No TUPE transfer where there was a long gap between old and new contracts


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The Advocate General has given his opinion that there was no transfer of an undertaking for the purposes of the Acquired Rights Directive (ARD) where the contract to operate a Spanish music school terminated for non-performance and the service was resumed by another contractor after a gap of five months in Colino Siguenza v Ayuntamiento de Valladolid and others.

Mr Sigüenza worked for Musicos, a small private company which operated a municipal music school for a public authority. Due to a sharp decline in pupils and, following a collective dismissal procedure, Musicos dismissed all its' staff and ceased all activities. It was subsequently wound up. A new contract to operate the music school was then awarded which began five months' later. Mr Sigüenza brought unfair dismissal claims against Musicos, the public authority and the new contractor.

The Advocate General held that there had been no transfer of an undertaking for the purposes of the ARD. In order to amount to a transfer under the ARD there had to be an organised grouping of persons and assets, organised with a view to carrying on an economic activity. Here there was no economic activity as Musicos had been incorporated solely for the purposes of tendering for the music school contract (it did not provide services to anyone other than the public authority), so when the contract came to an end so did the activity of Musicos.

In case the European Court of Justice (ECJ) should take a different view on the non-existence of an entity at the relevant time, the Advocate General considered the issue of whether, if there was an economic entity, it retained its identity. He concluded that it did. The fact that there was a five-month gap in services did not necessarily preclude a finding that this was a going concern. However, the period of inactivity was not confined to the summer holiday, and was therefore much longer than the services users (the parents and pupils) would have expected.

Take note: The Advocate General's conclusion that there was no longer any identifiable entity at the point at which a transfer could have taken place relied on the fact that Musicos had been established for the purpose of delivering this specific contract, and had no desire to work for other clients. His opinion that a five-month gap in services did not necessarily preclude a finding that this was a going concern ties in with domestic case law where it has been found that a temporary cessation of activities does not necessarily defeat the operation of TUPE, though the purpose, nature and length of the cessation will all be relevant to a consideration of whether TUPE continues to apply.

This article is taken from HR Law January 2018.

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