This case raises the question of whether a service provision change amounted the transfer of an economic entity that retained its identity (i.e. an old style transfer within Art 1(1) – TUPE Reg 3(1)(a)). (In Portugal there is no service provision regulation similar to Reg 3(1)(b)).
Here a security company, ICTS, lost its contract to provide security guards to Securitas who sought to argue that the mere taking over of a contract could not amount to transfer. It had refused to take on the ICTS employees. It also sought to rely on the provision of a collective agreement which provided that if the employer lost a customer this would not amount to a transfer. The question also arose as to whether such a provision was void.
The ECJ Judgment
The ECJ held that there was no principle that a service provision change could never amount to the transfer of an economic entity that retained its identity. in particular:
(a) there was no requirement that the transferor and transferee had to be in a direct contractual relationship. A transfer could take place via a third party intermediary (i.e. a tender process).
(b) It was necessary to consider “all the facts characterising the transaction in question, including in particular the type of undertaking or business, 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”.
(c) The background facts require an overall assessment of the case and none should be taken in isolation.
(d) In assessing the facts, the type of undertaking or business concerned must be considered. The degree of importance to be attached to each criterion will necessarily vary according to the activity carried or the production or operating methods employed in the relevant undertaking, business or part of a business. In a sector 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 transferee. Where, however, the activity is based essentially on equipment, the fact that the former employees of an undertaking are not taken over by the new contractor to perform that activity, as in the case in the main proceedings, is not sufficient to preclude the existence of a transfer.
(e) The fact that the tangible assets essential to the performance of the activity, taken over by the new contractor, did not belong to its predecessor but were merely provided by the contracting entity did not preclude the existence of a transfer. However, only the equipment that was actually used in order to provide the services, excluding the facilities that were the subject of those services, were be taken into consideration.
(e) Because the collective agreement contained a provision that prevented a transfer when the employer (ICTS) lost a customer and this provision did not permit any consideration of the factual circumstances it contravened Art 1(1) of the directive and was of no effect.
The point of principle in the case, namely whether, an SPC can amount to an old style transfer is unlikely to be of much interest given there are express provisions in Reg 3(1)(b) dealing with this. However, the case does provide a useful reminder that the requirements for old style transfers are broad and fact sensitive and this may be helpful in those cases in which the SPC requirements are not fulfilled.