Grafe and Pohle (Safeguarding of employees’ rights — Operation of bus routes - Judgment) [2020] EUECJ C-298/18 (27 February 2020)

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(Reference for a preliminary ruling — Directive 2001/23/EC — Article 1(1) — Transfer of an undertaking — Safeguarding of employees’ rights — Operation of bus routes — Re-employment of the staff —Operating resources not taken over — Grounds)

REQUEST for a preliminary ruling under Article 267 TFEU from the Arbeitsgericht Cottbus — Kammern Senftenberg (Labour Court, Cottbus — Senftenberg division, Germany), made by decision of 17 April 2018, received at the Court on 2 May 2018, in the proceedings

composed of M. Vilaras, President of the Chamber, S. Rodin, D. Šváby, K. Jürimäe and N. Piçarra (Rapporteur), Judges,

having regard to the written procedure and further to the hearing on 21 March 2019,

– Südbrandenburger Nahverkehrs GmbH, by A.‑K. Pfeifer, M. Sandmaier and O. Grimm, Rechtsanwälte,

– the European Commission, by M. Kellerbauer and C. Hödlmayr, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 11 July 2019,

1 This request for a preliminary ruling concerns the interpretation of Article 1(1) of 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).

2 The request has been made in proceedings between Mr Reiner Grafe and Mr Jürgen Pohle, and Südbrandenburger Nahverkehrs GmbH (‘SBN’) and OSL Bus GmbH (‘OSL’) concerning the lawfulness of the applicants’ dismissal by SBN.

3 Council 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, businesses or parts of undertakings or businesses (OJ 2001 L 82, p. 16), which entered into force on 11 April 2001, codified, as stated in recital 1 thereof, Directive 77/187.

4 Recital 3 of Directive 2001/23 states that ‘it is necessary to provide for the protection of employees in the event of a change of employer, in particular, to ensure that their rights are safeguarded’.

5 According to recital 8 of that directive, ‘considerations of legal security and transparency required that the legal concept of transfer be clarified in the light of the case-law of the Court of Justice. Such clarification has not altered the scope of Directive [77/187] as interpreted by the Court of Justice’.

‘(a) This Directive shall apply 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.

(b) Subject to subparagraph (a) and the following provisions of this Article, there is a transfer within the meaning of this Directive 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.

(a) “transferor” shall mean 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;

(b) “transferee” shall mean 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;

(d) “employee” shall mean any person who, in the Member State concerned, is protected as an employee under national employment law.’

The dispute in the main proceedings and the questions referred for a preliminary ruling

8 SBN had been operating public passenger transport by bus on behalf of the Landkreis Oberspreewald-Lausitz (district of Oberspreewald-Lausitz, Germany) since 1 August 2008, when that district carried out, in September 2016, a new tendering procedure for the transport services concerned.

9 SBN preferred not to submit a tender, taking the view that it was unable to submit an economically viable tender. It ceased trading and gave notice of termination of employment to its employees. On 19 January 2017, the company entered into a reorganisation and social plan agreement with its works council, that agreement making provision for redundancy payments in the absence of any re‑employment offer by the new successful tenderer or for loss of earnings in the event of re-appointment by it.

10 Kraftverkehrsgesellschaft Dreiländereck mbH was awarded the contract for the public transport bus services at issue in the main proceedings with effect from 1 August 2017. In order to provide those services, that company set up a subsidiary, OSL, which it wholly owns. OSL recruited the majority of SBN’s drivers and management staff.

11 In April 2017, Kraftverkehrsgesellschaft Dreiländereck informed SBN that it did not intend to either purchase or lease SBN’s buses, depots and other operating facilities, or to use its workshop services.

12 Mr Grafe had been employed as a bus driver and foreman on a full-time basis by SBN, as well as by its predecessor in title since July 1978. By letter of 27 January 2017, SBN terminated his employment with effect from 31 August 2017. Since 1 September 2017, he has been employed as a bus driver by OSL. Since OSL did not recognise his previous periods of employment, it classified him at the entry level of the applicable collective wage agreement.

13 In that context, Mr Grafe challenges SBN’s termination of his employment and submits that OSL is required to take into account his earlier period of service with SBN for the purposes of his professional classification. The applicant in the main proceedings and his previous employer submit that the employment contract of the person concerned was transferred to OSL in the context of a transfer of an undertaking within the meaning of Directive 2001/23.

