ECJ Closes TUPE Loophole


A recent decision of the European Court of Justice (ECJ) in a Dutch case has clarified the law relating to an employer’s obligations under the EC Acquired Rights Directive (ARD), implemented in the UK by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). The decision effectively closes a loophole whereby the employment rights of those working for a service company within a large organisation were not protected on a transfer of that part of the business if their contracts of employment were with another company in the group (Albron Catering BV v FNV Bondgenoten).
The dispute arose after catering activities carried out by Heineken Nederland BV at various locations of Heineken International, a group of beer producers in the Netherlands, were transferred to Albron Catering BV on 1 March 2005. The group organisation was structured so that all staff were employed by Heineken Nederlands Beheer BV (HNB), regardless of where they worked. More than 70 members of the catering staff were taken on by Albron.
One of these employees, Mr Roest, with the backing of his trade union, FNV, brought an action against Albron seeking a declaration that the transfer of the catering function was a relevant transfer within the meaning of the ARD and that Albron should pay Mr Roest and his colleagues a salary increase previously agreed with HNB.
Albron contended that the ARD does not apply to the transfer of a subsidiary of a group where the employees’ contracts of employment are with another company within the group.
Dutch law implementing the ARD merely states that an employer’s rights and obligations under a contract of employment concluded between the employer and the employee are automatically transferred to the transferee. The Dutch court therefore applied to the ECJ for clarification of the issue.
The ECJ ruled that if, within a group of companies, there are two employers, one that has contractual relations with the employees and another that has non-contractual relations with them, where the employees are assigned to the group company on a permanent basis it is possible, for the purposes of the ARD, to regard the employer responsible for the economic activity of the entity transferred as a ‘transferor’, despite the absence of contractual relations with those staff.
Whilst TUPE does not deal specifically with the circumstances of ‘non-contractual employment’, it is likely that, faced with similar facts, the Employment Tribunal would take the same purposive approach to the legislation in order to comply with the aims of the ARD.
When a business or business unit is being transferred, with its employees, it is essential to take advice at the beginning of the process, before any action is taken. Failure to comply with the law can prove costly.

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