CJEC, September 26, 2000, No C-175/99

THE COURT,

1. By judgment of 14 April 1999, received at the Court on 11 May 1999, the Conseil de Prud'hommes de Metz (Labour Tribunal, Metz) referred to the Court for a preliminary ruling under Article 234 EC two questions on 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. Those questions have arisen in proceedings between Mr Mayeur and the Association Promotion de l'Information Messine (hereinafter 'APIM) relating to Mr Mayeur's dismissal.

Community law

3. Article 1(1) of Directive 77-187 provides:

'This Directive shall apply to the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger.

4. Article 2 of Directive 77-187 provides:

'For the purposes of this Directive:

...

(b) 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 business;

...

5. Article 3(1), first subparagraph, of Directive 77-187 provides for the transfer to the transferee of the rights and obligations arising, for the transferor, from a contract of employment or from an employment relationship existing on the date of the transfer.

6. Under Article 4 of Directive 77-187:

'1. The transfer of an undertaking, business or part of a business shall not in itself constitute grounds for dismissal by the transferor or the transferee. ...

...

2. If the contract of employment or the employment relationship is terminated because the transfer within the meaning of Article 1(1) involves a substantial change in working conditions to the detriment of the employee, the employer shall be regarded as having been responsible for termination of the contract of employment or of the employment relationship.

7. