Grafe and Pohle (Social policy - Safeguarding of employees' rights - Operation of public transport bus services - Opinion) [2019] EUECJ C-298/18

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(Request for a preliminary ruling from the Arbeitsgericht Cottbus (Labour Court, Cottbus, Germany))

(Reference for a preliminary ruling — Social policy — Directive 2001/23/EC — Transfers of undertakings or businesses — Safeguarding of employees’ rights — Operation of public transport bus services — Taking over by a new undertaking of activities operated by another undertaking following a public procurement procedure)

1. Directive 2001/23/EC (2) codifies Directive 77/187/EEC 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 undertakings or businesses. (3) This request for a preliminary ruling by the Arbeitsgericht Cottbus (Labour Court, Cottbus, Germany) is made in proceedings brought by Mr Grafe and Mr Pohle against Südbrandenburger Nahverkehrs GmbH (‘SBN’), the former operator of a local public bus service, and OSL Bus GmbH (‘OSL Bus’), the new operator of that service.

2. The referring court seeks guidance as to whether there was a transfer of an undertaking within the meaning of Directive 2001/23 where there was no significant transfer of tangible assets, but the majority of the personnel employed by the former operator were engaged by the new operator. It also asks whether the Court’s ruling in Liikenne, (4) which concerned the application of EU legislation governing employees’ rights in cases of transfers of undertakings in relation to the operation of a public transport bus service, should apply here.

3. The following statements are made in the recitals to Directive 2001/23. First, in the event of a change of employer it is necessary to provide for the protection of employees, in particular to ensure that their rights are safeguarded. (5) Second, the Community Charter of the Fundamental Social Rights of Workers (6) states that ‘the completion of the internal market must lead to an improvement in the living and working conditions of workers in [what was at that time] the European Community. The improvement must cover, where necessary, the development of certain aspects of employment regulations such as procedures for collective redundancies and those regarding bankruptcies …’. (7) Third, Directive 77/187 was adopted in 1977 to promote, inter alia, the harmonisation of national laws safeguarding the rights of employees. (8)

4. Article 1(1)(a) states that Directive 2001/23 applies to any transfer of an undertaking, business, or part of an undertaking or business to another employer as a result of a legal transfer or merger. Pursuant to Article 1(1)(b), ‘… there is a transfer within the meaning of [Directive 2001/23] where there is a transfer of an economic entity which retains its identity, meaning an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary’. Article 1(1)(c) provides that the directive applies to public and private undertakings engaged in economic activities whether or not they are operating for gain. In accordance with Article 1(2), Directive 2001/23 applies where and in so far as the undertaking, business or part of the undertaking or business to be transferred is situated within the territorial scope of the Treaty.

5. The following definitions are set out in Article 2. A ‘transferor’ is ‘any natural or legal person who, by reason of a transfer within the meaning of Article 1(1), ceases to be the employer in respect of the undertaking, business or part of the undertaking or business’; a ‘transferee’ means ‘any natural or legal person who, by reason of a transfer within the meaning of Article 1(1), becomes the employer in respect of the undertaking, business or part of the undertaking or business’; and an ‘employee’ is ‘any person who, in the Member State concerned, is protected as an employee under national employment law’. (9)

6. The first subparagraph of Article 3(1) states that ‘the transferor’s rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer shall, by reason of such transfer, be transferred to the transferee’. The first subparagraph of Article 3(3) provides that ‘following the transfer, the transferee shall continue to observe the terms and conditions agreed in any collective agreement on the same terms applicable to the transferor under that agreement, until the date of termination or expiry of the collective agreement or the entry into force or application of another collective agreement’.

7. Council Directive 92/50/EEC relating to the coordination of procedures for the award of public service contracts (10) laid down the rules contracting authorities were to apply when awarding such contracts. However, at the time the contracting authority in the main proceedings organised the competition to award the contract for the provision of a local public bus service, that directive had been replaced by Directive 2014/24/EU on public procurement and repealing Directive 2004/18/EC. (11) Accordingly, I shall refer to the latter directive in this Opinion.

8. SBN held a contract with the Landkreis (administrative district of Oberspreewald-Lausitz ‘the Landkreis’ or ‘the contracting authority’) commencing on 1 August 2008 to operate the local public bus transport system in that region. In September 2016 the Landkreis issued a new call for tenders for operating its bus services. SBN did not participate in that competition. Subsequently, SBN decided to cease business operations and gave notice of termination of employment to all its employees.

