61994C0048
OPINION OF ADVOCATE GENERAL
COSMAS
delivered on 10 May 1995 (
*1
)
1.
The case before the Court concerns a certain number of questions submitted under Article 177 of the EC Treaty by Sø- og Handelsretten, Copenhagen, on the interpretation of Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses (hereinafter the ‘directive’). (
1
)
I — Facts
2.
Those questions were raised in proceedings between the applicant in the main proceedings, Ole Rygaard, and his employer, the defendant company Strø Mølle Akustik A/S (‘Strø Mølle’).
According to the order for reference the applicant was employed by the firm of carpenters, Svend Pedersen A/S (hereinafter ‘Pedersen’). That firm had agreed to carry out joinery works on behalf of the company SAS Service Partner A/S (hereinafter ‘SAS Service Partner’).
By letter of 27 January 1992 Pedersen informed SAS Service Partner, the awarder of the main building contract, that he wished part of the works (ceilings and joinery) to be entrusted to Strø Mølle with a view to their completion.
On 29 January 1992 Strø Mølle at the request of SAS Service Partner submitted a tender for the carrying out of those works. On 30 January 1992 Pedersen and Strø Mølle entered into an agreement for the takeover by Strø Mølle of the works transferred.
That agreement provided that Strø Mølle was Uable to reimburse to Pedersen the expenditure, including wages, which Pedersen had already incurred in regard to the works transferred. It also provided that two of Pedersen's apprentices would be transferred to Strø Mølle for the period from 1 February 1992 to 1 May of the same year.
3.
On the day after the agreement between Pedersen and Strø Mølle was entered into, that is to say 31 January 1992, Pedersen terminated the applicant's employment contract on the ground that the company had been placed in liquidation and had decided to transfer to Strø Mølle a part of the joinery works in question which it was carrying out in Kastrup. That letter went on to state that the applicant's employment relationship would come to an end on 30 April 1992 and that until that time he would be made available to Strø Mølle.
On 10 February 1992 SAS Service Partner accepted Strø Mølle's tender for carrying out the portion of the works relating to ceilings and joinery. The applicant in fact continued to work for Strø Mølle and on 26 May 1992 was given a new period of notice of dismissal taking effect on 30 June 1992. Following an application brought by Ole Rygaard against Strø Mølle the national court considered it necessary in order to resolve the dispute to refer a certain number of questions to the Court for a preliminary ruling.
II — The questions
4.
In the context of those proceedings Sø-og Handelsretten, Copenhagen, asked the Court, by order of 2 February 1994, (
2
) whether the directive applies when contractor B, pursuant to an agreement with contractor A, continues work on part of a contract begun by contractor A, and
(1)
an agreement is entered into between contractor A and contractor B that some of contractor A's workers will continue on the work for contractor B and contractor B takes over material on the building site in order to complete the contract, and
(2)
after the contract has been taken over contractor A and contractor B both work on the building works at the same time.
The national court is thus asking whether the fact that the contract for the completion of the works was entered into between the awarder of the main building contract and contractor B with the consent of contractor A has any effect in this respect.
5.
These questions essentially raise once again the question of the scope of the directive, as defined in Article 1(1) thereof.
More specifically, the present case essentially raises the question whether the transfer to contractor B of a part only of the works specified by contractor A who continues even after the transfer to work simultaneously with contractor B on the same site may be deemed to be a transfer of an undertaking, business or part of a business within the meaning of the abovementioned provision.
Moreover, the national court in its second question is asking whether the directive is applicable when the transfer of the relevant part of the works stems from an agreement between contractor B and the awarder of the main contract, entered into with the consent of contractor A.
III — Relevant legislation and case-law
6.
Article 1(1) of the directive provides that ‘this directive shall apply to the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger’.
The Court has had the opportunity of establishing a line of authorities on the scope of the directive, as defined in Article 1(1).
7.
