FULL RECOMMENDATION
SECTION 11 (1), EUROPEAN COMMUNITIES (PROTECTION OF EMPLOYEES ON TRANSFER OF UNDERTAKINGS) REGULATION, 2003 PARTIES : OVERPASS LIMITED T/A OCEAN PROPERTY MANAGEMENT (REPRESENTED BY MACSWEENEY & CO, SOLICITORS) - AND - DAVID LAVIN (REPRESENTED BY PURDY FITZGERALD SOLICITORS) DIVISION : Chairman: Ms Jenkinson Employer Member: Mr Marie Worker Member: Ms Tanham |
1. Appeal of Adjudication Officer Decision No: ADJ-00004236, Complaint/Dispute Reference No(s): CA-00004844-001, CA-00004844-003, CA-00004844-005, CA-00004844-006, CA-00004844-007, CA-00004844-009.
BACKGROUND:
2. The Worker appealed the Decision of the Adjudication Officer to the Labour Court on 29 March 2017. A Labour Court hearing took place on 20 September 2017. The following is the Decision of the Court:
DETERMINATION:
This is an appeal by Mr David Lavin against the Decision of an Adjudication Officer ADJ-00004236 under the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (“the Regulations”). In this Determination the parties are referred to as they were at first instance, hence Mr Lavin is referred to as ‘the Complainant’. The company, Overpass Limited t/a Ocean Property Management, is referred to as ‘the Respondent’.
The Adjudication Officer found that the complaint was not well founded and the complaint under the Regulations accordingly failed.
The Complainant appealed the Adjudication Officer Decision to this Court on 29thMarch 2017. The appeal came before the Court on 20thSeptember 2017.
Background to the Appeal
The Complainant in this case was employed in April 2004 by a company called Gleann Na Rí Property Management (Galway) Ltd (hereinafter, ‘Gleann Na Rí’). The company was engaged in letting and property management services and employed the Complainant as a Night Security Operative, along with three other staff in administrative/management positions.
It is not disputed that up until the beginning of February 2016, Gleann Na Rí Property Management (Galway) Ltd provided lettings and property management services at the Gleann Na Rí Student Residential Complex in Galway on behalf of a company called Murrough Management Ltd, which is an Owner Manager Company responsible for the common areas and management of the Complex. Gleann Na Rí provided these services from when the Complex was constructed in and around 2002.
At a meeting on 15thJanuary 2016, the Complainant was informed that the Directors of Gleann Na Rí had decided to cease operations and wind down the company, with the result that his position with the company would become redundant as of Friday 26thFebruary 2016. The Complainant received a letter confirming this position on the day, also dated 15thJanuary 2016. Gleann Na Rí was subsequently unable to meet its statutory redundancy obligations and the Complainant ultimately received his redundancy payment from the Social Insurance Fund of the then Department of Social Protection.
Following the decision of the Directors of Gleann Na Rí to cease trading, Murrough Management Ltd conducted a tender process to appoint a new service provider. The Respondent, Overpass Limited t/a Ocean Property Management, was ultimately successful in this process and the contract was awarded to it with a commencement date of 1stFebruary 2016.
The Complainant alleges that a transfer of an undertaking from Gleann Na Rí Property Management (Galway) Ltd to the Respondent, within the meaning of Regulation 3 of the Regulations, took place on Friday 26thFebruary 2016 such that his employment transferred to the Respondent company on that date. The Complainant further alleges that the termination of his employment by reason of redundancy was in breach of his right to transfer to the Respondent under the Regulations, specifically his rights under Regulation 4(1):-
- 4. (1) The transferor's rights and obligations arising from a contract of employment existing on the date of a transfer shall, by reason of such transfer, be transferred to the transferee.
The Complainant seeks compensation under Regulation 10(5) for the unfair termination of his employment.
The issue before the Court can be succinctly stated as follows: did a transfer of an undertaking occur in February 2016 when Gleann Na Rí Property Management (Galway) Ltd ceased trading and the lettings and property management contract previously awarded to it was awarded under a new tender process to the Respondent, such that the Complainant was entitled to continuous employment with the Respondent on no less favourable terms and conditions of employment?