9. On 19 January 2017, SBN agreed on a social plan with the company works council. The social plan provided that if employees did not receive an offer of re-employment from the new operator or if they suffered financial loss upon re-appointment, they were to receive severance payments of various amounts.

10. The contract to provide local public bus services from 1 August 2017 was awarded to Kraftverkehrsgesellschaft Dreiländereck mbH (‘KVG’) a wholly owned subsidiary of Rhenus Veniro GmbH & Co. KG. The latter set up a new wholly owned subsidiary, OSL Bus to provide the transport service. OSL Bus recruited many of the bus drivers and some of the management staff from the former operator, SBN. By letter of 10 April 2017, the new operator informed SBN that it would not purchase lease or otherwise use the tangible assets — buses, depots, workshops and operating facilities — which the latter owned.

11. Mr Grafe had been employed since 16 July 1978, on a full-time basis by SBN (or its legal predecessor) as a bus driver and foreman. By letter of 27 January 2017, SBN terminated Mr Grafe’s employment with effect from 31 August 2017. Since 1 September 2017, he has been employed as a bus driver by OSL Bus. The new operator did not take account of Mr Grafe’s previous periods of service completed with SBN. He was therefore classified at the entry level of the collective wage agreement with OSL Bus, as though he were a newly appointed employee. Mr Grafe challenged SBN’s termination of his employment and argues that when classifying him, the new operator must take account of his earlier period of service. Both Mr Grafe and SBN take the view that his employment relationship was transferred to OSL Bus by way of a transfer of an undertaking.

12. Mr Pohle had been employed since 6 November 1979 on a full-time basis by SBN as a bus driver and foreman. By letter of 27 January 2017, SBN terminated Mr Pohle’s employment with effect from 31 August 2017. The new operator did not offer Mr Pohle a job. Mr Pohle challenged SBN’s decision. In the alternative, he claimed a severance payment of EUR 68 034.56 based on the social plan agreed between SBN and its works council.

13. In its counterclaim, SBN argues that the employment relationship with Mr Pohle was transferred to the new operator, as there was a transfer of an undertaking for the purposes of Directive 2001/23. SBN was therefore under no obligation to make a severance payment to Mr Pohle. OSL Bus argues that there was no relevant transfer of an undertaking. It did not take over any of the former undertaking’s tangible assets; and the fact that it took on many of the employees was not of decisive importance for the provision of bus transport services.

14. In Liikenne, (12) this Court held that bus transport could not be regarded as an activity based essentially on manpower, as such an operation required substantial plant and equipment. In a sector such as scheduled public transport by bus, where the tangible assets contributed significantly to the performance of the activity, the absence of a transfer to a significant extent from the old to the new contractor of such assets, which were necessary for the proper functioning of the entity, must lead to the conclusion that the entity does not retain its identity. (13)

15. The referring court endorses SBN’s argument in the main proceedings that the conditions relating to the operation of the bus service in question differ from those underpinning the Court’s judgment in Liikenne. (14) Those conditions include: (i) legal requirements, technical developments and environmental protection, such as the ‘Euro 6 standard’ on emissions; (15) (ii) a contract for operating bus services in question that ran for a 10 year period; and (iii) tender criteria that stipulated that buses might not be more than 15 years old (from the date of initial registration), (16) all buses used had to be of a uniform basic design, the buses had to meet the Euro 6 standard, (17) and from 1 January 2018 40% of vehicles used had to be low floor or low entry (increasing to 70% from 1 January 2022). (18) Thus, a new operator might reasonably rule out taking over the stock of buses used by the former operator.

16. The referring court reached the following conclusions. First, buses that are typically unsuitable for further use or that can be used only to a very limited extent cannot be regarded as vital for the purposes of the new operator. Rather, those buses must necessarily be replaced in order to provide a local public bus service. Second, bus depots are no longer required. Third, bus drivers are vital to the undertaking concerned. The tender specifications stipulated that ‘the contractor must guarantee that the driving staff comply with the requirements of an attractive local public passenger transport service with extensive service- and client-orientation’. Bus drivers — particularly in rural areas — are the most important resource and, in particular, a scare resource. Last, on account of their local knowledge built up over years and their know-how regarding the routes bus drivers are not an easily replaceable resource.