It follows from that case-law that transfers of undertakings which satisfy the conditions set out below come within the scope of the directive:
—
First of all, for the directive to be applicable there must be a change in the person responsible for the operation of the undertaking. The Court has held that ‘the directive is applicable where, following a legal transfer or merger, there is a change in the legal or natural person who is responsible for carrying on the business and who by virtue of that fact incurs the obligations of an employer vis-à-vis the employees of the undertaking, regardless of whether or not ownership of the undertaking is transferred’. (
3
)
—
The second requirement is that the economic entity transferred must continue to exist and retain its identity. (
4
) The Court has accepted that the undertaking retains its identity where its operation is in fact continued or taken over by the new employer with the same economic activities or analogous activities. (
5
)
—
Thirdly, the directive is applicable only when the change in the person responsible for the operation of the undertaking is based on a contract, that is to say stems from a contractual transfer or from a merger. Transfers by operation of the law or resulting from a unilateral act of disposition are thus excluded.
—
Fourthly, the transfer must concern an undertaking, business or part of a business or economic entity. The mere disposal of assets of an undertaking does not constitute a transfer of that undertaking within the meaning of the directive. (
6
)
8.
In order to determine whether those conditions are satisfied it is necessary, under the terms of the Court's case-law, ‘to consider all the facts characterizing the transaction in question, including the type of undertaking or business, whether or not the business's tangible assets, such as buildings and moveable property, are transferred, the value of its intangible assets at the time of the transfer, whether or not the majority of its employees are taken over by the new employer, whether or not its customers are transferred, and the degree of similarity between the activities carried on before and after the transfer and the period, if any, for which those activities were suspended’, subject to the proviso, however, that ‘all those circumstances are merely single factors in the overall assessment which must be made and cannot therefore be considered in isolation’. (
7
)
IV — Replies to the preliminary questions
9.
First of all, the factual assessment necessary in order to determine whether or not there has been a transfer of an undertaking as defined above must be conducted by the national court which in that connection will have regard to the interpretative elements resulting from the Court's case-law in this connection, particulars of which are given above. (
8
)
The definitive reply to the question whether, having regard to the facts set out above, there has in this case been a transfer of an undertaking is for the national court to determine since that court is in a position to assess the significance of the facts of the case on the basis of the information set out above.
However, in order to reply to the questions submitted, it would appear to be useful for me also to conduct a factual assessment.
10.
The following matters may be inferred from the facts with regard to the question whether the conditions mentioned above are satisfied in this case:
—
There was in fact a change in the person with responsibility for the undertaking and, consequently, in the person of the employer, since the completion of the works concerned was entrusted to a new employer.
—
Moreover the activity carried on by the new employer and that carried on by his predecessor are identical since the latter is continuing the works commenced by the former in the context of the same job.
—
Moreover, as I shall explain later, the transfer is also based on a contract since it is the result of agreements entered into by the new employer with his predecessor and with the awarder of the main contract.
—
However, the question in the present case is whether there was in fact a transfer relating to ‘an undertaking, a business or part of a business’ within the meaning of Article 1(1) of the directive.
11.
It is a fact that in the present case the transfer does not concern an undertaking or part of an undertaking or even a continuing activity of an undertaking. As both the defendant in the main proceedings and the Commission have emphasized in their observations the relevant business transferred consists of the completion of certain works limited in time in the context of the carrying out of a specific job. It must therefore be examined whether a case of this nature may be regarded as coming within the concept of an undertaking, business or part of a business as laid down in the directive.
12.
A broad interpretation of that concept is not precluded by the literal terms of the directive. On the contrary it is clear from the case-law of the Court, which has interpreted Article 1(1) of the directive in a fairly flexible manner, that that concept must be deemed to have a very broad meaning.
More particularly it is clear from its case-law that under the broad interpretation which it has adopted the Court considers that underlying the notions of ‘undertaking, business or part of a business’ is that of ‘the economic entity’ which must be understood as comprising a totality of organizationally autonomous persons and assets assigned to a specific economic activity which may be carried on either by an undertaking or by a pan of the undertaking only. A clear reference is made to this concept in the Spijkers judgment in which the Court stated that the directive seeks to ensure continuity in employment relationships ‘existing within a business’ and that there cannot be a transfer of an undertaking or a part of an undertaking solely by virtue of the fact that the assets of that undertaking have been disposed of but that it is necessary to assess whether ‘the business was disposed of as a going concern’. (
9
) Moreover the Commission followed that decision in its proposal for a directive which it recently submitted to the Council in order to revise Directive 77/187. (
10
)
13.
