Suzen v Zehnacker Gebaudereinigung GmbH Krankenhausservice
[1997] IRLR 255
Betts v Brintel and KLM (Court of Appeal, 26 March 1997)
From the reaction in the media, the European Court of Justice decision on 11 March 1997 in Suzen represented the end of TUPE as we know it. This is far from the truth. The law would have been clearer, and more favourable for employees, if the Suzen judgment had never been made, but the implications of the decision itself are far less drastic than they have been portrayed.
The Court decided that the Acquired Rights Directive did not apply to a change from one cleaning contractor to another because there was neither a transfer of assets, nor a transfer of a major part of the workforce. The case concerned a cleaning contract carried out by eight cleaners. The secondary school awarded the contract to a different company. The Court did not know whether the new contractor offered jobs to the existing employees, but we do know that they were not taken on.
The decision does not overturn the previous cases, in particular Schmidt [1994] IRLR 302 and Redmond [1992] IRLR 366. Schmidt was a transfer of a cleaning contract being contracted out for the first time involving only one member of staff and Redmond was the termination of a grant to one charity and a transfer of that subsidy to another charity. These decisions remain valid.
The Court confirms that there may still be a transfer without any contractual relationship between the outgoing and incoming contractors, but it says that the mere similarity of service with the old and new contractors is not enough to establish that the Directive applies: an undertaking means more than just an activity. The identity of an undertaking emerges from factors such as its workforce, management staff, organisation of work, operating methods or operational resources.
Previous attempts to limit the scope of TUPE, in the courts and by the European Commission, have suggested that assets must transfer for the Directive to apply. The Court in Suzen does not accept that this is a prerequisite, particularly in labour intensive sectors. It would be illogical to focus on a transfer of assets in those cases.
It is helpful that the Court accepts that in labour-intensive activities "a group of workers engaged in a joint activity on a permanent basis may constitute an economic entity", that is an undertaking or part of an undertaking. This means there will be a transfer where the new employer takes over "a major part, in terms of their numbers and skills, of the employees specially assigned by his predecessor to that task".
There is a danger that UK courts may take Suzen as a signal to limit the applicability of TUPE. The Court of Appeal has succumbed to the temptation in the Betts case. The implications of these decisions are discussed later in this issue in Where are we now?