Case update (1): TUPE – It’s ok to take a break

Summary:  Does a five month suspension of an undertaking’s activities preclude a TUPE transfer?

No, held the CJEU in Colino Siguenza v Ayuntamiento de Valladolid, available here.

Facts:  The employee, Mr Colino Sigüenza, was a teacher at a Spanish music school.  He was engaged by a contractor assigned to manage teaching operations on behalf of the local authority. The number of pupils at the school was falling and there were subsequent financial difficulties.  This led to the contractor dismissing all its staff, including Mr Colino Sigüenza.

On around 1st April 2013, two months before the academic year ended, the contractor ceased its activities. In August 2013, following a tendering process for the new academic year, the local authority assigned the school’s management to a new contractor which started activities in early September 2013. The new contractor did not engage any of the staff, including Mr Colino Sigüenza, despite using the same premises, equipment and resources.

Mr Colino Sigüenza claimed that his employment should have automatically transferred to the new provider under the EU’s Acquired Rights Directive (“ARD”), which has been implemented in the UK as TUPE.

At first instance, the Spanish court found that there had been no transfer of an economic entity which had retained its identity, as required by the ARD.  This finding was based on the 5-month gap between the Claimant’s dismissal, the winding-up of the initial service provider and the subsequent outsourcing of services.

The CJEU disagreed with this approach and the Advocate General’s Opinion. It held that there could in principle be a transfer.  This was because the economic activity was asset reliant and the new contractor used the same premises, instruments and resources.   Further, whilst the gap in time was a relevant factor to be taken into account as part of any assessment, 3 months of this 5-month suspension represented the annual school holiday, during which the school would normally be closed. (However, the CJEU was also of the view that the dismissals were fair as they were for an ETO reason entailing changes in the workforce).

As a TUPE transfer was possible, the case was returned back to the national appeal court for a decision on this.

Implications:  This decision does not significantly affect the legal position in the UK, as TUPE already recognises the additional, broader concept of a ‘service provision change’ which would have applied in this case.  However, the decision is a helpful reminder that gaps in services or suspended activities – even if they last for a period of months – will not by themselves be sufficient to prevent the application of TUPE.