The European Court (CJEU) decision in Jorge Siguenza v Ayuntamiento de Valladolid concerns the potential application of a transfer of undertaking (TUPE transfer in the UK) in a case in which there is a long gap between one undertaking ceasing its activities and another commencing. Mr Siguenza was employed as a music teacher at the Municipal Music School of Valladolid in Spain from November 1996. From 1997 to 2013 management of the school was provided by a contractor, Musicos y Escuela, on behalf of the local authority. In 2012-13, owing to a reduction in the number of pupils, the authority refused to pay the sums claimed under the contract by Musicos y Escuela, which therefore sought the termination of the contract and claimed damages. In response, in August 2013, the authority terminated the contract, alleging wrongful conduct by Musicos y Escuela because it had ceased its activities before the end of the contractual end date. In a series of judgments delivered in 2014 and 2015 the Tribunal Superior determined that the authority had breached the contract because it was committed to providing guaranteed payments irrespective of the number of students, so that failure to make those payments in full had caused the breach of contract.
In the meantime, in March 2013, Musicos y Escuela started consultations with a view to the dismissal of all its staff. Mr Siguenza and his fellow employees were dismissed on 4 April and the company was declared insolvent on 30 July.
In August 2013 the authority assigned the management of the school to In-pulso Musical and provided it with the use of the premises, instruments and equipment necessary for it to carry out its duties. In-pulso Musical commenced its management of the school in September 2013 for the 2013-14 school year and was awarded further contracts for 2014-15 and 2015-16.
Unfair dismissal claims by the former employees failed but Mr Siguenza brought a further claim before the social court. His claim was dismissed on the basis of res judicata (the matter had already been determined by the other court) and he appealed to the high court. In doing so, he contended that there had been a transfer of undertaking from Musicos y Escuela to In-pulso Musical so that his contract of employment should have been preserved. It was this aspect of his claim that was transferred to the CJEU.
The European Court determined that:
- There was a relevant transfer. It was significant that the resources to enable the services to be performed had been provided to the new employer and that the services were very similar (if not identical). The material resources, such as musical instruments, facilities and premises, were essential to the economic activity relating to the management of a school of music. It did not matter that the resources remained in the ownership of the authority. A “temporary suspension” of a few months was insufficient to prevent there from being a relevant transfer.
- The dismissal did take place for “economic, technical or organisational reasons entailing changes in the workforce”. Although the employees had their contracts terminated prior to the transfer, they should nonetheless be regarded as having still been employed by the undertaking on the date of the transfer so that the employer’s obligations towards them were automatically transferred from the transferor to the transferee.
- The court did not have sufficient information to determine whether the principle of res judicata applied so it declined to rule on that point.
I don’t know how many times I have been asked by a client how much time should be allowed to pass in order to avoid a potential TUPE claim. As this case demonstrates, the answer is that there is no time limit. Rather, each case must be considered based on its own particular facts and the application of this complex area of law. As ever, my recommendation is that you should contact us for advice whenever there is a possibility that TUPE might be engaged.