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Can You Divide an Employment Contract Between Multiple Transferees?

on Friday, 31 July 2020.

The European Court of Justice (ECJ) decision in ISS Facility Services v Govaerts is a significant departure from existing UK case law...

...relating to transfers under the Transfer of Undertakings (Protection of Employment) Regulations (TUPE).

Current UK Case Law

The Acquired Rights Directive is the European legislation from which TUPE is derived. Neither the Acquired Rights Directive or TUPE expressly confirms what should happen to an employment contract where there is a transfer of undertaking involving several transferees.  

Kimberley Group Housing Ltd v Hambley and others is the leading case in the UK on this issue and suggests that employment contracts should transfer to the transferee taking on the majority of the activities. This interpretation of the Acquired Rights Directive has now been expressly rejected by the ECJ.

ISS Facility Services v Govaerts

ISS Facility Services had cleaning and maintenance contracts with the city of Ghent in Belgium. The work was divided into three lots and Ms Govaerts was employed by ISS as the project manager for all three lots. When the contracts were re-tendered, they were awarded to two new contractors, with one contractor taking lots one and three (which covered 85% of Ms Govaerts' work) and another taking lot two (which covered the remaining 15%). ISS informed Ms Govaerts that she would transfer to the contractor of lots one and three as these related to the majority of her work. However, the new contractor did not agree that the Acquired Rights Directive applied and terminated Ms Govaerts' employment.

Ms Govaerts brought claims against ISS and the new contractor for pay in lieu of notice, a pro-rata end of year bonus and leave pay. The Belgian courts found the Acquired Rights Directive applied. They asked the ECJ whether Ms Govaerts’ employment should be split between each of the new contractors.

The ECJ held where the transfer of an undertaking involves multiple transferees, the employment contracts of the individual employees may be split proportionally between the transferees in accordance with the tasks performed by the employee. This is provided that the division of the employment contract does not adversely affect the working conditions or rights of the employee.

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Practical Implications for UK Employers

The ECJ's decision represents a significant departure from the current position in respect of TUPE transfers. The decision may lead to a shift in approach by employment tribunals in the UK towards dividing an employment contract between multiple transferees.

Practically, it may be difficult to divide an individual's day to day work and time between different employers. The ECJ did not address how the division of a role into part-time contracts could be achieved, instead leaving it up to national courts to decide. The ECJ suggested the economic value or time dedicated to each part of the contract could be considered.

The division of an individual's work into multiple part-time contracts could adversely affect the working conditions or rights of the employee. The ECJ confirmed that in these situations the employment contract may be terminated, however, the transferees will be liable for the termination of employment regardless of whether the employee resigned or the transferees made the decision to dismiss them. Any such termination may still be automatically unfair under TUPE unless the transferee can argue there is an economic, technical or organisational reason for it that entails changes to the workforce. 

It is also worth remembering that TUPE may not apply at all if the business no longer retains its identity after the transfer because it has been broken up between multiple employers. 

This will be a developing area of law and the ramifications of this decision will only become clear as cases proceed through the courts in the UK. 

For more information on TUPE and dividing contracts between multiple transferees, please contact Eleanor Boyd in our Employment team on 07393 148143, or complete the form below.

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