TUD201

This is an appeal by Mr. Eric Keogh, (‘the Complainant’), of a Decision by an Adjudication Officer, ‘AO’, of the Workplace Relations Commission, ‘WRC’, that he did not have a valid claim for the application of the Protection of Employees on Transfer of Undertakings Regulations 2003, (‘the Regulations’).

The Complainant was employed by a company called Aintree Construction Ltd., (‘Aintree’) as a bricklayer. While working for Aintree, who were a sub-contractor to Duggan Brothers (Construction) Ltd., (‘Duggan’), on a site at the Stock Exchange, Dublin, the Complainant was informed on 8 April 2019 that his employment was terminated. He was also advised that a new sub- contractor, Keymore Construction Ltd., (‘the Respondent’) would be completing the work undertaken previously by Aintree on the site.

This situation arose following notification from Aintree to Duggan that they were not in a position to continue to work on the project. An agreement was reached between Duggan and the Respondent to complete the work.

The Complainant’s union sought to have the Complainant retained in employment and sought agreement to this effect with Duggan.

No agreement was reached and the union referred the matter to the WRC for conciliation initially and then, when there continued to be no agreement, to the adjudication service under the terms of the Regulations.

The AO decided that a Transfer of Undertakings within the meaning of the Regulations did not occur. The Complainant appealed this Decision to the Court.

Summary of the Complainant’s arguments

The remaining part of the bricklaying contract that passed on to the Respondent was clearly an ‘undertaking’ within the meaning of the Regulations, which apply even if there is no contractual nexus between the Transferor and the Transferee. The key criterion to decide if there is such a transfer is whether the activity is seen to be continuing, even with some differences. In the instant case, bricklaying continued with no difference.

The principle is that ‘…where following a legal transfer or a merger there is a change in the natural or legal person responsible for the business…’ an obligation towards employees is incurred, (see ‘Employment Law: Frances Meenan 2014, p782)

Art. 3(1) of the Regulations provides that a Transferor’s rights and obligations arising from a Contract of Employment or from an Employment Relationship are transferred to the Transferee.

In Spijkers v Gebroeders Benedic Abattori CV and Alfred Benedik en Zonen BV (1997) IRLR 255 the CJEU stated that ‘in order to establish whether or not such a transfer has taken place…it is necessary to consider whether…….the business was disposed of as a going concern, as will 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 the instant case, the Respondent took on an identical role to Aintree and, therefore, continued as a going concern with the same activities.

In Spijkers the CJEU went on to speak of consideration of all facts, including the transfer of tangible and/or intangible assets in order to determine if a transfer has occurred. In the instant case, the activity transferred is that of bricklaying by suitably qualified and skilled bricklayers, which amounts to the transfer of intangible assets. In Hernandez Vidal (Francisco) SA v. Gomez Perez (1998 ECR1/8179, 1999 IRLR 132 the Court decided that a group of wage earners specifically and permanently assigned to a common task amount to an economic entity.

Failure to reverse the AO Decision could allow sub contractors simply to abandon employees of a previous sub contractor and, thereby, circumnavigate the intention of the Regulations.

The Court was invited to consider the possibility that the Transferor and Transferee could have colluded to transfer the contract. In such a case, the intangible asset is the contract’s value and, if such occurred, the employees concerned, including the Complainant, would be entitled to the protections of the Regulations.

Summary of the Respondent’s arguments

The Decision of the AO was fully correct. No transfer of assets occurred, no staff transferred, Aintree did not cease to exist nor was all or part of its business transferred to the Respondent.

There was no obligation on the Respondent under the Regulations, the contract with Duggan made no reference to the Regulations and the Respondent had no contractual privity regarding the agreement between Aintree and Duggan. The award of the contract was in accordance with accepted practices in the construction industry.

Regulation 3(2) defines a transfer as ‘the transfer of an economic entity which retains its identity’ and defines ‘economic entity’ as an organised grouping of resources which has the objective of pursuing an economic activity.

The ruling in Spijkers set out a set of criteria, which is not exhaustive, to be used to determine if an economic entity that retains its identity exists. These are the type of business; whether tangible and/or intangible assets were transferred; the value of intangible assets at the time of transfer; whether the majority of employees are taken over; whether or not its customers are taken over; the degree of similarities between activities carried on before and after the transfer and the period, if any, for which activities are suspended. In the instant case, no stable economic entity was transferred. Aintree continues to exist, no assets transferred to the Respondent and no employees transferred. The Respondent resourced its own equipment, materials and labour to take on the contract.