From that point of view the case-law has acknowledged that activities of a specific kind which constitute independent works may be assimilated to businesses or parts of businesses within the meaning of the directive.
Thus the Court has held that the transfer by an undertaking of a part only of its activities, specifically its secondary activities only, may entail the application of the provisions of the directive. (
11
)
Even ancillary activities unrelated to the purpose of the undertaking may come within the sphere of the directive. The Court thus acknowledged in its judgment in Watson Rask and Christensen that ‘when an undertaking entrusts by a contract the responsibility for operating one of its services, such as a canteen, to another undertaking which thereby assumes the obligations of an employer towards employees assigned to those duties, that operation may come within the scope of the directive, as laid down in Article 1(1). The fact that in such a case the activity transferred is for the transferor merely an ancillary activity not necessarily connected with its objects cannot have the effect of excluding that operation from the scope of the directive.’ (
12
)
The Court recently had occasion to reaffirm that decision when it held that ‘when an undertaking entrusts by contract the responsibility for operating one of its services, such as cleaning, to another undertaking which thereby assumes the obligations of employer towards employees assigned to those duties, that operation may come within the scope of the directive’. (
13
)
14.
That very broad interpretation is justified and based on the social purpose pursued by the directive.
It should be remembered that the directive forms part of the Community's social action programme. (
14
)
The recitals in the preamble to the directive state that its objective is ‘the protection of employees in the event of a change of employer’ (second recital) and that it seeks to promote the approximation of laws in this field while maintaining the improvement described in Article 117 of the EC Treaty, which seeks to promote improved working conditions and an improved standard of living for workers (fifth recital).
15.
These are therefore provisions having a completely unambiguous social purpose, as has moreover been stressed by the Court. In the words of the Court ‘the purpose of the directive is to ensure, so far as possible, that the rights of employees are safeguarded in the event of a change of employer by enabling them to remain in employment with the new employer on the terms and conditions agreed with the transferor’. (
15
)
The provisions of the directive thus seek, in the interests of workers, to safeguard existing employment relationships in the event of a contractual change in the person responsible for operating the undertaking and who assumes the obligations of the employer towards the employees of that undertaking.
Those provisions must therefore be interpreted in a manner consonant with the objectives pursued by the directive. The Court moreover expressly confirmed that principle of interpretation in its Redmond Stichting judgment, cited above (paragraph 11).
16.
Taking that rule of interpretation as the criterion and having regard also to the Court's earlier case-law, I consider that in order to determine which cases come within the concept of ‘undertaking, business or part of a business’ and, more generally, in order to determine whether the directive is applicable, the question to be addressed is essentially whether there has been a transfer of an activity in regard to which, from an organizational point of view, the relationship between the workers and the undertaking carrying out the transfer had assumed a definite form. As the Court held in Botzen and Others, (
16
) the employment relationship is essentially characterized by the link which exists between the worker and the business of the undertaking within which he performs his duties.
The reply to that question presupposes that the specific activity is characterized by a certain autonomy of organization in the sense that in carrying on that activity one or more workers together possibly with materials have been assigned thereto, though that factor does not necessarily constitute a decisive criterion in that connection. (
17
) In such a case the transfer of the activity is accompanied by the transfer of an organic entity or in any event has an effect on that entity.
If that criterion is upheld it must be acknowledged that the transfer even of an isolated activity limited as to time comes within the scope of the directive and that, consequently, employees whose employment relationship is structurally linked to the carrying on of that actual activity enjoy the protection afforded by the directive. As the Court has acknowledged, that protection covers all employees in the context of the activity in question and it must be available even if only one worker is affected by the transfer. (
18
)
On the other hand, if that criterion is lacking one is dealing with a transfer of an activity without organizational underpinning as prescribed above, which means in such a case the directive does not apply.
