TUD174

Ms Nuala Heffernan was contracted by the Department of Social Protection (“the Department”), pursuant to a contract for services, to run and manage a Branch Office in Edenderry, Co. Offaly. Ms Heffernan was required under her contract with the Department to provide the premises and associated facilities, including staff, necessary to deliver the services to be provided by her as an agent of the Department.

Ms Heffernan retired on 11 December 2015. In anticipation of that event, the Department made a decision to change its arrangements in so far as the services that hitherto had been provided to members of the public via the Edenderry Branch Office were concerned. It did not seek to enter into a further contract for services with an alternative independent contractor to provide those services but decided to consolidate the delivery of those services with other services that it intended to provide through its planned new Intreo Office in Edenderry.

Ms Dunne (“the Complainant”) was employed (under a contract of service) by Ms Heffernan as her Deputy Manager between 2 June 2002 and 11 December 2015. She was paid approximately €650.00 per week. The Complainant was informed by Ms Heffernan in or about October 2015 that her own impending retirement and the closure of the Branch Office did not give rise to a redundancy situation and that she (Ms Heffernan) had received advice to the effect that the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (“the Regulations”) applied to the Complainant as Ms Heffernan’s business ‘would continue under the management of a new employer’. Ms Heffernan also advised the Complainant that the Department had made it known that it took a contrary view and did not accept that the proposed consolidation of the delivery of services in the Edenderry area constituted a transfer of undertakings within the meaning of the Regulations. The Department had written to Ms Heffernan on 2 November 2015 to that effect.

The Complainant was not paid a redundancy payment by her former employer and neither was she afforded the opportunity by the Department to transfer her employment to its new Intreo Office in Edenderry. She, therefore, referred a complaint under the Regulations to the Workplace Relations Commission. The complaint was heard by an Adjudication Officer on 7 March 2016 and a decision in favour of the Complainant issued on 14 June 2016. It is from this decision that the Department (alternatively referred to as “the Respondent” in this determination) appealed to this Court. The Notice of Appeal was received by the Court on 25 July 2016. The Court sat initially on 18 October 2016 to consider the appeal. At that sitting, the Court also requested further written legal submissions from both parties. The Court sat again on 24 January 2017 having received and considered the parties’ additional written submissions.

The Parties’ Submissions

Submissions on behalf of the Complainant

The single issue before the Court can be succinctly stated as follows: did a transfer of undertaking occur on 11 December 2015 when Ms Heffernan ceased operating the Branch Office in Edenderry and the Department consolidated the delivery of the services offered to the public via the Branch Office up to and including that date with the other services it was then delivering through its new Intreo Office, such that the Complainant was entitled to continuous employment with the Respondent on no less favourable terms and conditions of employment.

In support of his submission that a transfer of undertakings did occur on 11 December 2015, Counsel for the Complainant adverted to the following facts and events:

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  •The Respondent engaged a firm of logistics experts to remove all files and records from the Branch Office, commencing in October 2015;

  •Older files and records were removed to the Respondent’s premises in Sligo for secure storage whereas current files and all other property of the Respondent (including the computer and scanner used by the Complainant) were removed to the premises in which the Intreo Office was housed in Edenderry;

  •The services provided by the Branch Office continued to be provided through the Intreo Office;

  •Both offices cover the same geographical area (i.e. certain parts of Kinnegad; Clonard; Enfield; Carbury; Daingean; Rhode; Clonbulloge; Broadford; Cogherinkoe; Castlejordan and Mount Lucas);

  •An automated message was placed on the former Branch Office’s telephone number to inform callers that the services had been relocated to the Intreo Office at Carrick Road in Edenderry and giving the telephone number for that office;

  •The Local Office Number (603) which had been in use to identify customers of the Branch Office remains in use at the Intreo Office.