17. The public bus service in Oberspreewald-Lausitz was operated by SBN until 31 July 2017. It was run by the new operator from 1 August 2017. The referring court states that in order for a seamless transfer of the local public transport system to be made, it was irrelevant which buses were used, but it was relevant which bus drivers were employed.

18. Against that background the referring court asks this Court the following questions:

‘(1) Is a transfer of the operation of bus routes from one bus undertaking to another as a consequence of a tendering procedure under [Directive 2014/24] to be regarded as a transfer of a business within the meaning of Article 1(1) of [Directive 2001/23], even if no significant assets, in particular no buses, have been transferred between the two undertakings?

(2) Does the assumption that, on the basis of a reasonable commercial decision, buses are no longer of major importance for the value of the business in the case of a temporary award of services owing to their age and more stringent technical requirements (emission values, low-floor vehicles) provide justification for the [Court] to derogate from its decision of 25 January 2001 (C‑172/99) to the effect that, under such circumstances, the taking-over of a significant proportion of the staff can also result in [Directive 2001/23] being applicable?’

19. Written observations were submitted by SBN, OSL Bus and the European Commission. Neither Mr Grafe or Mr Pohle presented written observations, nor did they attend the hearing on 21 March 2019 at which SBN, OSL Bus and the Commission made oral submissions.

20. It is true that the order for reference does not include a description of national law; nor does it indicate whether the public procurement process relating to bus services operated on behalf of Landkreis Oberspreewald-Lausitz met the conditions laid down in EU law. It nevertheless seems to me that the Court has sufficient information to make a ruling; and that such omissions cannot therefore have the effect of depriving the Court of jurisdiction to reply to the questions referred. (19)

21. Two points arise from the referring court’s reference to Directive 92/50. First, it is clear from the information provided that that directive was no longer in force when Landkreis Oberspreewald-Lausitz issued its call for tenders. (20) Second, it is common ground that the points of EU law at issue concern solely the interpretation of Directive 2001/23 on the transfer of undertakings. The Court has already made clear that the fact that the provisions of Directive 2001/23 may in certain cases be applicable in the context of a transaction which falls within the scope of the public procurement directives cannot be seen as calling into question its objectives. (21) The Court does not have the necessary information to examine whether the relevant provisions of EU public procurement law were respected and it is unnecessary to dwell further on that point in order to reply to the referring court’s questions.

22. It is common ground that the transfer of the operation of public transport bus services on behalf of Landkreis Oberspreewald-Lausitz falls within the scope of Article 1(1)(a) of Directive 2001/23. (22) For the purposes of that directive SBN is the transferor, OSL Bus is the transferee and Mr Grafe and Mr Pohle are employees within the meaning of respectively Article 2(1)(a), (b) and (d) of that directive.

23. By its first question, the referring court seeks to ascertain whether the transfer of the operation of a rural bus service from one operator to another, in the context of a public procurement procedure, constitutes the transfer of an undertaking for the purposes of Article 1(1)(b) of Directive 2001/23, even where no tangible assets (such as the buses themselves) were transferred to the new operator. The second question asks in essence whether in cases of transfers of undertakings where the tangible assets are no longer important it is possible to depart from the Court’s ruling in Liikenne. (23) In answering Question 1 it will be necessary to examine the Court’s judgment in that case. I shall therefore deal with both questions together.

24. The practical issue at stake here is whether OSL Bus takes on the rights and obligations relating to the employment contracts of Mr Grafe and Mr Pohle from the former operator. (24)

25. There is some common ground on this point between SBN, OSL Bus and the Commission. First, they each assert that in order to determine whether there is a transfer of an undertaking for the purposes of Article 1(1)(b) of Directive 2001/23, it is necessary to take account of all the circumstances of fact which characterise the business operation at issue. Those circumstances must be considered as part of the overall assessment of the case at issue and cannot therefore be considered in isolation. Second, they recognise that the Court has ruled that in certain sectors where the retention of the undertaking’s personnel is of primordial importance, an undertaking can conserve its identity after a transfer if the new operator pursues not only the same activity, but also keeps essentially the same group of personnel.

26. SBN submits that there has been a transfer of an undertaking. The actual buses (which are easily replaced) are of less importance than the personnel. It was only by taking over a major part of SBN’s existing personnel that the new operator could continue to run a smoothly functioning bus service in the Landkreis Oberspreewald-Lausitz.