14 Mr Pohle had also been employed full-time as a bus driver and foreman by SBN since November 1979. By letter of 27 January 2017, that company notified him that his employment would be terminated with effect from 31 August 2017. He was not recruited by the successful tenderer. In that context, he challenges his termination of employment and claims, in the alternative, payment of compensation of EUR 68 034.56 under the social plan set up by SBN. By way of counterclaim, SBN contends that Mr Pohle’s employment contract was transferred to OSL upon the transfer of the undertaking and that, consequently, it is not required to pay compensation.

15 OSL relies on the judgment of 25 January 2001, Liikenne (C‑172/99, EU:C:2001:59), to argue that, since the operating resources, including buses, have not been taken over in the present case, there can be no transfer of an undertaking within the meaning of Article 1(1) of Directive 2001/23.

16 SBN argues that the taking over of the buses by the new public contractor concerned was precluded, given the technical and environmental standards in force. According to SBN, the requirements relating to calls for tenders require that buses do not exceed a maximum age of 15. They are also required to meet at least the ‘Euro 6’ environmental standard. However, on the date of the award of that public contract, which was to be concluded for a 10-year period, the average age of SBN’s buses was, according to SBN, 13 years. In addition, according to SBN, they complied only with the ‘Euro 3’ or ‘Euro 4’ standards. Furthermore, they did not meet the requirements of accessibility to disabled persons. SBN adds that the use of bus depot services is no longer necessary, since the maintenance or repair of buses may be entrusted to specialist workshops.

17 According to SBN, it is clear from the call for tenders concerned that bus drivers must be in possession of a valid licence, have knowledge of the legal framework and professional regulations in force, be able to provide passengers with information, have a good knowledge of the network and roads, routes and timetables in the area served, regional bus routes, connections as well as railway routes and fare conditions. SBN adds that these drivers constitute a ‘scarce resource’ in rural areas. According to SBN, their know-how and knowledge of the network made SBN’s bus drivers operational from 1 August 2017, thus ensuring the continuity of public transport service in the district. SBN infers from this that the drivers are vital to the economic entity.

18 In that context, the referring court, which considers the description of the legislative and factual context provided by SBN to be accurate, asks whether the approach adopted in the judgment of 25 January 2001, Liikenne (C‑172/99, EU:C:2001:59), is applicable in the case in the main proceedings.

19 In those circumstances, the Arbeitsgericht Cottbus — Kammern Senftenberg (Labour Court, Cottbus — Senftenberg division, Germany) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

‘(1) Is a transfer of the operation of bus routes from one bus undertaking to another as a consequence of a tendering procedure under Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts [(OJ 1992 L 209, p. 1)] to be regarded as a transfer of a business within the meaning of Article 1(1) of [Directive 77/187], 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 77/187] being applicable?’

20 As a preliminary point, it should be pointed out that, although the question concerns the interpretation of Directive 77/187, the applicable legislation at the time of the facts at issue in the main proceedings is Directive 2001/23, which, as is stated in recital 8 thereof, seeks precisely to codify Directive 77/187 in order to clarify the concept of transfer of an undertaking in the light of the case-law of the Court.

21 By its two questions, which must be considered together, the referring court is asking, in essence, whether Article 1(1) of Directive 2001/23 must be interpreted as meaning that, in the context of a takeover, by an economic entity, of an activity under a procedure for the award of a public contract, the fact that that entity has not taken over the operating resources owned by the economic entity which was previously engaged in that activity precludes the classification of that transaction as a transfer of an undertaking.

22 It should be borne in mind that, under Article 1(1)(b) of that directive, 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. The term entity thus refers to an organised grouping of persons and assets facilitating the exercise of an economic activity which pursues a specific objective.

23 It is apparent from the case-law of the Court that the decisive criterion for establishing the existence of such a transfer is the fact that the economic entity in question retains its identity, as indicated inter alia by the fact that its operation is actually continued or resumed (see, to that, effect, judgment of 9 September 2015, Ferreira da Silva e Brito and Others, C‑160/14, EU:C:2015:565, paragraph 25 and the case-law cited).

24 In order to determine whether that condition is met, it is necessary to consider all the facts characterising the transaction concerned, including in particular the type of undertaking or business concerned, 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. However, all those circumstances are merely single factors in the overall assessment which must be made and cannot therefore be considered in isolation (judgment of 9 September 2015, Ferreira da Silva e Brito and Others, C‑160/14, EU:C:2015:565, paragraph 26 and the case-law cited).

