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The mere fact that the service carried out by an old and a new awardee of a contract is similar does not automatically means that there has been a transfer of an economic entity.
In this case, the Court of Justice ruled that in the absence of a transfer of assets or the taking over of an essential part of the workforce, the directive is not applicable.
Mrs Ayse Süzen was employed by Zehnacker. That company had been entrusted with the cleaning of a school in Bonn-Bad-Godesberg and assigned Mrs Süzen to cleaning operations. The school terminated the contract with Zehnacker on 30 June 1994, whereupon Zehnacker dismissed all the employees who had worked as cleaners at the school. The school then, by a new contract, entrusted the cleaning of its premises to Lefahrt GmbH, which apparently did not offer to re-employ the dismissed employees.
Mrs Süzen then instituted proceedings before the Labour Court, Bonn, for a declaration that the notice of dismissal served on her by Zehnacker had not brought to an end her employment relationship with that company.
The relevant Community legislation is 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 purpose of that Community directive is to introduce into the legislation of all the Member States provisions to protect employees in the event of a change of employer, so that their rights are maintained.
Article 1(1) of the directive provides: "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 Labour Court, Bonn, considered that the decision to be given in the case before it depended on an interpretation of the Directive. It was important to determine whether the termination of the cleaning contract and the transfer of that contract to another undertaking was to be regarded as a transfer of a business, so that Mrs Süzen's employment relationship with the new cleaning undertaking would be continued without any change. It therefore decided to stay proceedings pending a preliminary ruling from the Court of Justice on a number of general questions concerning that directive, to which the Court has today given an answer in general terms.
The answer given is binding on the national court and is intended to help it decide the individual case pending before it.
The Court explained that the national court wishes to know whether the directive applies to a situation in which a person who has entrusted the cleaning of his premises to a first undertaking terminates the contract between him and that undertaking and, for the performance of similar work, enters into a new contract with a second undertaking without any concomitant transfer of tangible or intangible business assets from one undertaking to the other.
The aim of the Directive is to ensure continuity of employment relationships within an "economic entity", irrespective of any change of ownership and irrespective of the detailed arrangements for that change. The term "entity" thus refers to an organized grouping of persons and assets facilitating the exercise of an economic activity which pursues a specific objective. According to the Court, a transfer, within the meaning of the Directive, takes place if the economic entity maintains its identity. To determine whether the conditions for a "transfer of an entity" are met, the Court cited a number of factors which may be taken into account as individual aspects of the overall assessment required of the national court. It cited in particular the transfer of substantial tangible assets (such as buildings and movable property) or intangible assets, and the question whether or not the new employer has taken over a major part of the workforce in terms of numbers and skills.
The Court emphasizes that the mere loss of a service contract to a competitor cannot therefore, by itself, disclose the existence of a transfer within the meaning of the Directive. In those circumstances, the service undertaking previously entrusted with the contract does not, on losing a customer, thereby cease fully to exist, and it cannot be considered that a business or part of a business belonging to it has been transferred to the new awardee of the contract.
It is therefore for the national court to establish, in the light of the interpretative guidance provided, whether or not a transfer has occurred in the case before it.
The Court stated in reply to the question from the German court that Article 1(1) of the directive does not apply to the situation described in the questions referred if the transaction concerned is not accompanied by a transfer from one undertaking to the other of significant tangible or intangible assets or the taking over by the new employer of a major part of the workforce, in terms of numbers and skills, which his predecessor assigned to performance of his contract.