A question that we often get asked is whether a temporary closure of a business or suspension of a service being provided prevents the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE") from applying. A recent case relating to a music school in Spain gives some indication of the mood music coming from the courts in such situations.
The short answer is "no" – depending on the facts and circumstances of the situation, a temporary cessation of work does not mean that TUPE cannot apply to transfer the employment of the relevant employees from the old business to the new business.
This is often a trap for the unwary, and can lead to either unexpected employment costs of continuing to employ individuals when the business is not trading, or facing unfair dismissal claims from employees who believe that their employment should not have been terminated.
A recent case in point
The European Court of Justice ("ECJ") has recently considered the effect of such a cessation of activities in a Spanish case, Jorge Luís Colino v Ayuntamiento de Valladolid and others.
This case involved a music school in the city of Valladolid, the management of which had been tendered out to a contractor since 1997. In 2013, the contractor and the city council were in dispute regarding payments due under the contract. As a result, the contractor stopped providing the services under the contract and entered into collective redundancy consultation to dismiss the entire staff of the music school. These dismissals were effected on 8 April 2013, approximately two months before the academic year end.
In August 2013, a new management contractor was appointed to run the school. It did not employ any of the individuals who had been employed and dismissed by the previous contractor. Mr Sigüenza raised a claim under the Spanish equivalent of TUPE to declare that there was a transfer of undertaking from the previous contractor to the new contractor so as not to justify the termination of his employment contract.
The case was referred by the Spanish courts to the ECJ to consider, with particular reference to the five-month cessation of the services which were provided under the contract. The ECJ held that the cessation of the management services of the school for this period of time was not fatal to the potential application of TUPE. It referred to existing ECJ case law, which had previously found that a temporary suspension of activities "of only a few months" did not preclude there being a potential TUPE transfer, providing the rest of the usual requirements were satisfied.
In the facts of this particular case, the ECJ found it of import that although there had been a cessation of activities for a period of five months, this figure included three months of school holidays. It therefore held that there was no reason why TUPE could not potentially apply and remitted it back to the Spanish court to consider it in context of the particular facts of the matter.
So what does this mean in practice?
There is, unfortunately, no definite timescale either in the legislation or through case law guidance when it can be said that TUPE will not apply due to the temporary closure of a business or suspension of a service being provided. It is clear, though, that if this closure or suspension is for a limited period of time, and perhaps even a period of months, then TUPE can still apply.
Get in touch
We've dealt with and advised on every level of complex TUPE transfers from one employee to thousands, therefore if your business is considering how TUPE may affect it, please get in touch with one of our employment team.