25 Thus, the degree of importance to be attached to each criterion will necessarily vary according to the activity carried on and the production or operating methods employed in the undertaking, business or part of a business (judgment of 9 September 2015, Ferreira da Silva e Brito and Others, C‑160/14, EU:C:2015:565, paragraph 27 and the case-law cited).

26 It should also be pointed out that the mere fact that one economic entity takes over the economic activity of another economic entity is not a ground for concluding that the latter has retained its identity. The identity of such an entity cannot be reduced to the activity entrusted to it. Its identity emerges from several indissociable factors, such as its workforce, its management staff, the way in which its work is organised, its operating methods or indeed, where appropriate, the operating resources available to it (judgments of 20 January 2011, CLECE, C‑463/09, EU:C:2011:24, paragraph 41, and of 20 July 2017, Piscarreta Ricardo, C‑416/16, EU:C:2017:574, paragraph 43).

27 It follows from the foregoing that the classification as a transfer presupposes a number of factual findings, that question having to be assessed in actual fact by the national court in the light of the criteria laid down by the Court (see, to that effect, judgment of 7 August 2018, Colino Siguënza, C‑472/16, EU:C:2018:646, paragraph 45), as well as the objectives pursued by Directive 2001/23, as set out, inter alia, in recital 3 thereof.

28 In that context, the referring court raises more specifically the question whether, in the present case, the approach adopted in the judgment of 25 January 2001, Liikenne (C‑172/99, EU:C:2001:59), in which a contract for the provision of a bus transport service covering 7 regional routes for a period of 3 years was at issue, is applicable in the present case. The new operator had purchased the work uniforms of some of the drivers who had transferred to it and, pending delivery of the vehicles ordered, had merely leased two buses from the previous operator for a few months.

29 When asked whether there had been a transfer of an undertaking within the meaning of Article 1(1) of Directive 77/187, the Court first of all pointed out, in paragraph 39 of the judgment of 25 January 2001, Liikenne (C‑172/99, EU:C:2001:59), that bus transport cannot be regarded as an activity based essentially on manpower, as it requires substantial plant and equipment. The Court added that, accordingly, 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 for the purposes of classification as a transfer of an undertaking. It then held, in paragraph 42 of that judgment, that, since the tangible assets contribute significantly to the performance of that 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 concerned, must lead to the conclusion that the entity does not retain its identity. Finally, the Court concluded, in paragraph 43 of that judgment, that, 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.

30 It should, however, be noted that, since in paragraph 39 of the judgment of 25 January 2001, Liikenne (C‑172/99, EU:C:2001:59), the Court was careful to point out that the fact that the tangible assets used for operating the bus routes were not transferred from the old to the new contractor constitutes a circumstance to be taken into account, it cannot be inferred from that point that the takeover of the buses must be regarded in the abstract as the sole determining factor of whether an undertaking whose activity consists in the public transport of passengers by bus has been transferred.

31 Therefore, in order to determine whether the fact that the operating resources, namely the buses, were not transferred precludes the classification as a transfer of an undertaking, the referring court must take account of the particular circumstances of the case before it.

32 In this respect, it is apparent from the order for reference that compliance with the new technical and environmental standards required by the contracting authority as regards operating resources did not enable, from both an economic and legal point of view, the successful tenderer to take over the operating resources of the undertaking previously holding the contract for the public transport services at issue in the main proceedings. It would not have been sensible, from an economic point of view, for a new operator to take over an existing bus fleet consisting of vehicles which, having reached the end of the period of operation authorised and not complying with the constraints imposed by the contracting authority, could not be operated.

33 In other words, the decision of the new operator not to take over that undertaking’s operating resources was dictated by external constraints, whereas, as the Advocate General observed in point 54 of her Opinion, nothing in the statement of facts at issue in the case which gave rise to the judgment of 25 January 2001, Liikenne (C‑172/99, EU:C:2001:59) indicates that that was the situation in that case.

34 It is also clear from the information provided by the referring court, summarised in paragraph 16 above, that, in view of the technical and environmental standards required by the contracting authority, the undertaking which formerly held the contract for the public transport services at issue in the main proceedings would itself have been forced, if it had submitted a tender for that contract and had been awarded it, to replace its operating resources in the near future.

