Does a Five-Month Cessation of Activities Preclude the Operation of TUPE?

No, declared the European Court of Justice (ECJ) in the case of Colino Sigüenza v Ayuntamiento de Valladolid and others, but it determined that dismissals arising from the transfer were probably for an "economic, technical or organisational" reason, which is critical to avoid a claim of automatic unfair dismissal.

The ECJ has decided that a "transfer of an undertaking" for the purposes of the Acquired Rights Directive (implemented in the UK by the Transfer of Undertakings (Protection of Employment) Regulations 2006) had potentially occurred in circumstances where a contract to operate a Spanish music school was terminated due to non-performance reasons resulting in the dismissal of staff and where the service was resumed by another contractor but following a gap of five months.

The Court considered that the "economic activity" in question was an asset reliant one and the new contractor used the same premises, instruments and resources, and so, a transfer of undertaking may be construed.

However, the ECJ considered that an employee's dismissal in those circumstances was probably for an economic, technical or organisational reason entailing changes in the workforce. The Court considered it particularly relevant that dismissal took place well before the date of the alleged transfer and in circumstances where it was impossible for the alleged transferor to pay its staff.

The ECJ then returned the matter to the Spanish court to determine whether there was a transfer of an undertaking and the genuine reason for dismissal. 

This case reminds contractors assuming services some months after an apparent suspension that TUPE considerations may still apply.

For more information please contact Nicola Gray or Martin Sinclair, or call 01224 632464.