‘Transfer’ case highlights need to update EU rules

Date: 06/03/1997

By Simon Coss

A FORTHCOMING judgement from the European Court of Justice is expected to shed some light on what should happen to employees when companies farm out parts of their operations to contractors.

Current EU rules in this area - known as the 'transfer of undertakings' - date back to a directive passed in 1977, and it is generally accepted that they need to be updated to take into account subsequent changes in working practices.

The 1977 directive was drafted with the main intention of protecting employees' rights when one company is taken over by another rather than dealing with the practice of 'contracting-out', which was comparatively rare 20 years ago.

The case currently being considered by the ECJ concerns a German woman, Ayse Süzen, who worked as a contract cleaner at a private college near Bonn. Süzen complained to the German courts when her employer lost the college contract to a competitor. She was retained by the new contractor, but on less-favourable terms than before and she argued that the original firm had not given her the legally required amount of notice before terminating her employment.

The judge in Germany turned to the ECJ as he felt the woman's complaint hinged on whether or not the transfer of the cleaning contract constituted a 'transfer of business'. If it did, then the woman would have no case as her employment would be regarded as continuous.

ECJ Advocate-General Antonio la Pergola caused a stir last October when he published his opinion on the case. While he conceded that Süzen's situation did indeed constitute a transfer of undertakings on the basis of existing ECJ case-law, he argued that this action provided a good opportunity to review the criteria adopted in those previous cases.

“It is in fact necessary to define more precisely the concept of a transfer of undertakings as mentioned in the directive,” he stated.

Employers are worried that if a single employee counts as an 'undertaking', their ability to adapt to new challenges and working practices - including the contracting out of parts of their business - will be severely restricted.

Employees' organisations, on the other hand, want to ensure that hard-won workers' rights are not eroded by any changes to the rules.

For its part, the European Commission recognised the need for changes to the directive over three years ago when it adopted a proposal to amend the 1977 law. “We need to clarify what constitutes a transfer of undertakings. There is currently great uncertainty over this,” said an aide to Social Affairs Commissioner Pádraig Flynn recently.

But the Commission proposal has been given a rough ride since it was launched in late 1994. MEPs are unhappy with some of its provisions and it needs the unanimous support of all 15 member state governments if it is to become law. This, the Commission concedes, will be an uphill struggle.

The ECJ will rule on the Süzen case on 11 March.