27. OSL Bus argues that, on the contrary, Directive 2001/23 does not apply where there has been no notable transfer of operating resources (here, the buses) by the former operator to the new operator. Bus transport is precisely one of the sectors that does not rely essentially on skilled personnel. In that sector, value-added is created in particular through the tangible assets — the buses. The service cannot be operated without those assets. Thus, whether the buses are transferred between the old and new operators is determinative.

28. The Commission likewise submits that it follows from the Court’s judgment in Liikenne (25) that bus transport is not a sector where the operation of the service relies on the personnel. It is for the national court to determine whether there are sufficient factors to indicate that a transfer occurred. In its view, the importance of the fact that no tangible assets were transferred cannot be countered by the fact that the former operator carried out the activity in question with tangible assets that had lost most of their material value because of their age and that were out of date as a result of technical improvements made in that sector.

29. It seems to me that in order to ensure that Directive 2001/23 is applied in a uniform way, the Court has essentially approached the question of establishing whether there is a transfer within the meaning of Article 1(1)(b) of that directive by examining whether the entity in question retains its identity. (26) That approach provides for a uniform application in spite of the differences between the various language versions of that directive and the divergences between the laws of the Member States with regard to what constitutes a legal transfer. The Court has given a sufficiently flexible interpretation in keeping with the objective of Directive 2001/23. (27)

30. In order to determine whether an entity retains its identity, it is necessary to consider all the facts characterising the transaction in question, including in particular the type of undertaking or business, whether or not its tangible assets, such as buildings and movable property, are transferred, the value of its intangible assets at the time of the transfer, whether or not the majority of its employees are taken over by the new employer, whether or not its customers are transferred, the degree of similarity between the activities carried on before and after the transfer, and the period, if any, for which those activities were suspended. Those elements must be considered as part of the general assessment of the circumstances of the particular case and cannot therefore be examined in isolation. In particular, the Court has held that a national court, in assessing the facts characterising the transaction in question, must take into account, among other things, the type of undertaking or business concerned. (28) It follows that when determining whether or not there has been a transfer within the meaning of Directive 2001/23, the degree of importance to be attached to each criterion will necessarily vary according to the activity carried on, or indeed according to the production or operating methods employed in the relevant undertaking, business or part of a business. (29)

31. The difficulty here lies in establishing how to apply that test, in particular in assessing what weight is to be attached to the various factors in that assessment. It seems to me that it is not simply a question of whether the personnel or the tangible assets (the buses) were transferred to the new operator. Rather, the starting point of any assessment should be the objective of Directive 2001/23, which is to provide protection for employees in the event of a change of employer, in particular to safeguard their rights. (30) Thus, in my view any determination requires a greater degree of nuance than that suggested by the parties to these proceedings.

32. Pursuant to Article 3(1) of Directive 2001/23, obligations arising from a contract of employment (or an employment relationship) existing on the date of a transfer are automatically transferred to the transferee on the date of the transfer.

33. The legislative history confirms that where an undertaking is transferred, protecting the employment relationship between the transferor and the employees who are transferred to the new operator is at the core of Directive 2001/23. (31) Thus, the determination as to whether the identity of the entity in question is retained and the assessment of the surrounding facts and circumstances is to be made in accordance with that central objective.

34. It follows from the Court’s case-law that such an assessment is necessarily flexible. Thus, the weight to be attached to elements of that assessment will vary according to the case at issue. On the one hand, the Court has held that where an activity is based essentially on manpower, the identity of an economic entity cannot be retained if the new operator does not engage the majority of employees of the former operator. (32) On the other hand, where a particular activity is based essentially on equipment, the fact that the former employees were not taken on by the new operator to perform that activity does not preclude there being the transfer of an undertaking for the purposes of Directive 2001/23. (33)

35. Here, the referring court states that the manpower (the bus drivers and management personnel) was important to ensure that the provision of a local bus service in Landkreis Oberspreewald-Lausitz between the old and new operator, was seamlessly transferred. (34) However, there is no finding in the order for reference to the effect that the buses and other tangible assets were vital to the undertaking, particularly at the time when the competent authority launched the call for tenders.

36. It therefore seems to me that SBN and OSL Bus cannot be right in so far as the two defendants in the main proceedings both suggest that it automatically follows that there is (or conversely is not) a transfer of an undertaking according to whether one of the factors identified by the Court exists. The assessment to be carried out is more complex than that.