Submissions on behalf of the Complainant
In support of his submission that a transfer of undertakings did occur in February 2016, Solicitor for the Complainant, Mr. Einde O’Donnell of Purdy Fitzgerald Solicitors, adverted, in summary, to the following:-
- By way of correspondence from Purdy Fitzgerald Solicitors on 24thFebruary 2016, prior to the termination of the Complainant’s employment, the Respondent was put on notice of its obligations to the Complainant. However, the Respondent denied receiving the correspondence;
- The key factor for the Court to consider, as per the strict test laid down in Regulation 3 of the Regulations, is whether there was a transfer of an economic entity that retained its identity, from Gleann Na Rí Property Management (Galway) Ltd to the Respondent. In support of his argument, Mr. O’Donnell cited the ECJ judgement in Case C-29/91Dr Sophie Redmond Stichting v Hendrikus Bartol and Others, which stated:-
- “First, the decisive criterion for establishing whether there is a transfer for the purposes of the directive is whether the entity in question retains its identity as indicated inter alia by the fact that the operation is actually continued or resumed”;
- The property management and lettings services originally outsourced from Murrough Management Ltd to Gleann Na Rí Property Management (Galway) Ltd constituted an economic entity as defined in Regulation 3(2) of the Regulations. The economic entity transferred to the Respondent via the tender process;
- The tender process involved the passing of the same property management and lettings services from Gleann Na Rí Property Management (Galway) Ltd to the Respondent;
- The Respondent economic entity carries out the exact same business as Gleann Na Rí did with the same customers and therefore it retained its identity;
- The economic entity test laid down in Regulation 3 of the Regulations is the primary test;
- The tests relating to the question of whether there had been a transfer of tangible and intangible assets and staff, as set out by the ECJ inAyse S�zen v Zehnacker Geb�udereinigung GmbH KrankenhausserviceCase C-13/95, are secondary tests to the economic entity test, which is the primary test;
- The secondary tests inS�zendo not arise in this case as it is clear that the primary test i.e. the transfer of an economic entity, was met;
- The Respondent deliberately avoided taking on the staff so as to evade the Regulations;
- Mr. O’Donnell further pointed out thatS�zenhad since been contradicted and cited the UK Court of Appeal case ofRCO Support Services v Unison [2002] IRLR 401where it was found that the economic entity had retained its identity despite the fact that no significant assets or employees had transferred;
- Mr. O’Donnell added thatRCOwas also authority for the proposition that deliberate actions by an employer in avoiding taking over employees so as to evade the Regulations would not serve to negate the existence of a transfer of an undertaking;
- Consideration of whether or not an economic entity had transferred should be carried out by reference to the criteria laid out in Case C-160/14Jaoa Filipe Ferreira da Silva e Brito and Others v Estado Portogues.Mr. O’Donnell highlighted in particular that all customers had transferred from Gleann Na Rí to the Respondent and there was an identical similarity between the activities carried out pre and post transfer.
Submissions on behalf of the Respondent
Solicitor for the Respondent, Mr. Shane MacSweeney of MacSweeney & Company Solicitors, submits that the economic entity operated by Gleann Na Rí did not retain its identity within the Respondent’s organisation, that no significant assets or employees transferred, that a transfer of an undertaking did not occur and that, accordingly, the Regulations do not apply in this case.
The principal facts that Mr. MacSweeney outlined to the Court and on which his submission that no transfer of undertakings occurred as between Gleann Na Rí Property Management (Galway) Ltd and the Respondent can be summarised as follows:-
- No property or assets transferred;
- No software or IT systems transferred;
- There was no transfer of goodwill;
- No employees transferred and no employees sought to transfer – two of Gleann Na Rí's former employees tendered in their own right for the contract that was eventually awarded to the Respondent;
- The Respondent has at all times traded under its own name, post the awarding of the tender;
- The entity operated by Gleann Na Rí did not retain its identity within the Respondent’s operation;
- Gleann Na Rí operated a concierge-type on-site service, whereas the Respondent operates a remote/off-site service;
- Unlike Gleann Na Rí, the Respondent does not employ a night security officer, the Respondent employs a caretaker who can source emergency services;
- The Respondent does not employ four staff to work exclusively on the contract for the Student Complex, instead the workload is spread across its general workforce of 16 staff.
