Report for the Hearing in Case C-209/91
I — Relevant legislation and facts of the main proceedings
1. Applicable legislation
Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses (OJ 1977 L 61, p. 26, hereinafter the Directive) is intended to provide for the protection of employees in the event of a change of employer, in particular to ensure that their rights are safeguarded (second recital in the preamble).
According to Article 1(1), the directive is applicable to the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger.
Article 3(1) provides as follows:
Article 3(2) safeguards existing terms and conditions of employment in the following terms:
Directive 77/187 was implemented in Denmark by Law No 111 of 21 March 1979 on the legal position of employees on the transfer of undertakings.
2. Facts of the main proceedings
Anne Watson Rask and Kirsten Christensen, the plaintiffs in the main proceedings, were employed by the Philips company (hereinafter Philips) in one of its four staff canteens.
By an agreement dated 2 December 1988, which took effect on 1 January 1989, Philips handed over the management of those canteens to ISS Kantineservice (ISS), the defendant in the main proceedings.
Under the agreement, ISS agreed that it would assume full and entire responsibility for managing the canteens, including menu planning, purchasing, preparation, dispatch and all administrative functions, together with staff recruitment and training.
In return, Philips agreed to pay ISS, first, a fixed monthly fee to cover all expenditure relating to direct or indirect remuneration, insurance, work clothes, management expenses and supervisory and administrative costs and, secondly, the costs of various products, such as disposable plates and packaging, serviettes and cleaning materials, which were to be invoiced at the ruling wholesale price.
ISS also agreed to take over, as from 1 January 1989, Philips's permanent canteen staff on the same terms as regards wages and seniority.
The agreement provided inter alia that the wages paid to the employees concerned would consist of the normal ISS wages plus a transfer supplement so that the employees taken over by ISS would not lose wages owing to their new employment relationship. It further stipulated that future pay adjustments would only affect the normal wages and that a set-off against the transfer supplement could be made in so far as ISS adjusted pay rates by more than was prescribed by the collective agreements.
Under the agreement, ISS undertook not to rationalize canteen operations within the first six months of the contract and not to transfer former Philips employees to other ISS-operated canteens.
However, ISS changed the day on which wages were paid to employees from the last Thursday in the month to the last working day in the month. It also changed the make-up of the wages, although the total amount of each employee's wages remained unchanged.
Pursuant to the agreement, the contracts of employment of Mrs Watson Rask and Mrs Christensen were transferred to ISS with effect from 1 January 1989.
Mrs Watson Rask asked ISS to pay her her wages at the time she was used to receiving them at Philips. She also sought, together with Mrs Christensen, payment of various allowances (for laundry, footwear, etc.) that Philips used to pay as part of their wages.
ISS refused to accede to those requests, whereupon Mrs Watson Rask declared that she did not wish to go on working under those conditions and ISS dismissed her.
Mrs Watson Rask brought an action in the Sø-og Handelsretten i København (Maritime and Commercial Court, Copenhagen) for compensation for wrongful dismissal and she and Mrs Christensen asked that court to order ISS to pay them the items of pay which they claimed.
Before the Sø-og Handelsretten i København, the plaintiffs in the main proceedings argued that Philips had transferred part of its undertaking to the defendant and that, under the Danish law on transfers of undertakings, they should be employed by ISS on the same terms and conditions as they had been by Philips, that is to say, without any loss of advantages.
The defendant in the main proceedings contended that the agreement concluded between it and Philips had not effected a transfer within the meaning of the aforementioned Danish law or of Directive 77/187 and that no provision of the agreement precluded it from altering the composition of wages of the employees who had been transferred. As regards more specifically Mrs Watson Rask's claim, ISS argued that, even if the law on transfers of undertakings were applicable, it as transferee was bound only to maintain the essential terms and conditions of employment, such as wages and seniority, but not ancillary terms, such as that relating to the time at which wages were paid.
The Sø-og Handelsretten i København considered that these cases raised difficulties concerning the interpretation of Directive 77/187 and, by order of 30 July 1991, referred the following questions to the Court for a preliminary ruling:
3. Procedure before the Court
The order for reference was received at the Court on 6 August 1991.
Pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted by the plaintiffs in the main proceedings, represented by Jens B. Bjørst, of the Copenhagen Bar, by ISS Kantineservice, represented by K. Werner, of the Copenhagen Bar, and by the Commission of the European Communities, represented by Karen Banks and Anders Christian Jessen, of its Legal Service, acting as Agents.
Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry.
Pursuant to Article 95(1) and (2) of the Rules of Procedure, the Court decided on 3 June 1992 to assign the case to the Third Chamber.
II — Written observations submitted to the Court
The Commission observes in limine that the Court has consistently held (see, in particular, Case 101/87 Bork International v Foreningen af Arbejdsledere i Danmark [1988] ECR 3057, paragraph 19) that it is for the national court to make the necessary appraisal of the facts, in the light of the interpretative criteria laid down by the Court, in order to establish whether or not the Directive is applicable. It argues that the Court is therefore not called on to make factual assessments in this case, as the questions referred by the national court seem to be asking it to do.
1. The national court's first question
The plaintiffs in the main proceedings and the Commission consider that this question should be answered in the affirmative.
— It maintains, in the first place, that the transaction considered by the national court is not a transfer within the meaning of Article 1(1) of the Directive.