37. In Schmidt, (35) the Court specifically addressed the question of whether the absence of any transfer of tangible assets precluded the existence of a transfer covered by Directive 77/187. (36) The Court answered that question firmly in the negative. It noted that previous case-law had listed the transfer of such assets amongst ‘the various factors to be taken into account by a national court to enable it, when assessing a complex transaction as a whole, to decide whether an undertaking has in fact been transferred’. (37) However, the mere fact that a transfer of tangible assets was a listed factor did not entitle one to conclude that, in the absence of such a transfer of assets, no transfer of an undertaking had taken place. The Court recalled that it had previously held (in Spijkers) (38) that that factor was not decisive on its own. It therefore concluded that the purpose of the directive, namely worker protection, ‘cannot depend exclusively upon consideration of [that] factor’. (39)

38. The referring court states in its order for reference that OSL Bus taking over the bus fleet used by SBN was ruled out in practice, because the conditions that applied to operating bus routes for the Landkreis Oberspreewald-Lausitz had changed. More stringent emissions requirements now applied. Buses in service were not allowed to be more than 15 years old (on average SBN’s buses were 13 years old at the time that the new operator took over the bus service). A large proportion of the vehicles used had to be suitable for disabled access. There was a general move towards using electric buses rather than diesel or petrol fueled buses; and the referring court took account of the fact that the new operator’s contract was for a 10 year period. Regarding the staff, the referring court accepted SBN’s submission that ‘bus drivers are vital to the economic entity’. The tender specifications stipulated that ‘the contractor must guarantee that the driving staff comply with the requirements of an attractive local public passenger transport service with extensive service- and client-orientation’. The referring court also expressed the view that in rural areas, such as Landkreis Oberspreewald-Lausitz, experienced bus drivers are a rare and valuable resource. (40)

39. Whether the business in question retained its identity is ultimately a question of fact; and therefore a matter for the referring court. It is settled case-law that retention of identity is indicated, inter alia, by whether the new employer actually continues or resumes the same or similar activities. (41)

40. Here, the order for reference indicates that OSL Bus, the new operator, provided essentially similar bus services to those run by the former operator SBN. There was no break in service from one day to the next. (42) The service was provided for the same client (the contracting authority) probably to operate many of the same routes for many of the same passengers.

41. Against that background, is the fact that there was no transfer of tangible assets of overriding significance?

42. OSL Bus places particular emphasis on what it describes as ‘the value-added of the tangible assets of the former operator’. It submits that the factors set out by the referring court in its order for reference are immaterial. The case should be assessed in the abstract and whether the tangible assets are transferred to the new operator is determinative.

44. The transfer of an undertaking does not happen in the abstract. On the contrary: the elements mentioned by the referring court are consistent with the factors identified as relevant by this Court in its extensive case-law. It is precisely because the transfer of an undertaking has real and practical effects not only for the entities involved but also for their employees that the EU legislature decided to act in this sphere. It would therefore be perverse to examine such cases from a purely abstract perspective. The test the Court applies is quintessentially a practical real-world test: is there ‘a transfer of an economic entity which retains its identity’ within the meaning of Article 1(1)(b) of Directive 2001/23? That assessment cannot be reduced to determining whether the tangible assets are transferred from the old to the new operator.

45. Does it necessarily follow from Liikenne (43) that because the existing stock of (old) buses was not transferred to the new operator by the previous operator, there was no transfer of an undertaking here?

46. Liikenne (44) concerned a three-year contract for bus services covering seven regional bus lines. The old operator (Hakunilan Liikenne: ‘HL’) operated the routes with 26 buses. Whilst waiting for the delivery of 22 new buses which it had on order, the new operator (Liikenne) leased two buses from HL for a period of two or 3 months and purchased some uniforms from it. (45) It did not take over any vehicles or other significant assets on a permanent basis.

47. The Court began by making a number of general points that follow well-established case-law. These include a reference to the aims of Directive 2001/23; what constitutes an undertaking for the purposes of that directive; an exposition of the test and the criteria for assessing whether there has been a ‘transfer’ within the meaning of Article 1(1)(b) thereof; and a reminder that it is for the national court to assess the facts in any particular case. (46)

48. It is the following passage of the judgment that potentially causes difficulties:

‘39 However, bus transport cannot be regarded as an activity based essentially on manpower, as it requires substantial plant and equipment (see, reaching the same conclusion with respect to driveage work in mines, Allen, ^[(47)^] paragraph 30). The fact that the tangible assets used for operating the bus routes were not transferred from the old to the new contractor therefore constitutes a circumstance to be taken into account.