In support of his position, Mr. MacSweeney opened up to the Court various aspects of ECJ cases,Ayse S�zen v Zehnacker Geb�udereinigung GmbH KrankenhausserviceCase C-13/95 andJMASpijkers v Gebroedaeas Benedik Abbatoir C.V. [1986] ECR 119.
Relying onSpijkers, Mr. MacSweeney submitted, in effect, that the essence of a transfer is that the economic entity retains its identity and drew the Court’s attention to the following extract:-
- “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 characterising the transaction, the business was disposed of as a going concern”
Mr. MacSweeney stated that the ECJ in theSpijkerscase had set out a list of factors which would be relevant in ascertaining whether a transfer had taken place:-
- “the type of undertaking or business in question, the transfer or otherwise of tangible assets such as buildings and stocks, the value of intangible assets at the date of transfer, whether the majority of the staff are taken over by the new employer, the transfer or otherwise of the circle of customers and the agree of similarity between activities before and after the transfer, and the duration of any interruption in those activities.”
Applying these factors to the facts of the case before this Court, as set out above, Mr. MacSweeney submitted that the economic entity operated by Gleann Na Rí could not be said to have retained its identity.
With regard toS�zen,Mr. MacSweeney submitted to the Court that what had occurred in the instant case was a change in service provider, or a so-called second generation transfer. He stated that in labour intensive operations (as distinct from asset intensive operations) such as the case in issue, a key factor in determining whether the economic entity has retained its identity is whether or not a significant proportion of the workforce transferred to the new service provider. Therefore, in order to attract the protection of the Regulations in such cases the taking over of the contract by the Respondent must have been characterised by a transfer of significant tangible or intangible assets (excluding the contract itself) or by the taking over by the new employer of a major part of the workforce. None of those characteristics applied here.
On this basis, Mr. MacSweeney invited the Court to find that no transfer within the meaning of the Regulations occurred on the facts of this case.
Discussion & Decision
The aim 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 EU Directive known as the ‘Acquired Rights Directive’ (which the Regulations give effect to) 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).
Suzenwas decided in the wake of a number of decisions which extended the Regulations to second generation contracting out – where part of a business is contracted out to a second company, and the contract subsequently transfers to a third entity. InSuzen, the Court looked at the elements set out inSpijkers, applied them and found that no transfer of tangible assets had taken place: -
- “The mere fact that the service provided by the old and the new awardees of a contract is similar does not therefore support the conclusion that an economic entity has transferred. An entity cannot be reduced to an activity entrusted to it. Its identity also emerges from other factors such as its work force, management staff, the way in which its work is organised, operational methods or where appropriate the operational resources available to it”.
In the judgment, the ECJ drew a distinction between businesses that are asset-reliant, on the one hand, and those that are labour-intensive, on the other. It found that in certain sectors in which the business is based essentially on the workforce, as in the present case, there can be a transfer within the meaning of the Directive where the group continues to exist after the taking over of an essential part of the workforce by the new awardee of the contract.
The Court is satisfied that the business in issue in the present case falls in to the category of labour-intensive. The Court is further satisfied that the loss of the contract from Gleann Na Rí to the Respondent was a second generation contract, the service having originally been contracted out from Murrough Management Ltd to Gleann Na Rí Property Management (Galway) Ltd.
The Complainant has made the case that the services provided by Gleann Na Rí prior to the beginning of February 2016 were thereafter provided by the Respondent. This is disputed by the Respondent, who contends that the services provided before and after the tender process are not comparable.
What is not in dispute between the parties are the following key factors:-
- No property or tangible assets transferred;
- There was no transfer of goodwill or other intangible assets;
- No employees transferred.
Conclusions of the Court
On the basis of the foregoing analysis of the case law 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 Regulations did not occur in February 2016 when Gleann Na Rí Property Management (Galway) Ltd ceased to operate the contract and the contract was subsequently won by the Respondent following a tender process.
The Complainant herein, had no entitlement, therefore, to transfer his employment from Gleann Na Rí Property Management (Galway) Ltd to Overpass Limited t/a Ocean Property Management.
The Adjudication Officer’s decision is upheld accordingly.
The Court so Determines.
Signed on behalf of the Labour Court
Caroline Jenkinson
5 October 2017______________________
MNDeputy Chairman
NOTE
Enquiries concerning this Determination should be addressed to Michael Neville, Court Secretary.