Counsel also opened before this Court a number of judgments of the Court of Justice (including: Joined Cases C-232/04 and C-233/04Nurten G�ney-G�rres and Gul Demir v Securicor Aviation (Germany) Ltd and K�tter Aviation Security GmbH & Co. KG; Joined Cases C-127/96, C-229/90 and C-74/97Hernandez Vidal and Others; Case C-458/12Lorenzo Amatori and Others v Telecom Italis SpA, Telecom Italia Information Technology Srl,formerly Shared Service Center Srl) which he submitted, having regard to the facts outlined above, were clear authority for the proposition that the Branch Office operated by Ms Heffernan constituted an autonomous economic entity within the meaning of Directive 2001/23 and the Regulations. He further submitted that certain of the assets used by Ms Heffernan in her business (many of the assets which were owned by the Respondent) were subsequently used in the Respondent’s Intreo Office to serve the same individuals as had been serviced by the Branch Office prior to its closure. Counsel also referred the Court to the judgment of the ECJ in Joined Cases C-171/94 and C-172/94Albert Merckx, Patrick Neuhuys and Ford Motor Company Belgium SAto highlight the significance which he submitted to this Court, following the lead of the ECJ, should place on the transfer of customers within the same defined geographical area as an indicator of a transfer of an economic entity between undertakings.

In his supplementary written submission, counsel for the Complainant referred the Court in particular to the following: paragraphs 11, 12 and 31 of the judgment of the ECJ in Case C-29/91Dr Sophie Redmond Stichting v Hendrikus Bartol and Others; and paragraphs 25 and 26 of Case C-160/14Jaoa Filipe Ferreira da Silva e Brito and Others v Estado Portogues.On the basis of the foregoing, Counsel submitted that because all of the services previously provided by the Branch Office, and all of its customers were transferred to the Intreo Office without any period of suspension, the Court should find that a relevant transfer had occurred.

Submissions on behalf of the Respondent

Counsel for the Respondent submits that the Regulations do not apply in circumstances where the work which was previously the subject of an outsourced contract to Ms Heffernan was subsequently “insourced” by the Respondent into an entirely new premises from which a different “platform of services”/a “much wider array of services” was provided to the public of Edenderry via the Intreo Office. In this respect, Counsel requested the Court to find that the economic entity which was the former Branch Office did not retain its identity. Counsel provided the Court with a comprehensive list of the services provided through the Branch Office when it was operating and also a list of the additional services currently provided by the Respondent through the Intreo Office.

The principal facts that Counsel for the Respondent outlined to the Court and on which his submission that no transfer of undertakings occurred as between Ms Heffernan’s Branch Office and the new Intreo Office in Edenderry in December 2015 can be summarised as follows:

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  a. No buildings transferred; the building in which the Complainant worked in her former employment was leased/owned by her employer and the Department had no proprietary interest in same whether during the term of or her employment or thereafter;

  b. No intangible assets (whether IP rights, goodwill or otherwise) that belonged to the Complainant’s former employer transferred to the Department;

  c. No employees transferred;

  d. The activities carried on in the former Branch Office were limited in nature and were thereafter subsumed into a suite of services provided by the Department’s Intreo Office.

With respect to the files that were returned to the Respondent on the closure of the Branch Office, Counsel stated: “Such a transfer is not a transfer of assets as the Department was the owner and/or data controller at all times.” He makes similar observations in relation to the computers, adding that these were removed for data protection purposes but denies they were physically transferred to the Intreo Office. Counsel opines that “A transfer of an asset cannot occur if you already own an asset.” When commenting on the relevant facts of the judgment of the Court of Justice in Case C-24/85Spijkers v Abattoir &Anor, Counsel made a similar argument when he stated: “Furthermore, the reference to ‘stock’ inSpijkersis not of any pertinence given that the data and files that the former Branch Manager worked with were at all material times the property of the Department of Social Protection.” Likewise, Counsel submitted, when making observations on Case C-29/91Dr Sophie Redmond Stichting v Bartol & Ors,that the facts of the latter case and the instant appeal could be distinguished on the basis that a transfer of” knowledge and resources” had occurred inDr Sophie Redmond Stichtingbut no such transfer had occurred on the facts of the instant case because “the files that the Branch Manager worked with were at all material times the property of the Department of Social Protection.”

