of Ms Govaerts would transfer. They then asked the ECJ to rule on whether Ms Govaerts’ employment should be split between the new contractors or whether it should transfer only to the contractor that acquired the lots on which she was mainly employed.
Surprisingly, the ECJ found that the ARD did not prevent an employee’s contract of employment being split into part-time contracts, each in proportion to the extent to which they were assigned to the parts of the business acquired by the transferees. However, the ECJ held, this will only occur if such a division is possible and does not cause a worsening of the working conditions of the individual or have an adverse effect on their rights, which are matters for national courts/tribunals to decide. In addition, the ECJ found that, if a division of the contract is not possible or would adversely affect the rights of the worker, the transferee(s) would be regarded as being responsible for any consequent termination of the employment relationship, even if that termination was initiated by the worker.
The ECJ’s ruling may lead to a change in approach to such situations in the UK, where the current case law does not support the splitting of an individual’s employment across multiple transferees. This is no doubt influenced by the difficulty inherent in dividing up a person’s employment in a way that does not adversely affect their position. Given that the transferee(s) would be liable if the employment contract is subsequently terminated, and such terminations would inevitably be by reason of the transfer, the risk for transferees is that these dismissals would be automatically unfair unless an “ETO” (e.g. redundancy) reason can be argued. As a starting point, transferee employers involved in outsourcings and business acquisitions should investigate carefully the extent to which they have adequate indemnity protection against such outcomes.