G. C. Allen and Others v Amalgamated Construction Co. Ltd.
Date: 1999-12-02
16 The Directive is therefore applicable where, following a legal transfer or merger, there is a change in the natural or legal person responsible for carrying on the business who by virtue of that fact incurs the obligations of an employer vis-à-vis employees of the undertaking, regardless of whether or not ownership of the undertaking is transferred (Case 287/86 Ny Mølle Kro [1987] ECR 5465, paragraph 12, and Case 324/86 Tellerup v Daddy's Dance Hall [1988] ECR 739, paragraph 9).
17 It is thus clear that the Directive is intended to cover any legal change in the person of the employer if the other conditions it lays down are also met and that it can, therefore, apply to a transfer between two subsidiary companies in the same group, which are distinct legal persons each with specific employment relationships with their employees. The fact that the companies in question not only have the same ownership but also the same management and the same premises and that they are engaged in the same works makes no difference in this regard.
18 That conclusion is not affected by the judgment in Viho v Commission, cited above, in paragraphs 15 to 17 of which the Court held that Article 85(1) of the EC Treaty (now Article 81(1) EC) does not apply to relations between a parent company and its subsidiaries where those companies form a single economic unit within which the subsidiaries do not enjoy real autonomy in determining their course of action on the market, but carry out the instructions issued to them by the parent company controlling them.
20 Nothing justifies a parent company's and its subsidiaries' uniform conduct on the market having greater importance in the application of the Directive than the formal separation between those companies which have distinct legal personalities. That outcome, which would exclude transfers between companies in the same group from the scope of the Directive, would be precisely contrary to the Directive's aim, which is, according to the Court, to ensure, so far as possible, that the rights of employees are safeguarded in the event of a change of employer by allowing them to remain in employment with the new employer on the terms and conditions agreed with the transferor (see, in particular, Ny Mølle Kro, cited above, paragraph 12, and Daddy's Dance Hall, cited above, paragraph 9).
23 The aim of the Directive is to ensure continuity of employment relationships within an economic entity, irrespective of any change of ownership. The decisive criterion for establishing the existence of a transfer within the meaning of the Directive is whether the entity in question retains its identity, as indicated inter alia by the fact that its operation is actually continued or resumed (Case 24/85 Spijkers [1986] ECR 1119, paragraphs 11 and 12, and Case C-13/95 Süzen [1997] ECR I-1259, paragraph 10).
24 First of all, in order for the Directive to be applicable, the transfer must relate to a stable economic entity whose activity is not limited to performing one specific works contract (Case C-48/94 Rygaard [1995] ECR I-2745, paragraph 20). The term `entity' thus refers to an organised grouping of persons and assets facilitating the exercise of an economic activity which pursues a specific objective (Süzen, cited above, paragraph 13).
26 Second, in order to determine whether the conditions for the transfer of an economic entity are met, it is necessary to consider all the facts characterising the transaction in question, including in particular the type of undertaking or business, whether or not its tangible assets, such as buildings and movable property, are transferred, the value of its intangible assets at the time of the transfer, whether or not essential staff are taken over by the new employer, whether or not its customers are transferred, the degree of similarity between the activities carried on before and after the transfer, and the period, if any, for which those activities are suspended. However, all those circumstances are merely single factors in the overall assessment which must be made and cannot therefore be considered in isolation (see, in particular, Spijkers, paragraph 13, and Süzen, paragraph 14).
27 So, the mere fact that, in the instant case, the service provided by the undertaking holding the contracts for driveage work and then by the undertaking to which the work was then subcontracted is similar does not warrant the conclusion that an economic entity has been transferred between the first and the second undertaking. Such an entity cannot be reduced to the activity entrusted to it. Its identity also emerges from other factors, such as its workforce, its management staff, the way in which its work is organised, its operating methods or indeed, where appropriate, the operational resources available to it (Süzen, cited above, paragraph 15, Joined Cases C-127/96, C-229/96 and C-74/97 Hernández Vidal and Others [1998] ECR I-8179, paragraph 30, and Joined Cases C-173/96 and C-247/96 Hidalgo and Others [1998] ECR I-8237, paragraph 30).
