TUPE potentially applies even when there is a long gap between old and new contracts


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The European Court of Justice (ECJ) has held that there was potentially a 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. The matter has been left to the referring court to establish.

The European Court of Justice (ECJ) has held that there was potentially a 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 Sigüenza v Ayuntamiento de Valladolid and others. The matter has been left to the referring court to establish.

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, ceased all activities and 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 ECJ held that there had potentially been a transfer of an undertaking for the purposes of the ARD. Here the economic activity required a significant amount of material resources (musical instruments, facilities and premises) which were all made available to the new contractor. The ECJ made the point that a temporary suspension of activities does not preclude the possibility of an economic entity retaining its identity with the result that TUPE would apply. This was particularly the case as, in the five months for which the activities ceased, three of the months were during the school holidays.

When coming to the decision that there was potentially an economic entity which retained its identity, the ECJ concluded that it appeared that the staff employed by Musicos had been dismissed for "economic, technical or organisational reasons entailing changes in the workforce", provided that the dismissal of the employees and the delayed appointment of the new contractor was not a deliberate measure intended to deprive the employees of their rights under TUPE. This was left to the referring court to decide.

Take note: The ECJ's finding that a five-month gap in services did not necessarily preclude a finding that this was a going concern ties in with UK 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 whether TUPE applies.

This article is taken from HR Law - September 2018.

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