40 At the hearing, the representative of the defendants in the main proceedings emphasised the economic value of the contract between the contracting authority YTV and Liikenne, and submitted that this was a significant intangible asset. That value cannot be denied; but in the context of an award which is to be renewed, the value of such an intangible asset in principle falls to nil on the expiry of the old contract, since the award is necessarily thrown open again.

41 If an award procedure such as that at issue in the main proceedings provides for the new contractor to take over the existing contracts with customers, or if the majority of the customers may be regarded as captive, then it should nevertheless be considered that there is a transfer of customers.

42 However, in a sector such as scheduled public transport by bus, where the tangible assets contribute significantly to the performance of the activity, the absence of a transfer to a significant extent from the old to the new contractor of such assets, which are necessary for the proper functioning of the entity, must lead to the conclusion that the entity does not retain its identity.

43 Consequently, in a situation such as that in the main proceedings, Directive 77/187 does not apply in the absence of a transfer of significant tangible assets from the old to the new contractor.’

49. The answer given to the national court was therefore that, ‘ … in a situation such as that in the main proceedings, Directive 77/187 does not apply where there is no transfer of significant tangible assets between those two undertakings’. (48)

50. Given the passages that I have just cited from Liikenne, I respectfully commend the Arbeitsgericht Cottbus (Labour Court, Cottbus) for its loyalty and good sense in making the present reference.

51. Does the Court’s ruling in Liikenne mean that the national court is here precluded from arriving at a different conclusion in relation to another set of factual circumstances where the change of operator for a local public bus service likewise did not involve the transfer of the existing bus stock from the old operator to the new operator?

53. In my view, the facts of the present case are clearly very different, in crucial respects, from those that gave rise to the ruling in Liikenne.

54. It is of course impossible to run a bus service without having buses as well as the drivers to drive them. That said, nothing in the facts of Liikenne, as recorded in Advocate General Léger’s Opinion (49) and in the judgment (50) suggests that the new operator’s decision there not to take over the old operator’s bus stock was dictated by legal, technical or environmental reasons. Liikenne appears to have had nearly enough buses to service the seven additional lines that it was taking over running (it leased two buses from HL for a short period); and it had 22 new buses already on order. Why (commercially) would it then also have taken over HL’s existing stock of 26 buses?

55. Here, the contract put out to tender was for over three times as long a period (10 years, rather than 3 years). The contract was to run an entire district bus service, where easy interchangeability of buses between various routes is likely to have been of significance. Whether the existing bus stock could sensibly be used during the full duration of that contract may plausibly be supposed to have been a relevant consideration. Twenty years on from the facts of Liikenne, (51) the tender specifications had made it crystal clear to potential tenderers that the capital equipment (the buses) to be used during the new 10-year tender period would need to meet specific new (higher) technical and environmental standards.

56. The order for reference thus contains abundant material to conclude (subject, naturally, to any further necessary verification by the national court as sole judge of fact) that — totally independently of the size of the bus fleet already possessed by the new operator — it made no sense for that operator to take over the old operator’s existing bus fleet because it would not have been able to use those buses to fulfil its new contractual and legal obligations. The vehicles in question were near the end of their permitted service life; and they did not meet the legal, technical and environmental requirements laid down in the tender specifications. Had the existing bus fleet been transferred, it would not (to use the words of paragraph 42 of Liikenne (52)) have been ‘necessary for the proper functioning of the entity’. It would have been destined to be scrapped.

57. In circumstances in which legal, technical and environmental constraints mean that it is not commercially viable for the new operator to take on the tangible assets of the old operator, it seems to me that the proper course is for the national court to disregard what has happened to the tangible assets and to concentrate on the other elements of the transaction when assessing whether or not there has been a transfer of an undertaking falling within the scope of Directive 2001/23. As the Court put it in Liikenne, (53) and placing the reference to ‘tangible assets’ in square brackets, ‘to determine whether the conditions for the transfer of an economic entity are satisfied, it is also necessary to consider all the factual circumstances characterising the transaction in question, including in particular the type of undertaking or business involved, [whether or not its tangible assets such as buildings and movable property are transferred,] the value of its intangible assets at the time of the transfer, whether or not the core of its employees are taken over by the new employer, whether or not its customers are transferred, the degree of similarity between the activities carried on before and after the transfer, and the period, if any, for which those activities were suspended. These are, however, merely single factors in the overall assessment which must be made, and cannot therefore be considered in isolation (see, in particular, Spijkers, [(54)] paragraph 13, and Süzen, (55) paragraph 14)’.