In points out, first, that whilst, in Case 135/83 H. B. M. Abels v Bedrigfsvereniging voor de Metaalindusrie en de Electrotechnische Industrie [1985] ECR 469, the Court found differences in terminology as between the language versions of the Directive as regards the concept of transfers, some clearly referring to contractual transfers, others having a wider definition, Article 1(1) of the Directive has to be interpreted as referring solely to contractual transfers, that is to say, essentially transfers resulting in a change of proprietor. Account should be taken in this connection of the legal or natural person who incurred the obligations of an employer vis-à-vis the employees of the undertaking (Spijkers v Benedik and Ny Mølle Kro, cited above).
Secondly, ISS argues that those ideas imply that transactions other than sales, gifts or mergers come within the scope of the Directive. However, it considers that any interpretation of the wording of the directive going beyond its usual meaning must be based on serious grounds.
Thirdly, it contends that there can be no transfer within the meaning of the Directive unless the transferee assumes responsibility for and control over the undertaking and has the ownership of it. That is not the case here, since the provider of the service is not free to set its prices and does not choose his customers.
Fourthly, it maintains that the contract for services at issue in the main proceedings is different from the lease-purchase agreement which the Court held to fall within the scope of the Directive in Foreningen af Arbejdsledere i Danmark v Daddy's Dance Hall, cited above. In the first place, the provider's fee is fixed and not based on turnover. Secondly, the provider does not have full powers to run the business, inter alia to change the circle of customers. Thirdly, the provider of services is not under a duty to operate the service in accordance with the relevant legislation, as this is the customer's responsibility. Consequently, lease-purchase is more akin to selling than to the provision of services.
Fifthly, the defendant in the main proceedings argues that if contracts for services were to fall within the scope of the Directive, serious difficulties would arise as regards the application of the rules laid down by the Directive in the case of public bodies' entrusting private suppliers with the performance of certain of their duties. It maintains that the Directive cannot apply to public services fulfilling a public-interest aim which cannot be transferred by contract to the private sector, or to civil servants, in view of the particular features of their status. In its view, such an interpretation could only impede the privatization movement which has been initiated in the Member States of the European Community.
Lastly, it observes that contracts for services relate to activities which are of limited duration and content, which makes them radically different from traditional instances of transfers of undertakings,
— Next, the defendant in the main proceedings argues that it cannot be regarded as an employer within the meaning of the Directive.
In its view, it follows both from the words used in some of the language versions of the Directive (indehaver in Danish, Inhaber in German, ondenemer in Dutch) and from a Commission memorandum of 10 February 1977 (document 12/212 DK/77, Soc. 22), according to which employer should be taken to mean the legal or natural person legally responsible for the undertaking, that the transfer of full responsibility for the undertaking determines whether the contracting party is in fact the employer.
This is not so in the case at issue in the main proceedings, since the transferee's freedom of action is subject to major restrictions.
However, the defendant in the main proceedings concedes that in some judgments (for instance, the judgment in Foreningen af Arbejdsledere i Danmark v Daddy's Dance Hall, cited above, concerning a lease-purchase agreement) the Court has not had regard to the fact that the proprietor has not changed, but has latched on to the fact that the employer has changed. In its view, those judgments reflect a desire to treat specific situations as if a change of owner were involved.
The company goes on to argue that, in view of the constraints restricting its actions, it cannot be regarded as the head of an undertaking, as the employer or as the person legally responsible for the undertaking.
— Lastly, the defendant in the main proceedings contends that the activity entrusted to it cannot be described as an undertaking, business or part of a business within the meaning of the Directive.
After calling to mind the principles set out by the Court in Spijkers v Benedik, cited above, at paragraphs 12 and 13, it argues that in the case at issue in the main proceedings tangible assets were not transferred, but merely made available without financial consideration; the intangible assets were not transferred; there was no transfer of customers in the ordinary meaning of the expression; the transfer was not profit-making, since all that was involved was a service offered to staff; and only ten of the 1300 employees of the undertaking were taken on by ISS.
To expand the concept of an undertaking to cover an activity such as that at issue in the main proceedings would, in the view of the defendant in the main proceedings, give rise to major legal uncertainty having regard to the difficulty in categorizing certain activities, such as the upkeep of flowers or repairs to be carried out within premises.
In the defendant's view, a distinction should be drawn according to whether the activity entrusted to the provider of services falls within the objects of the undertaking which effects the transfer or whether it constitutes simply a service intended for employees or required by law.
The company also maintains that too broad an interpretation of the term undertaking would impede the Commission's desire to step up the privatization or the putting out to contract of certain public-sector activities.
Lastly, it states that in the case in point for Philips to take the employees in question back on the expiry of the agreement would give rise to difficulties, since it is stipulated that Philips will not enter into any contract of sale or contract for services falling within the ambit of the agreement with persons employed by ISS during the last twelve months, and will not recruit such persons.
2. The national court's second question
The plaintiffs in the main proceedings and the Commission suggest that the second question should be answered in the negative.
3. The national court's third question
The plaintiffs in the main proceedings argue that, according to Article 3 of the Directive, the transferee has to maintain the same terms and conditions in relation to wages and work which existed before the transfer, which includes the day on which wages are paid.
The Commission and the defendant in the main proceedings point out that according to the Court's case-law (Case 105/84 Danmols Inventar [1985] ECR 2639 and Foreningen af Arbejdsledere i Danmark v Daddy's Dance Hall, cited above) the Directive is intended to achieve only partial harmonization, not to establish a uniform level of protection for employees throughout the Community on the basis of common criteria. It merely ensures that the employee is protected in his relations with the transferee to the same extent as he was protected in his relations with the transferor under the national legislation. Consequently, if the transferor is entitled to alter the terms and conditions relating to the payment and composition of wages, the transferee is also entitled to do so.
The Commission adds that it is for the national court to assess whether the terms and conditions relating to the payment and composition of wages may be altered under Danish law.
1 Language of the case: Danish.