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DOI: 10.5553/EELC/187791072023008004008

European Employment Law CasesAccess_open

Case Reports

2023/36 The transfer of undertakings regime in the succession of the provision of security and surveillance services (PT)

Keywords Transfer of Undertakings
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Magda Sousa Gomes and Joana Brisson Lopes, "2023/36 The transfer of undertakings regime in the succession of the provision of security and surveillance services (PT)", European Employment Law Cases, 4, (2023):179-181

    According to the Portuguese Supreme Court of Justice there is no transfer of establishment when a company ceases to provide surveillance and security services to a particular client, following the contracting (by the client) of such services to another company, without any employee or any other resources, skills or organisational instruments having been transferred to the new services provider, which could constitute an ‘economic unit’.
    For this assessment, the Supreme Court has taken into consideration the ruling issued by the Court of Justice of the European Union (‘CJEU’) in Case C-675/21, Strong Charon and the enlightenments about the interpretation of Council Directive 2001/23/EC concerning the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses.

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    • Summary

      According to the Portuguese Supreme Court of Justice there is no transfer of establishment when a company ceases to provide surveillance and security services to a particular client, following the contracting (by the client) of such services to another company, without any employee or any other resources, skills or organisational instruments having been transferred to the new services provider, which could constitute an ‘economic unit’.
      For this assessment, the Supreme Court has taken into consideration the ruling issued by the Court of Justice of the European Union (‘CJEU’) in Case C-675/21, Strong Charon and the enlightenments about the interpretation of Council Directive 2001/23/EC concerning the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses.

    • Legal background

      Council Directive 77/187/EEC (and its successor, Council Directive 2001/23/EC, the ‘TUPE Directive’) required all EU Member States to implement laws protecting employees who are affected by a transfer of a business. Portugal transposed the TUPE Directive and the transfer of undertakings regime is part of the Portuguese Labour Code.
      Recently, Law no. 18/2021 of 8 April amended the Portuguese Labour Code in order to clarify, among other things, that the transfer of undertakings regime is applicable in case of tender procedures involving service providing contracts.

    • Facts

      This case focuses on the evaluation of the enforcement of the transfer of undertakings regime between two companies (Company A and Company B), both dedicated to surveillance and security services in a situation where Company B succeeded Company A in the provision of services to a particular client (the ‘Client’).
      The plaintiff, who worked for Company A since 1988 in the position of security guard, was assigned, together with three other colleagues, to the provision of services to the Client between January and December 2019.
      During this time, the four employees from Company A performed their duties as security guards including (i) control and registration of people accessing and staying at the premises, (ii) opening and closing of the premises, (iii) monitoring of intrusion and fire detection alarm systems, (iv) provision of information and guidance to the Client’s visitors, (v) answering and routing telephone calls, and (vi) surveillance rounds of the Client’s premises.
      However, and further to a public tender procedure launched by the Client, the surveillance and security services were awarded to a different company – Company B. Thus, as of 1 January 2020, Company B replaced Company A and placed four employees of its own staff to perform security guard duties.
      In this context, Company A sent a letter to the plaintiff informing him that the TUPE regime was in place since the services of surveillance and security awarded to Company B were to be considered an ‘economic unit’. Therefore, Company A stated that his employment contract and relationship were transferred to the latter as of 1 January 2020. A letter of equal content was sent by Company A to Company B, to which Company B replied that there was no ‘economic unit’, and therefore the TUPE regime was not applicable and the plaintiff’s employment contract was not consequently transferred.
      With both companies refusing the qualification as the plaintiffs’ employers, the employee was prevented from working as of 1 January 2020. Furthermore, the plaintiff was not able to apply for unemployment allowance because he had not been formally terminated by Company A.
      Both first and second instance courts decided in favour of Company A. Unsatisfied with the outcome, Company B appealed to the Supreme Court of Justice.

    • Judgment

      The Supreme Court held that although it was indisputable that the group of four workers per se, part of the surveillance team, constituted an economic unit, for the purposes of applying the transfer of undertakings regime – provided for in Article 285 of the Portuguese Labour Code – these four workers did not transfer from Company A to Company B, nor did any other resources, skills or organisational instruments considered essential or mandatory for the development of such activity, which could constitute an ‘economic unit’.
      In this decision, the Supreme Court has taken into consideration the ruling issued by the CJEU in Case C-675/21, Strong Charon concerning the interpretation of Council Directive 2001/23/EC, notably that the transfer of undertakings regime is not applicable when only a very limited number of employees is taken over, without them having specific skills and knowledge essential to the services, and also when there was no transfer to the new services provider of other tangible or intangible assets necessary for the continuity of the provision of such services.
      The Supreme Court also pointed out that the structure, organisation and resources of the beneficiary of the surveillance and security services and the fact that Company A used them before and then Company B also began to use them is not relevant, for those assets belong to the beneficiary, the Client, being kept in the Client and were not transmitted. Therefore, these resources are not part of the transferor’s economic unit, even if they are allocated to the contracted activity (such as the beneficiary’s systems of intrusion and fire detection alarm, premises keys, desk, chair, and landline phone), and must not be considered for the purposes of the legal regime in question.
      Thus, the Supreme Court concluded that there was no transfer of any ‘economic unit’ between the defendants and, for this reason, also concluded that the employment contract in question was unilaterally terminated by Company A by way of an unlawful dismissal, first and foremost because it was not preceded by the mandatory procedure as set out in Article 381 paragraph c) of the Portuguese Labour Code. Being an unlawful dismissal, Company A was ordered to pay the labour credits established in the process and to reinstate the plaintiff.

