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Abler v Sodexho MM Catering Betriebsgesellschaft mbH: C-340/01

[2003] ECR I-14023, [2004] IRLR 168, [2003] All ER (D) 277 (Nov)

Court: ECJ

Judgment Date: 20/11/2003

Cases referring to this case
Annotations: All Cases Court: ALL COURTS

EUROPEAN COMMUNITY - EMPLOYMENT - TRANSFER OF UNDERTAKINGS - SAFEGUARDING OF WORKERS' RIGHTS - INTERPRETATION OF DIRECTIVE - DEFINITION OF TRANSFER - COUNCIL DIRECTIVE (EEC) 77/187
EUROPEAN COMMUNITY - THE COURT OF JUSTICE - REFERENCE FROM NATIONAL COURT - REFERENCE FOR PRELIMINARY RULING - INTERPRETATION OF DIRECTIVE - TRANSFER OF UNDERTAKINGS - SAFEGUARDING OF WORKERS' RIGHTS - COUNCIL DIRECTIVE (EEC) 77/187

The management authority of a hospital concluded an agreement with S, under which S took over the management of catering services within the hospital. Disagreements subsequently arose between the management authority and S, leading S to refuse to provide the contracted services for two months. During that time, the respondent firm provided the catering services in the hospital. The management company terminated its contract with S, and informed it that the contract would be awarded to the applicant. S contended that that constituted a transfer of the undertaking, although as the respondent had refused to take over S's materials, stock and employees, S reduced stocks so that there was nothing left and terminated the employment contracts of its employees. The applicants, who were amongst those employees, brought an action against the respondent seeking a declaration that their employment relationship continued with the respondent on the basis of provisions of national law on transfers of undertakings. The action was dismissed on the basis that the requirements of a transfer of an undertaking had not been met as there had been no transfer of staff. The applicants' appealed against that decision. The higher court allowed that appeal, having found that a transfer had taken place since, in essence, an economic entity which retained its identity had been transferred. The respondent appealed against that decision. The court stayed proceedings and referred to the Court of Justice of the European Communities for a preliminary ruling the question whether art 1 of Council Directive (EEC) 77/187 (on the approximation of the laws of the member states relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses) had to be interpreted as applying to a situation in which a contracting authority which had awarded the contract for the management of catering services in a hospital to one contractor terminated that contract and concluded a contract for the supply of the same services with a second contractor, where the second contractor, on the one hand, used substantial parts of the tangible assets previously used by the first contractor and subsequently made available to it by the contracting authority and, on the other hand, refused to take on the employees of the first contractor.
Held - Article 1 of the directive had to be interpreted as applying to a situation in which a contracting authority which had awarded the contract for the management of the catering services in a hospital to one contractor terminated that contract and concluded a contract for the supply of the same services with a second contractor, where the second contractor used substantial parts of the tangible assets previously used by the first contractor and subsequently made available to it by the contracting authority, even where the second contractor had expressed the intention not to take on the employees of the first contractor. The aim of the directive was to ensure continuity of employment relationships within an economic entity, irrespective of any change of ownership. The decisive criterion for establishing the existence of a transfer within the meaning of the directive was whether the entity in question retained its identity, as indicated by the fact, inter alia, that its operation was actually continued or resumed. It was clear from the wording of art 1 of the directive that it was applicable whenever in the context of contractual relations, there was a change in the legal or natural person who was responsible for the carrying on of the business and who, by virtue of that fact incurred the obligations of an employer in respect of the employees of the undertaking, regardless of whether or not ownership of the tangible assets was transferred. The fact that the tangible assets taken over by the new contractor did not belong to its predecessor but were provided by the contracting authority could not preclude the existence of a transfer within the meaning of the directive.