58. I add that an analysis which focused exclusively on the fact that such tangible assets had not been transferred could undermine the core aim of Directive 2001/23. It would be all too easy for the new operator to structure the transaction in such a way as to fall outwith the directive by not taking over the tangible assets (indeed, it seems likely that it would do precisely that). As a result, however, the new operator would then be able to avoid the obligations that it would otherwise incur towards the old operator’s employees. That clearly cannot be right.

59. The approach that I propose does not contradict the ruling in Liikenne. (56) Every transfer of undertakings case requires the national court to apply the criteria laid down in the Court’s case-law to the specific facts of the case before it. As I have shown, the facts and circumstances of Liikenne (57) were crucially different from those of the present case. The reasoning of Liikenne (58) can remain intact and yet a different conclusion follows here on the basis of those very different facts.

60. I therefore consider that in determining whether an economic entity has retained its identity, and thus whether there is a transfer of an undertaking for the purposes of Article 1(1)(b) of Directive 2001/23, the national court should: (i) take full account of the main objective of that directive to protect employees and to safeguard their rights in the event of a change of employer; and (ii) assess all the facts and circumstances relating to the transaction at issue including any legal, technical and environmental constraints relating to the operation of the business activity in question. The fact that significant tangible assets have not been transferred is relevant but not necessarily determinative.

61. In the light of all the above considerations I am of the opinion that the Court should answer the questions raised by the Arbeitsgericht Cottbus (Labour Court, Cottbus, Germany) as follows:

In determining whether an economic entity has retained its identity, and thus whether there is a transfer of an undertaking for the purposes of Article 1(1)(b) of Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, business or parts of undertakings or businesses, the national court should:

– take full account of the main objective of that directive to protect employees and to safeguard their rights in the event of a change of employer; and

– assess all the facts and circumstances relating to the transaction at issue including any legal technical and environmental constraints relating to the operation of the business activity in question.

Where the transfer of significant tangible assets is in practice precluded by the existence of such legal, technical and environmental constraints, the national court should not regard that aspect of the transaction as necessarily determinative in deciding whether or not there has been a transfer of an undertaking for the purposes of Article 1(1)(b) of Directive 2001/23.

2 Council Directive of 12 March 2001 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 undertakings or businesses (OJ 2001 L 82, p. 16). Although the referring court mentions Directive 77/187 in its order for reference, it is Directive 2001/23 that was in force at the relevant time: see points 8 to 17 below.

6 The Community Charter of the Fundamental Social Rights of Workers was adopted on 9 December 1989; see in particular points 7, 17 and 18 thereof.

10 Directive of 18 June 1992 (OJ 1992 L 209, p. 1). That directive was repealed and replaced by Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ 2004 L 134, p. 114).

11 Directive of the European Parliament and of the Council of 26 February 2014 (OJ 2014 L 94 p. 65).

13 Judgment of 25 January 2001, Liikenne, C‑172/99, EU:C:2001:59, paragraphs 39 and 42.

15 The referring court states that the tender requirements in the public procurement procedure stipulated that buses must meet the current Euro standard. Buses already used to provide local public transport for a number of years would probably not be able to meet those requirements. For reasons of environmental protection, it was likely that electric buses would be used rather than vehicles using diesel or petrol. Most diesel vehicles were likely to be subject to a ban (particularly in inner cities) because of nitrogen oxide pollution. In practice therefore the successful tenderer would not take over the existing bus stock.

17 SBN’s buses met the Euro 3 standard or the Euro 4 standard, but not the Euro 6 standard.

19 See for example, judgment of 1 December 2005, Burtscher, C‑213/04, EU:C:2005:731, paragraph 33.

21 Judgment of 25 January 2001, Liikenne, C‑172/99, EU:C:2001:59, paragraph 22; see also paragraph 25. That judgment also established, following the advisory opinions of the EFTA Court (Case E-2/95 Eidesund v Stavanger Catering A/S, Report of the EFTA Court 1 July 1995 31 December 1996, p. 1, paragraph 50, and Case E-3/96 Ask and Others v ABB Offshore Technology AS and Aker Offshore Partner AS, Report of the EFTA Court 1997, p. 1, paragraph 33), that circumstances where a contract is awarded under a public procurement procedure do not rule out the application of the rules protecting employees in the event of a transfer of an undertaking: see paragraph 21 of the judgment.

