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posted 9 years ago
In early 2016, the Danish Labour Court has in its judgment established that it was not a business transfer when the winner of a cleaning task, which was put out to tender by the municipality, employed 14 out of 31 employees from one of the two former cleaning suppliers.
The employees of the municipality’s former suppliers, whom the new supplier had employed in connection with taking over the task, claimed that the takeover of the cleaning task was a business transfer due to the fact that a significant amount of the former supplier’s employees was employed when the task was passed on to the new supplier.
In that case, it would mean that the new supplier adopted a wide range of obligations towards the employees including wages and seniority together with the obligation to pay certain allowances.
It was neither in pursuance of the contract documents nor an obligation for the new supplier to take over one or more of the former supplier’s employees. However, in a job advertisement, the new supplier encouraged the terminated employees of the former supplier to apply for a position with the new supplier.
The decision of the Danish Labour Court
The Danish Labour Court reviews the grounds in a number of practical imposed requirements to a business transfer.
In its judgments, the Danish Labour Court has ruled in line with case law from the European Court of Justice (EOJ) that the Danish Business Transfer act implementing the Acquired Rights Directive is applicable to transfers of a business or parts of a business.
In practice, this has been interpreted to encompass situations where there is a takeover of employees when such takeovers comprises an economic entity which after the takeover preserves its identity, which partly includes that it is possible for the transferred activity to continue being operated in a stable manner after the takeover.
At the same time, within the cleaning services industry, it is a requirement that a considerable amount of the workforce, according to quantity and qualifications, is acquired thus allowing the new company to stably continue the activity retaining its identity.
At the same time, the Danish Labour Court dismissed the possibility to establish a concrete demand for a minimum of 50% of the workforce employed at a former supplier to be acquired to the new company as a condition for the takeover to constitute a business transfer.
The Labour Court found that the statement needed separate evaluation for each company and an overall assessment for both companies could not be made.
The Labour Court decided that it was not a business transfer and put emphasis on the following aspects among other things:
– less than half of the employees continued their employment with the new supplier;
– key employees were not taken over thus the former activities could be carried on in a stable manner; and
– there was no grounds to establish that the identity of the transferred company was retained after the transfer of the cleaning tasks.
Lund Elmer Sandager’s comments
The decision of the Danish Labour Court comply with the, by now, many decisions on taking over cleaning services contracts in particular in so-called second generation outsourcings.
It contributes to clarifying which conditions to take into account when an overall assessment is made as to whether the transfer of a task from one supplier to another constitutes a business transfer.
When the activity is characterized by the use of workforce and does not demand significant tangible assets to perform the job, it is often decisive whether a considerable amount of the workforce measured both in the quantity of employees as well as the sum of qualifications has been transferred.
It is the employees who carry the burden of proof that the conditions are met.
Within industries that are characterized by the necessity of workforce, it will be necessary when taking on employees from a former supplier to look at whether the take over/employment of employees from the former supplier entails a risk that this will constitute a business transfer.
Thus, the supplier, which takes over a task through public tender procedures, should consider both whether this risk should be included in the submitted offer and also whether there could be a need for a precautionary measure to renounce any collective bargaining agreement applicable the former supplier pursuant to the Danish Company Transfer Act.
Lund Elmer Sandager provides advice on all processes related to offers on tasks or services being put out to tender. If you have any questions in this regard, questions to the handling of employees in connection with taking on tasks, or any other questions regarding the identification of risks and prevention of conflicts with labour unions and employees do not hesitate to contact Lund Elmer Sandager’s experienced employment department.
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