Desperately seeking Suzen? Two contrary rulings from the European Court of Justice have shrouded the law on transfers of undertakings in complexity for years, writes Sue Nickson, but the situation might soon improve.
| Author | Nickson, Sue |
| Position | Legal |
In Pinnacle AIC Ltd v Honeyman & Cape Industrial Services Ltd the courts have been reviewing the vexed question of whether the Transfer of Undertakings (Protection of Employment) Regulations 1981 (Tupe) apply on a change of contractors where no assets or employees are taken on by the new contractor.
Rather unexpectedly for hardened Tupe-watchers, a welcome consistency has emerged, which seems to resolve the conflict between two differing lines of authority from the European Court of Justice (ECJ). In Spijkers the ECJ stressed in 1986 that the transfer of assets and employees was only one relevant factor when deciding whether the acquired rights directive (ARD) applied--the key question was whether the entity retained its identity after a transfer. If so, the directive and Tupe would apply. But in Suzen the ECJ held in 1997that Tupe could not apply if there was no transfer of significant assets and most of the workforce was not taken on. The identity retention issue was therefore less important.
In Pinnacle, nine scaffolders employed by Cape lost their jobs when a client moved its contract for scaffolding services to Pinnacle. The nine had worked mainly on the contract in question. The client's new contract with Pinnacle was different from the one with Cape in that Pinnacle was to provide multi-disciplinary services (including, but not limited to, the same scaffolding services as before). No tangible assets transferred from Cape to Pinnacle. Pinnacle had its own scaffolders and declined to take on the Cape nine, claiming that Tupe did not apply. The employees brought tribunal claims against both Cape and Pinnacle for unfair dismissal, breach of contract and redundancy payments.
If Tupe applied, liability for the claims would pass to Pinnacle. The tribunal decided that it did apply on the basis that the scaffolders and the scaffolding contract together comprised an economic entity. The tribunal felt that it retained its identity after the transfer. Contrary to the Siizen decision, the fact that no assets or employees were transferred was not a deciding factor.
Pinnacle went to the Employment Appeals Tribunal...
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