28 As pointed out in paragraph 26 above, the national court, in assessing the facts characterising the transaction in question, must take into account, among other factors, the type of undertaking or business concerned. It follows that the degree of importance to be attached to each criterion for determining whether or not there has been a transfer within the meaning of the Directive will necessarily vary according to the activity carried on, or indeed the production or operating methods employed in the relevant undertaking, business or part of a business. Where, in particular, an economic entity is able, in certain sectors, to function without any significant tangible or intangible assets, the maintenance of its identity following the transaction affecting it cannot, logically, depend on the transfer of such assets (Süzen, paragraph 18, Hernández Vidal and Others, paragraph 31, and Hidalgo and Others, paragraph 31).
29 The Court has thus held that, since in certain sectors in which the activity is based essentially on manpower, a group of workers engaged in a joint activity on a permanent basis may constitute an economic entity, such an entity is capable of maintaining its identity after it has been transferred where the new employer does not merely pursue the activity in question but also takes over a major part, in terms of their numbers and skills, of the employees specially assigned by his predecessor to that task. In those circumstances, the new employer takes over a body of assets enabling him to carry on the activities or certain activities of the transferor undertaking in a stable way (Süzen, paragraph 21, Hernández Vidal and Others, paragraph 32, and Hidalgo and Others, paragraph 32).
30 Although, as far as this case is concerned, the driving of underground tunnels cannot be considered to be an activity based essentially on manpower since it requires a significant amount of plant and equipment, it is clear from the order for reference that, in the mining sector, it is common for the essential assets required for driveage work to be provided by the mine owner himself. For instance, AMS, as subcontractor, was able to use the equipment which RJB previously made available to ACC. The fact that ownership of the assets required to run the undertaking did not pass to the new owner does not preclude a transfer (see Ny Mølle Kro and Daddy's Dance Hall, cited above, and Case C-209/91 Watson Rask and Christensen [1992] ECR I-5755). In the circumstances, the fact that there was no transfer of assets between ACC and AMS is not of decisive importance.
31 Nor can the fact that ACC was always RJB's sole contractor and subcontracted the work to AMS preclude in itself the existence of a transfer within the meaning of the Directive. First, the transfer of customers between transferor and transferee is only one factor amongst others in the overall assessment to be made to ascertain whether a transfer has taken place (Spijkers, cited above, paragraph 13). Second, the Directive is applicable wherever, in the context of contractual relations, there is a change in the natural or legal person responsible for carrying on the business who incurs the obligations of an employer towards employees of the undertaking (see, inter alia, Joined Cases C-171/94 and C-172/94 Merckx and Neuhuys [1996] ECR I-1253, paragraph 28).
33 Moreover, even if a temporary suspension of the undertaking's activity does not of itself preclude the possibility that a transfer has taken place (see Ny Mølle Kro, cited above, paragraph 19), the fact that the work was performed continuously, with no interruption or change in the manner of performance, is none the less a normal feature of transfers of undertakings.
37 It is true that in Rygaard the Court held that the situation in which an undertaking transfers to another undertaking one of its building works with a view to the completion of that work, confining itself to providing the latter undertaking with certain workers and equipment to carry out the work in progress, is outside the scope of the Directive. However, that situation differs from the present case in that complete works projects were subcontracted to AMS. Furthermore, at paragraph 21 of the judgment in Rygaard, cited above, the Court added that a transfer of building works with a view to the completion of that work could come within the terms of the Directive if it included the transfer of a body of assets enabling the activities or certain activities of the transferor undertaking to be carried on in a stable way. So, the fact that ACC only subcontracted to AMS the performance of certain driveage work would not be sufficient to preclude application of the Directive if it were established that in that transaction AMS had acquired from ACC a body of assets which would enable it to carry out driveage work on a permanent basis at the Prince of Wales Collieries.