The Claimants worked at a Spanish music school. From 1997 the school was run by a private company. The contract was terminated for non-performance in April 2013 and all staff were dismissed. Five months later, a new contract to operate the school was awarded to a different contractor and the service was resumed using the same premises, instruments and resources. None of the previously dismissed staff were rehired.
The ECJ found that despite the five month gap in activities, it was still possible that a TUPE transfer had taken place. Whilst this case was interpreted in accordance with Spanish law, it follows a line of judgements in earlier domestic cases with the same outcome.
Under UK law, the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) apply where there is a 'relevant transfer'. This might be a sale of a business or a situation where a company outsources an activity, moves the activity from one contractor to another or takes the activity back in-house. This is known as a service provision change (SPC).
Where there is a relevant transfer, the new employer steps into the shoes of the outgoing employer, taking on the employees on their existing terms and conditions of employment.
TUPE will only apply to an SPC where there is 'an organised grouping of employees' prior to the change and their principal purpose is to perform the relevant activities that constitute the service. Uncertainty can arise as to whether a TUPE transfer has taken place where there is a change in service provider and a gap between the activities of the first and second provider.
This issue was considered by the Employment Appeal Tribunal (EAT) in the case of Inex Home Improvements Ltd v Hodgkins. Here the employees had been temporarily laid off at the time of the SPC. The EAT found that this temporary absence did not prevent them from being part of an organised grouping of employees and therefore transferring to the subsequent contractor. The EAT observed that there is nothing in the wording of TUPE that requires employees to be actually performing the activities at the time of the SPC.
These cases show that the ECJ's approach is consistent with that under domestic law, that a temporary cessation of work prior to an SPC or business transfer will not necessarily prevent a TUPE transfer. However, the purpose, nature and length of the cessation will be relevant in determining whether or not the organised grouping continued to exist.
Employers undertaking due diligence prior to an SPC should ascertain whether any employees have been or will be laid-off or have ceased work for any other reason prior to the transfer, as these employees may still be covered by TUPE.