The fact that in the present case, in addition to the transfer of the relevant works to the new employer materials and two apprentices were also transferred are factors which at first sight militate in favour of the idea that there was in fact in this case from an organizational point of view an actual employment relationship as regards the workers concerned in the framework of the works transferred, obviously subject to the proviso that, as stated above, the assessment of the facts and final judgment are matters for the national court.
17.
The preliminary question also mentions the fact that, subsequent to the transfer, contractor A and contractor B (defendant in the main proceedings) continued to work for a certain period of time on the same works together.
I do not think that this fact can have a negative effect on the application of the provisions of the directive since, after the transfer, the transferor of the works in question ceased to carry on those works, performing other works on the site, which may have run in parallel to but were not identical to those transferred; the new employer works in an autonomous and independent manner in relation to his predecessor and himself assumes liability for the completion of those works.
18.
The national court also seeks to ascertain whether the directive is applicable in a case where the contract for completion of the works transferred was entered into by the awarder of the main contract and the new contractor with his predecessor's agreement.
This question leads into a discussion of the expression ‘legal transfer’ in Article 1(1) of the directive.
In order to determine whether in a specific case there has been a transfer as a result of ‘a legal transfer or merger’, the Court always has regard to the end result pursued by the actual contractual relationship. It is clear from its case-law that here as well the Court applies the abovementioned teleologicai or purposive method of interpretation.
19.
In Une with that approach it has systematically given a broad interpretation to the expression ‘legal transfer’. Thus it does not require there to be an assignment between the transferor and his predecessor in title; it is sufficient if the transfer occurs on the basis of a contract.
In its judgment in Berg v Besselsen, (
19
) the Court held that there is a legal transfer when an undertaking transferred under a leasepurchase agreement is restored to the former employer following the termination of that agreement ‘regardless of whether the termination results from an agreement between the contracting parties or a unilateral declaration by one of them or indeed a judicial decision. In all these cases, the transfer of the undertaking occurs on the basis of a contract.’
Following the same approach the Court also held in its judgment in Bork International and Others that ‘where, upon the expiry of the lease, the lessee ceases to be the employer and a third party becomes the employer thereafter under a contract of sale concluded with the owner, the resulting operation may fall within the scope of the directive as defined in Article 1(1) thereof. The fact that in such a case the transfer is effected in two stages, inasmuch as the undertaking is first retransferred from the lessee to the owner and the latter then transfers it to the new owner, does not prevent the directive from applying, provided that the undertaking in question retains its identity ...’. (
20
)
The Court has also held that the leasing of an undertaking followed by termination of the lease on recovery of the undertaking by the owner, (
21
) an agreement to transfer a restaurant undertaking, cancellation of that agreement and the conclusion of a fresh agreement to transfer the restaurant undertaking with a new employer, (
22
) all come within the scope of the directive.
20.
In the light of that case-law, cases such as that described in the second question asked by the national court in which certain works necessary in order to complete a project are directly entrusted by the awarder of the main contract to a new employer with the consent of the initial employer, come within the concept of legal transfer and, therefore, within the scope of the directive.
V — Conclusion
21.
I propose therefore that the Court should reply as follows to the questions submitted for a preliminary ruling by the national court:
(1)
In cases such as that before the national court the continuation, within the context of works already commenced by the original contractor, of specific works limited as to time entrusted by the awarder of the main contract to another employer with the consent of the initial employer may come within the scope of Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses. The fact that the initial contractor continues to work on the site with the new employer in order to complete other works in connection with the project in question does not preclude the application of the directive. It is for the national court to assess whether that directive in fact applies in the specific case before it taking account of the interpretative criteria laid down in the Court's case-law. It will be for the national court to examine, inter alia, whether the activity transferred in the given case is autonomous from an organizational point of view in the sense that persons and possibly materials have been allocated for its completion.