22 Judgment of 11 July 2018, Somoza Hermo and Ilunión Seguridad, C‑60/17, EU:C:2018:559, paragraphs 26 to 28.

26 Judgment of 25 January 2001, Liikenne, C‑172/99, EU:C:2001:59, paragraph 27; see more recently judgment of 11 July 2018, Somoza Hermo and Ilunión Seguridad, C‑60/17, EU:C:2018:559, paragraph 28 and the case-law cited.

27 Judgment of 20 January 2011, CLECE, C‑463/09, EU:C:2011:24, paragraph 29 and the case-law cited.

28 Judgment of 11 July 2018, Somoza Hermo and Ilunión Seguridad, C‑60/17, EU:C:2018:559, paragraphs 30 and 31 and the case-law cited.

29 Judgment of 11 July 2018, Somoza Hermo and Ilunión Seguridad, C‑60/17, EU:C:2018:559, paragraph 32 and the case-law cited.

31 See the Explanatory memorandum to the Commission’s proposal for a directive, COM(74) 351, final/2 of 21 June 1974, pages 2 to 3 and 5. In the 1970s the transfer of undertakings, collective redundancies and employer insolvency were the three key social policy issues first regulated by the European Union outside the sphere of gender equality — see Council Resolution of 21 January 1974 concerning a social action programme (OJ 1974 C 13, p. 1).

32 Judgment of 19 October 2017, Securitas, C‑200/16, EU:C:2017:780, paragraph 29.

33 Judgment of 19 October 2017, Securitas, C‑200/16, EU:C:2017:780, paragraph 30.

34 The Court was informed at the hearing that 85% of the personnel of the former operator were employed by the new operator.

37 Judgment of 14 April 1994, Schmidt, C‑392/92, EU:C:1994:134, paragraph 16.

39 Judgment of 14 April 1994, Schmidt, C‑392/92, EU:C:1994:134, paragraph 16. The English translation of the judgment is unfortunate (particularly in the use of the word ‘subject matter’ for ‘objet’). I have paraphrased in order to convey what I understand to be the sense of the original language in which the judgment was drafted (French). That text reads : ‘… La circonstance que la jurisprudence de la Cour cite le transfert de tels éléments au nombre des différents critères à prendre en compte par le juge national pour, dans le cadre de l’évaluation d’ensemble d’une opération complexe, apprécier la réalité d’un transfert d’entreprise ne permet pas de conclure que l’absence de ces éléments exclue l’existence d’un transfert. En effet, le maintien des droits des travailleurs qui, selon son intitulé même, est l’objet de la directive, ne saurait dépendre de la seule prise en considération d’un facteur dont la Cour a, d’ailleurs, déjà relevé qu’il n’était pas, à lui seul, déterminant (voir arrêt du 18 mars 1986, Spijkers, 24/85, EU:C:1986:127, point 12).’

41 Judgment of 14 April 1994, Schmidt, C‑392/92, EU:C:1994:134, paragraph 17.

42 SBN ceased to provide the bus service for the contracting authority on 31 July 2017. OSL Bus began running the bus service on 1 August 2017.

45 Opinion of Advocate General Léger in Liikenne, C‑172/99, EU:C:2000:563, point 10. Those facts are repeated at paragraphs 9 and 10 of the judgment.

46 Judgment of 25 January 2001, Liikenne, C‑172/99, EU:C:2001:59, see in particular paragraphs 19, 26, 27, 31, 33 and 35.

48 Judgment of 25 January 2001, Liikenne, C‑172/99, EU:C:2001:59, paragraph 44 and point 2, second indent, of the operative part of the judgment (the ‘operative part’), emphasis added.

49 Opinion of Advocate General Léger in Liikenne, C‑172/99, EU:C:2000:563, points 8 to 14.

50 Judgment of 25 January 2001, Liikenne, C‑172/99, EU:C:2001:59, paragraphs 8 to 14.

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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> Grafe and Pohle (Social policy - Safeguarding of employees' rights - Operation of public transport bus services - Opinion) [2019] EUECJ C-298/18_O (11 July 2019) URL: http://www.bailii.org/eu/cases/EUECJ/2019/C29818_O.html Cite as: EU:C:2019:593, ECLI:EU:C:2019:593, [2019] EUECJ C-298/18_O

Court of Justice of the European Communities (including Court of First Instance Decisions)