In a somewhat convoluted fashion, Counsel for the Respondent accepts that there was a transfer of service users from the Branch Office to the Intreo Office but submitted that the fact that those service users who had previously accessed benefits via the Branch Office thereafter accessed those same services via the Intreo Office “is not indicative of a transfer of a stable economic entity in the same way as the launderette example” he had given earlier in his written submission when he said that “if a local launderette sells its business to another entity and the customers are transferred to a new launderette this is indicative of a transfer of a stable economic entity.” Counsel, however, did not offer any reasons for his submission that the transfer of customers does not carry the same weight in both the instant case and in the hypothetical scenario he outlined. Counsel expressed this very same argument a second time when he stated: “[T]he transfer of customers in the orthodox sense [sic] is of limited assessment benefit in the present case given that recipients of social protection [sic] would inevitably transfer as a result of the in-sourcing decision made by the Department.”

In a supplemental written submission lodged with the Court, Counsel for the Respondent reiterated his view that the facts of the instant case clearly indicated that the economic activity in question (i.e. the social welfare services previously provided to the public via the Branch Office in Edenderry) did not “retain its identity”, as required by Article 1(b) of Directive 2001/23, when the delivery of those services commenced from the Respondent’s new Intreo Office in Edenderry following Ms Heffernan’s retirement. On this basis, Counsel invited the Court to find that no transfer within the meaning of the Directive/Regulations occurred on the facts of this case.

At the specific request of the Court, Counsel submitted written observations on the judgment of the Court of Justice in Case C-29/91Dr Sophie Redmond Stichting v Bartol & Orsand the potential application, if any, of that Court’s reasoning therein to the facts of the instant appeal. Counsel commented as follows: “A point of distinction between Stichting and the present matter is that Stichting related to the cessation of funding by the local authority and its replacement by a third party foundation whereas in the present matter the position of Branch Manager was governed by contract and upon the cessation of the contract, arising from the retirement of the Branch Manager, it was decided by the Department, for modernisation, customer service and legitimate reasons, to ‘in-source’ the work into the Department and to replace the Branch Office with the services provided by Intreo Offices”.

Discussion & Decision

The aim of Directive 2001/23 (and by extension, that of the Regulations) is to safeguard the rights and entitlements of employees arising from their employment relationship when the business or part of the business in which they are employed transfers from one employer to another employer. The Court of Justice has consistently stated that the decisive criterion for establishing the existence of a transfer within the meaning of the Directive is whether the entity in question retains is identity, as indicated by the fact that its operation is actually continued or resumed. (See, inter alia, Case 24/85Spijkers, paragraphs 11 and 12; Case C-13/95Suzen, paragraph 10; and Case 340/01Abler and Others, paragraph 29). The Complainant has made the case that the services provided by the Branch Office prior to 11 December 2015 were thereafter provided by the Intreo Office. This is not disputed by the Respondent albeit that the Respondent contends that, because those particular services were at that point integrated into a broader suite of services, the continuation in the provision of the relevant services cannot be regarded as giving rise to a transfer within the meaning of the Regulations. (We refer to this aspect of the Respondent’s submission below).

The Court of Justice has developed a considerable body of jurisprudence in relation to transfer of undertakings ever since it was first called upon to interpret the provisions of the original so-called ‘Acquired Rights Directive’ (Directive 77/187). Nevertheless, it is widely accepted that the Court’s judgment in Case 24/85SpijkersvGebroeders Benedik Abbatoir CVremains a cornerstone of that jurisprudence. The Court stated the following at paragraphs 12 to 15 inSpijkers:

• “12 Consequently, a transfer of an undertaking, business or part of a business does not occur merely because its assets are disposed of. Instead it is necessary to consider, in a case such as the present, whether the business was disposed of as a going concern, as would be indicated, inter alia, by the fact that its operation was actually continued or resumed by the new employer, with the same or similar activities.