    • Commentary

      The question of whether the transfer of undertakings regime applies in situations where a company providing certain services substitutes another company in providing the same services has been raised frequently before the Portuguese courts. In recent years, the dispute has been particularly common in the private sector, namely surveillance, food, cleaning or transport services, with the companies that ceased rendering services affirming that the TUPE regime applies on the basis that (i) the new company will continue to develop the same activity and (ii) it will also use some of the client’s tools and services, as the previous company had done.
      Amid this controversy, many employees lost their jobs and their salaries, and were forced to go to court, claiming for a decision on who would ultimately take over as employer. These cases are particularly sensitive because during the period between the date in which the services cease to be provided and the court’s decision, the employee receives no income and their potential right to claim an unemployment allowance is limited, leading to very delicate social situations.
      Several first and second instance decisions have considered that the transfer of undertakings regime applies, trying to guarantee employment security to the employees, but the Supreme Court of Justice has been adopting a different view and building a very clear and unequivocal jurisprudential line, very much based on the CJEU ruling: there is no transfer of establishment when a company ceases to provide surveillance and security services to a particular client, following the award (by the client) of such services to another company, without any employee or any other resources, skills or organisational instruments having been transferred to it, which could constitute an ‘economic unit’.

    • Comments from other jurisdictions

      Denmark (Christian K. Clasen, Norrbom Vinding): The Portuguese case report illustrates, among other things, that the decisive criterion when determining if a transfer within the meaning of Directive 2001/23/EC has taken place is whether or not the economic entity in question has retained its identity and that all facts of the transfer must be taken into account when assessing whether or not this criterion has been met.
      A recent judgment by the Danish Labour Court concerned a situation comparable to the Portuguese case.
      In the Danish case, the question was whether or not the Danish Transfer of Undertakings Act, implementing Directive 2001/23/EC, applied in a situation where a cleaning company (A) took over the cleaning services in various institutions in a municipality from another cleaning company (B). Thus, as in the Portuguese case, this case involved services based mainly on manpower.
      With reference to ECJ case law, the Labour Court noted that in a case concerning cleaning services, a main criterion when determining if a transfer within the meaning of Directive 2001/23/EC has taken place is whether the transferee has carried on the economic activity in question and, in addition, based on numbers and skills, has taken over a considerable part of the workforce which carried out the economic activity at the former employer. What must be considered a considerable part of the workforce in the specific situation depends on a case-by-case assessment. However, in this regard, it must be a decisive factor whether the transferred workforce makes it possible for the transferee to carry on the economic activity in a stable manner.
      The Labour Court took into account that, with regard to the total cleaning services transferred, company (A) employed a total of 23 employees and that only seven of these employees were former employees of company (B). The Labour Court also attached importance to the fact that it was not argued that some of the seven employees were key employees in such a way that they enabled company (A) to carry on the cleaning services in a stable manner.
      Further, the Labour Court noted that the assessment of whether a considerable part of the workforce has been transferred must be based on the total economic activity transferred to the transferee. For this reason, it was of no importance whether company (A), with regard to some of the institutions covered by the cleaning services, took over a considerable part of the workforce. Taking into account the merits of the case, the Labour Court therefore held that no transfer of an undertaking had taken place.
      Consequently, the Danish case – like the Portuguese case – illustrates the assessment made by the national courts of whether or not a transfer within the meaning of Directive 2001/23/EC has taken place in a situation where a company providing certain services substitutes another company in providing the same services, including some of the facts that may be taken into account in this assessment.

      Subject: Transfer of undertakings
      Parties: Securitas – Serviços e Tecnologia de Segurança, S.A. (Company A), 2045 – Empresa de Segurança, S.A. (Company B)
      Court: Portuguese Supreme Court
      Date: 13 September 2023
      Case number: BS1150/20.2T8EVR.E1.S1
      Internet publication: http://www.dgsi.pt/jstj.nsf/954f0ce6ad9dd8b980256b5f003fa814/3c508829081021bf80258a2a002d7bc8?OpenDocument


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