35 In that context, the fact that there is no transfer of operating resources, in so far as it results from legal, environmental or technical constraints, does not therefore necessarily preclude the taking over of the activity concerned from being classified as a ‘transfer of an undertaking’ within the meaning of Article 1(1) of Directive 2001/23.

36 It is therefore for the referring court to determine whether other factual circumstances among those referred to in paragraphs 24 to 26 above support the conclusion that the identity of the entity concerned has been retained and, therefore, that there has been a transfer of an undertaking.

37 In this respect, it should be pointed out, in the first place, as the Advocate General noted in point 40 of her Opinion, that the order for reference shows that the new operator provides a bus transport service which is essentially similar to that provided by the previous undertaking; that service has not been interrupted and has probably been operated on many of the same routes for many of the same passengers.

38 In the second place, the referring court points out that the presence of experienced bus drivers in a rural area such as the district of Oberspreewald-Lausitz is crucial for the purpose of ensuring the quality of the public transport service concerned. It notes, in particular, that they must have sufficient knowledge of routes, timetables in the area served and fare conditions, as well as of other regional bus routes, railway routes and existing connections, in order to be able not only to sell tickets but also to provide passengers with the information they need to complete the planned journey.

39 In that context, it should be borne in mind that, since a group of workers engaged in a joint activity on a permanent basis may constitute an economic entity, such an entity is capable of maintaining its identity after it has been transferred where the new employer does not merely pursue the activity in question but also takes over a major part, in terms of their numbers and skills, of the employees specially assigned by his predecessor to that task. In those circumstances, the new employer takes over a body of assets enabling him to carry on the activities or certain activities of the transferor undertaking on a regular basis (judgment of 20 January 2011, CLECE, C‑463/09, EU:C:2011:24, paragraph 36 and the case-law cited).

40 Thus, in the case in the main proceedings, to the extent that, as was noted in paragraphs 32 and 35 above, the fact that the operating resources necessary for the pursuit of the economic activity were not transferred does not necessarily preclude the entity at issue in the main proceedings from retaining its identity, the taking-over of the majority of the drivers must be regarded as a factual circumstance to be taken into account in order to classify the transaction concerned as a transfer of an undertaking. In this respect, it is apparent from the facts at issue in the main proceedings that the members of staff taken on by the new operator are assigned to the same or similar tasks and hold specific qualifications and skills which are essential to the pursuit, without interruption, of the economic activity concerned.

41 In the light of all the foregoing considerations, the answer to the questions referred is that Article 1(1) of Directive 2001/23 must be interpreted as meaning that, in the context of the takeover by an economic entity of an activity the pursuit of which requires substantial operating resources, under a procedure for the award of a public contract, the fact that that entity does not take over those resources, which are the property of the economic entity previously engaged in that activity, on account of legal, environmental and technical constraints imposed by the contracting authority, cannot necessarily preclude the classification of that takeover of activity as a transfer of an undertaking, since other factual circumstances, such as the taking‑over of the majority of the employees and the pursuit, without interruption, of that activity, make it possible to establish that the identity of the economic entity concerned has been retained, this being a matter for the referring court to assess.

42 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Article 1(1) of Council 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, businesses or parts of undertakings or businesses must be interpreted as meaning that, in the context of the takeover by an economic entity of an activity the pursuit of which requires substantial operating resources, under a procedure for the award of a public contract, the fact that that entity does not take over those resources, which are the property of the economic entity previously engaged in that activity, on account of legal, environmental and technical constraints imposed by the contracting authority, cannot necessarily preclude the classification of that takeover of activity as a transfer of an undertaking, since other factual circumstances, such as the taking‑over of the majority of the employees and the pursuit, without interruption, of that activity, make it possible to establish that the identity of the economic entity concerned has been retained, this being a matter for the referring court to assess.

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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 (Safeguarding of employees’ rights — Operation of bus routes - Judgment) [2020] EUECJ C-298/18 (27 February 2020) URL: http://www.bailii.org/eu/cases/EUECJ/2020/C29818.html Cite as: [2020] ICR 1395, [2020] EUECJ C-298/18, [2020] IRLR 399, [2020] WLR(D) 118, ECLI:EU:C:2020:121, [2020] 3 CMLR 12, EU:C:2020:121

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