The Labour Court recently held that a “transfer of an undertaking” had taken place in a scenario where there was no transfer of assets - but where the same core assets continued to be used after the transfer.

The Transfer of Undertakings Regulations

Under the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003, when there is a business transfer to which the Regulations apply, then the employees automatically transfer with the business to the new operator of the business. The employees transfer with their existing terms and conditions of employment safeguarded and their continuity of service intact. 

What Constitutes a Business Transfer?

A business transfer may occur in many situations such as the sale of a business or a part of a business; a merger; the lease of a business; an internal reorganisation; the outsourcing of particular activities or functions or when there is a change in a service provider. Whether the Regulations apply to a particular business transfer however is a complex matter which is often the subject of disputes.

Euro Car Parks (Ireland) Limited and Dermot Kelly (TUD1810)

Euro Car Parks was engaged to run the Paul Quay Car Park in Wexford in July 2013, but that contract was terminated, with effect from November 2016, because the new owners of the car park were insourcing the running of the car park. 

Mr Kelly was employed at the car park from October 2007.

Following the notice that its contract was terminated, Euro Car Parks informed Mr Kelly that the Regulations would apply in this situation and that he was therefore entitled to transfer his employment, on the same terms and conditions, etc., to the new operator of the car park.  The new car park operator was of the view that the Regulations did not apply and Mr Kelly was left without employment. 

An Adjudication Officer held that the Regulations did not apply to the transfer and stated the following:

a)    it is accepted that no transfer of assets occurred,

b)    no staff transferred and

c)    the previous holder of the contract did not cease to fully exist nor was a business or part of a business belonging to it transferred.

Euro Car Parks appealed the Adjudication Officer’s decision to the Labour Court.  According to Euro Car Parks, the business carried on at the car park up until the date of the termination of its contract, was in all material respects identical to the business carried on after that date by the new operator; the Regulations applied and Mr Kelly was entitled to transfer his employment to the new car park operator.

The Labour Court’s Determination

The Labour Court in considering the matter, made a number of observations/findings, to include:

• The aim of the Regulations and the related EU Directive 2001/23, known as the Acquired Rights Directive, is to safeguard the rights and entitlements of employees arising from their employment relationship when the business, or the part of the business, in which they are employed, transfers from one employer to another.
• The European Court of Justice (ECJ) has consistently stated that the decisive criteria for establishing the existence of a transfer is whether the entity in question retains its identity, as indicated by the fact that its operation is actually continued or resumed post transfer.
• Firstly, it needed to be determined whether the operation of the car park could be characterised as a stable economic entity, and if it was, then it had to consider whether or not the essential characteristics of that economic entity were maintained following the insourcing of the operation of the car park. 
• The ECJ’s judgment in Spijkers (Case 24/85) continues to be fundamental to the interpretation of the law relating to the transfer of undertakings and in determining the conditions which must be considered when establishing if there has been a transfer of an undertaking.

These conditions include whether the business is disposed of as a going concern as would be indicated by the fact that the operation is actually continued or resumed by the new employer with the same or similar activities; the type of business; whether or not tangible assets such as buildings or movable property are transferred; the value of the intangible assets at the time of the transfer; whether the majority of employees are taken over by the new employer; whether customers are transferred; the degree of similarity between the activities carried on before and after the transfer; and the period, if any, for which the activities are suspended.

• It is clear from the Spijkers case that all of these conditions are merely single factors in an overall assessment and cannot be considered in isolation.  The degree of importance to be attached to each criterion for determining whether or not there has been a transfer will vary according to the activity carried on or the production or operating methods employed in the business.
• According to ECJ case law, the Acquired Rights Directive could apply where there was no change in the legal owner of a business, but rather a change in the person responsible for the day to day operation of the business. 
• The Labour Court focused on the ECJ judgment in Abler and others(C-340/01).  In Abler, the ECJ found that a transfer occurred where a provider of catering services was succeeded by a second provider, in circumstances where both providers had the use of the same kitchens, food storage and food preparation facilities, owned by the client on whose behalf the services were provided.  The ECJ determined that the fact that the ownership of these assets did not transfer did not mean that the Acquired Rights Directive did not apply. 
• Referring to Abler, the Labour Court held that "this parallels, mutatis mutandis, the circumstances that apply to the successive operators of a facility such as a multi-storey car parking complex: both operators provide a service (i.e. operating the service of providing car parking facilities to the paying public) utilising that same substantial and fixed essential asset (i.e. the car park building, ticket machines, barriers, etc.)". 

The Labour Court set aside the decision of the Adjudication Officer, concluding a transfer of an undertaking within the meaning of the Regulations had occurred and Mr Kelly was entitled to transfer his employment to the new operator of the car park.  

It is clear from this case that it is vital when assessing the factual circumstances surrounding any business transfer to consider not only whether the core assets of the business have transferred but also whether there is any continuation in the use of the core assets of the business post transfer notwithstanding that there is no change in the ownership of such assets. 

Read the full case transcript here