In the case of Aye Suzen v Zehnacker Gebaudereinigung GmBH Krankehausservice the CJEU held that ‘ the mere fact that the service provided by the old and new awardees of a contract is similar does not therefore support the conclusion that an economic entity has been transferred’ and that ‘the mere loss of a service contract to a competitor cannot therefore by itself indicate the existence of a transfer within the meaning of the directive.’

In the case of Rygaard v Stro Molle Akustik A/S (1996) IRLR 51 the CJEU held that there must be a stable economic entity for there to be a transfer and that this could not be held to exist where it is limited to one specific contract.

In Francisco Hernandez Vidal SA v Perez and Contratas y Limpiezas SL (1999) IRLR132 the Court re-affirmed the principles set out in ‘Suzen’ and held that the existence of a contract between two parties does not trigger the application of the Regulations.

In Cannon v Noonan Cleaning Ltd and CPS Ltd (1998) ELR the EAT held that ‘where the new contractor refused to take on a major part of the workforce in circumstances of a second generation transfer where a third party is responsible for the transfer, the Directive does not apply’.

In analysing the case law quoted, in the instant case no transfer of tangible or intangible assets occurred, the principles in Aye Suzen indicate that taking over work from a previous contractor does not establish that a ‘transfer’ has occurred and the short term nature of the contract means that a ‘transfer’ cannot have taken place.

The applicable law

Protection of Employees on Transfer of Undertakings Regulations 2003

3. (1) These Regulations shall apply to any transfer of an undertaking, business, or part of an undertaking or business from one employer to another employer as a result of a legal transfer (including the assignment or forfeiture of a lease) or merger.

(2) Subject to this Regulation, in these Regulations -

“transfer” means the transfer of an economic entity which retains its identity;

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.

(2) Following a transfer, the transferee shall continue to observe the terms and conditions agreed in any collective agreement on the same terms applicable to the transferor under that agreement until the date of termination or expiry of the collective agreement or the entry into force or application of another collective agreement.

enforcement. 11. (1) A party concerned may appeal to the Tribunal from a decision of a rights commissioner under Regulation 10, and if the party does so, the Tribunal shall -

(a) give the parties an opportunity to be heard by it and to present to it any evidence relevant to the appeal,

(b) make a determination in writing in relation to the appeal affirming, varying or setting aside the decision, and

(c) communicate the determination to the parties.

(2) An appeal under this Regulation shall be initiated by the party concerned by a notice in writing to the Tribunal containing such particulars as may have been determined under paragraph (4)(e) and stating the intention of the party concerned to appeal against the decision. Such a notice in writing shall be given within 6 weeks of the date on which the decision to which it relates was communicated to the party or such greater period as the Tribunal may, in accordance with paragraph 4(f), determine in the particular circumstances.

(3) A copy of a notice under paragraph (2) shall be given by the Tribunal to the other party or parties concerned as soon as may be after the receipt of the notice by the Tribunal.

(4) The following matters, or the procedures to be followed in relation to them shall be determined by the Tribunal namely -

(a) the procedure in relation to all matters concerning the initiation and the hearing by the Tribunal of appeals under this Regulation;

(b) the times and places of hearings of such appeals;

(c) the representation of the parties to such appeals;

(d) the publication and notification of determinations of the Tribunal;

(e) the particulars to be contained in a notice under paragraph (2);

(f) any matters consequential on, or incidental to, the foregoing matters.

Deliberation

In the case of Overpass Ltd T/A Ocean Property Management and Susan Clancy. Determination TUD1713. this Court drew attention to the fact that the CJEU has stated that the decisive criterion for establishing the existence of a transfer is whether or not the entity disposed of retains its identity, as indicated by the fact that its operation is actually continued or resumed, (see Spijkers paras 11 and 12 and Aye Suzen para 10).

In the instant case, the alleged Transferror retains its separate identity and continues in business separately from the Respondent.

It is clear that no tangible assets transferred between Aintree and the Respondent. The suggestion that the transfer of the contract amounted to an agreed transfer of intangible assets between these two companies is a novel point that is not sustained by any facts. There is no evidence that Aintree had any part in determining the award of a new contract, which was an agreed arrangement between the main contractor and the Respondent.

In the instant case, there was no transfer of goodwill and no employees transferred.

It is evident, therefore, that the economic entity of Aintree did not become any part of the Respondent organisation. Accordingly, there was no transfer of undertaking and the Regulations do not apply. It follows that the Complainant had no entitlement under the Regulations to transfer his employment to the Respondent.

Determination

The Decision of the AO is upheld.

The Court so determines.

Signed on behalf of the Labour Court




MK______________________
27 January 2020Tom Geraghty
Deputy Chairman


NOTE

Enquiries concerning this Determination should be addressed to Mary Kehoe, Court Secretary.