In this case the closure of an undertaking for a period of 5 months did not have the effect of preventing a transfer under the Acquired Rights Directive.
CS was music teacher employed by a music school. The School was initially operated by a local authority but from 1997, after its operation was put out to tender, until 31 March 2013, it was operated by ME. ME managed the premises, the facilities and instruments and took on the staff. It operated the School on behalf of the local authority and was paid by them. There was a commercial dispute in 2013 which led to the local authority ceasing to pay ME in February 2013. As a consequence, on the 27 March 2013 ME dismissed all of the staff and closed the School with effect from the 31 March 2013. It returned the premises, instruments and facilities to the local authority. In August 2013 another contractor, In Pulso Musical, took over the school and commenced the operation of the School in September 2013 and continued to operate the School for the academic years 2013/14 to 2015/16.
CS claimed there was transfer of his employment from ME to In Pulso Musical. The Spanish High Court referred to the CJEU the question of whether there was a transfer where the activity ceased with effect from the 1 April 2013, two months before the end of the academic year 2012/13, and recommenced in in September 2013 at the start of the the new academic year 2013/14.
The CJEU Judgment
The CJEU held that there was a transfer. In doing so it restated the well-known principles for determining whether there is a transfer of an undertaking, in particular:
- There is transfer when there is a change in the legal or natural person carrying out the undertaking; whether or not the ownership of tangible assets transfer.
- The decisive criterion is whether the entity retains its identity as indicated by the fact that inter alia the operation is actually continued or resumed.
- To determine whether that condition is met, it is necessary to consider all the facts characterising the transaction concerned, including the type of undertaking or business concerned, whether or not its tangible assets, such as buildings and movable property, are transferred, the value of its intangible assets at the time of the transfer, whether or not the majority of its employees are taken over by the new employer, whether or not its customers are transferred, the degree of similarity between the activities carried on before and after the transfer, and the period, if any, for which those activities were suspended. An overall assessment of all of the circumstances must be considered.
- The degree of importance attached to each criterion will vary depending on the activity.
- Where the activity is based essentially on manpower, the identity of an economic entity cannot be retained if the majority of its employees are not taken on by the alleged transferee.
- However, in a sector where the activity is based essentially on equipment, the failure of the new contractor to take over the staff which its predecessor employed to perform the same activity is not sufficient to preclude the existence of a transfer of an entity which retains its identity
Applying those principles to this case the CJEU observed:
- The local authority made available to the new contractor all the material resources which it had assigned to the former contractor.
- As the activity was not an activity based essentially on manpower, the fact that they did not transfer was not determinative.
- The fact that the ownership of assets did not transfer from one contractor to another was also not determinative.
- Although the closure of the School for a temporary period was a factor to be taken into account, this was not determinative in a case where three months of the closure was during school holidays and the incoming contractor commenced the activity at the start of the new academic year.
- Whether there was a transfer was matter for the national court to decide but it was not precluded by the 5 months cessation of activities in this case.
The underlying facts would have fulfilled a service provision change under TUPE. This does not exist in Spanish law nor under the Directive and that is why the CJEU looked at the matter from first principles. The central issue in the case (cessation of the operation of the undertaking or service for a period of time) is of importance to any kind of transfer