(2)
It is for the national court to determine whether the transfer of an entity or an activity has been carried out by way of legal transfer. For there to be a legal transfer within the meaning of the directive it is not necessary for there to be a contract between the transferor and transferee. It is sufficient for the transfer to have taken place within the framework of a contractual relationship, as in the present case where, with the agreement of the initial contractor, an agreement to transfer actual works was entered into between the awarder of the main contract and the new employer.
(
*1
)	Original language: Greek.
(
1
)	OJ 1977 L 61, p. 26.
(
2
)	OJ 1994 C 90, p. 9.
(
3
)	See judgment in Case C-392/92 Schmidt [1994] ECR I-1311, paragraph 12. See also judgments in Case C-209/91 Watson Rask and Christensen [1992] ECR I-5755, paragraph 15 and in Case 287/86 Ny MMe Kro [1987] ECR 5465.
(
4
)	See judgments in Case 24/85 Spijkers v Benedik [1986] ECR 1119 and in Case C-29/91 Redmond Stichting [1992] ECR I-3189, and the Schmidt and Ny Mølle Kro judgments, cited above.
(
5
)	See the Spijkers v Benedik judgment, cited above (paragraph 11), Redmond Stichting, cited above (paragraph 23), and Schmidt, cited above (paragraph 17).
(
6
)	See Spijkers v Benedik, cited above (paragraph 12).
(
7
)	See Spijkers v Benedik, cited above (paragraph 13) and Redmond Stichting, cited above (paragraph 24).
(
8
)	See Spijkers v Benedik, cited above (paragraph 14).
(
9
)	See judgment cited above (paragraphs 11 and 12).
(
10
)	See OJ 1994 C 274, p. 10. It is to be noted that the second subparagraph of Article 1(1) of that proposal for a directive provides dût ‘The transfer of an activity which is accompanied by the transfer of an economic entity which retains its identity shall be deemed to be a transfer within the meaning of this Directive. The transfer of only an activity of an undertaking, business or part of a business, whether or not it was previously carried out directly, does not in itself constitute a transfer within the meaning of the Directive.’
(
11
)	See the Redmond Stichting judgment, cited above (paragraphs 30 and 31).
(
12
)	See judgment cited above (paragraph 17).
(
13
)	See the Schmidt judgment, cited above (paragraph 14).
(
14
)	The directive was announced by Council Resolution of 21 January 1974 concerning a social action programme (OJ 1974 C 13, p. 1).
(
15
)	See the Ny Melle Kro judgment, cited above (paragraph 12). See also judgments in Case 324/86 Daddy's Dance Hall [1988] ECR 739, paragraph 9, in Joined Cases 144/87 and 145/87 Berg v Besselsen [1988] ECR 2559, paragraph 12, in Case 101/87 Bork International and Others [1988] ECR 3057, paragraph 13, and in Case C-362/89 D'Urso and Others [1991] ECR I-4105, paragraph 9, and see also the Schmidt judgment, cited above (paragraph 15).
(
16
)	Judgment in Case 186/83 Botzen and Others [1985] ECR 519, paragraph 15. See also the Schmidt judgment, cited above (paragraph 13).
(
17
)	It should be noted that, as the Court emphasized in the Schmidt judgment, cited above (paragraph 16), ‘the fact that in its case-law the Court includes the transfer of such assets among the various factors to be taken into account by a national court to enable it, when assessing a complex transaction as a whole, to decide whether an undertaking has in fact been transferred cannot warrant the conclusion that the absence of these factors precludes the existence of a transfer. The safeguarding of employees' rights, which constitutes the subject-matter of the directive, as is clear from its actual tide, cannot depend exclusively on consideration of a factor which the Court has in any event already held not to be decisive on its own (judgment in Case 24/85 Spijkers v Benedik [1986] ECR 1119, paragraph 12).’
(
18
)	See the Schmidt judgement, cited above (paragraph 15).
(
19
)	Cited above (paragraph 19).
(
20
)	Judgment cited above (paragraph 14).
(
21
)	See Ny Mølle Kro judgment, cited above.
(
22
)	See the Daddy's Dance Hall judgment, cited above.