  13 In order to determine whether those conditions are met, it is necessary to consider all the facts characterizing the transaction in question, including the type of undertaking or business, whether or not the business' s 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 and 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. It should be noted, however, that all those circumstances are merely single factors in the overall assessment which must be made and cannot therefore be considered in isolation.

  14 it is for the national court to make the necessary factual appraisal, in the light of the criteria for interpretation set out above, in order to establish whether or not there is a transfer in the sense indicated above.

  15 Consequently, in reply to the questions submitted it must be held that article 1(1) of Directive No 77/187 of 14 February 1977 must be interpreted as meaning that the expression ' transfer of an undertaking, business or part of a business to another employer' envisages the case in which the business in question retains its identity. In order to establish whether or not such a transfer has taken place in a case such as that before the national court, it is necessary to consider whether, having regard to all the facts characterizing the transaction, the business was disposed of as a going concern, as would be indicated inter alia by the fact that its operation was actually continued or resumed by the new employer, with the same or similar activities.”

In Case C-29/91,Dr. Sophie Redmond Stichting v Hendrikus Bartol and Others, the ECJ held that the expression ‘legal transfer’ as used in the Directive "covers a situation in which a public authority decides to terminate the subsidy paid to one legal person, as a result of which the activities of that legal person are fully and definitively terminated, and to transfer it to another legal person with a similar aim.” It is common case that the Respondent (“a public authority”) terminated the financial arrangement with Ms Heffernan that had been in place pursuant to the contract of services between those two parties when that contract naturally expired on Ms Heffernan’ reaching retirement age. Undoubtedly then, having regard to the submissions made to this Court by both parties to the within proceedings, the activities of the Branch Office which existed in order to facilitate the delivery of services which were specified in the relevant contract for services were “fully and definitively terminated”. Those services were also “transfer[red] to another legal person with a similar aim” – i.e. they were transferred to the Department itself (in the guise of its Intreo Office) – a legal person other than Ms Heffernan – and continued thereafter to be delivered to the public of Edenderry (i.e. “with a similar aim”).

At Paragraph 31 of its judgment inDr. Sophie Redmond Stichting,the Court, re-iterating what it had previously stated inSpijkers, albeit applying that to the particular facts of the case before it, states:

• “31 … Article 1(1) of Directive 77/187 must … be interpreted as meaning that that expression ["transfer of an undertaking, business or part of a business"] refers to the case in which the entity in question has retained its identity. In order to ascertain whether or not there has been such a transfer in a case such as that which is the subject of the main proceedings, it is necessary to determine, having regard to all the factual circumstances characterizing the operation in question, whether the functions performed are in fact carried out or resumed by the new legal person with the same or similar activities, it being understood that activities of a special nature which constitute independent functions may, where appropriate, be equated with a business or part of a business within the meaning of the directive.”

In its brief summary above of the second written submission of Counsel for the Respondent, the Court notes that Counsel has sought to distinguish the material facts of the instant case from those that applied in Dr Sophie Redmond on two counts: (i) Ms Heffernan’s arrangement was one that that was based on contract whereas inDr Sophie Redmondthe foundation in question had been in receipt of local authority funding which enabled it to deliver a particular social service until a decision was made to apply the funding to another foundation instead to enable it to deliver the relevant service; and (ii) In the instant case, the delivery of the service previously entrusted to the Branch Office became part of the service delivered by the Intreo Office following Ms Heffernan’s retirement whereas in Dr Sophie Redmond the relevant service was delivered at all times by a third party.

Having given careful consideration to Counsel’s observations, and in particularly light of the passage quoted above from paragraph 31 of the ECJ’s judgment inDr Sophie Redmond, this Court is of the view that the differences between the facts of the instant case and those of the case before the ECJ do not support the conclusions that Counsel appears to draw from them. In the event that it is determined that in fact a transfer of undertaking did occur as between the Branch Office and the Intreo Office on the closure of the former, then the difference between the two cases become merely one as between a transfer of undertaking based on a decision by a transferee to insource a service previously outsource versus a so-called second-generation outsourcing (i.e. third party to third party).

Counsel for the Respondent in this appeal has made much of the fact that no staff at all transferred from the Branch Office to the Intreo Office before or after 11 December 2015. As stated previously he submitted that “a principal component of a stable economic entity is its staff. The absence of any staff being re-deployed is highly indicative of a non-transfer.” Counsel supports his submission by reference to a passage from a specified academic text. It would be inappropriate for this Court to neglect to comment on Counsel’s submission in this regard. In its judgment inSuzen, the ECJ drew a distinction between businesses are asset-reliant, on the one hand, and those that are labour-intensive, on the other. The ECJ, while strongly endorsing the reasoning it had applied inSpijkersandDr Sophie Redmond, also stated at paragraph 18 of its judgment inSuzen:

• “18 As pointed out in paragraph 14 of this judgment, the national court, in assessing the facts characterizing the transaction in question, must take into account among other things the type of undertaking or business concerned. It follows that the degree of importance to be attached to each criterion for determining whether or not there has been a transfer within the meaning of the directive will necessarily vary according to the activity carried on, or indeed the production or operating methods employed in the relevant undertaking, business or part of a business. Where in particular an economic entity is able, in certain sectors, to function without any significant tangible or intangible assets, the maintenance of its identity following the transaction affecting it cannot, logically, depend on the transfer of such assets.”

We must turn briefly to Counsel’s observation to the effect that, “The absence of any staff being re-deployed is highly indicative of a non-transfer”. When one has regard to the accumulated jurisprudence of the ECJ in relation to transfer of undertakings – only some of which has been discussed in this determination – Counsel’s aforementioned observation can only be imbued with any meaning if it is understood to apply to a change of provider in a labour intensive (as opposed to an asset reliant) business. It has been the subject of much commentary, both in the subsequent case law and in academic writing, that a consequence of the reasoning adopted by the ECJ in its judgment inSuzenis that an operator of a labour-intensive service business can avoid coming within the scope of the Directive when he/she acquires a related business by simply refusing to take over any employees engaged in the acquired business. The Irish Employment Appeals Tribunal noted the ‘illogic’ of this outcome is the following paragraph of its determination inCannon v Noonan Cleaning Services Ltd[1998] E.L.R. 153:

• “There is no doubt that it in a service undertaking the workforce and its expertise constitute a major part of the undertaking but it is difficult to understand how, where an employer refuses to take on the workers of the previous contractor, he can escape the rigours of the Directive, while a contractor who takes on a major part of the workforce, perhaps out of magnanimity, will be caught by it. It would seem that the Directive, in the former instance, has not addressed the mischief in the law that it was intended to do.”

Conclusion

On the basis of the foregoing analysis of the case law of the Court of Justice interpreting the Directive and having regard to all of the submissions made by the parties to the instant appeal, the Court determines that a transfer of undertaking within the meaning of the Directive and Regulations occurred on or about 11 December 2015 when Ms Heffernan retired as Manager of the Branch Office in Edenderry and the responsibility for delivery of the services provided up to that point by that office was assumed by the new Intreo Office in the town. The Complainant herein, by virtue of the rights bestowed on her by the Regulations and by operation of law, was entitled, therefore, to transfer her employment from the Branch Office to the Intreo Office on no less favourable terms and conditions and to have her continuity of service preserved. The Complainant’s annual salary on the date of the transfer (based on her 2015 earnings) was €33,800.00

The Court accordingly determines that the Complainant should be reinstated by the Respondent with effect from the date of the said transfer of undertaking on 11 December 2015. In addition, the Court awards the Complainant €5,000.00 by way of redress for the Respondent’s failure to comply with the Regulations. The Adjudication Officer’s decision is varied accordingly.

The Court so determines.

Signed on behalf of the Labour Court




19 April 2017______________________
MNAlan Haugh
Deputy Chairman


NOTE

Enquiries concerning this Determination should be addressed to Michael Neville, Court Secretary.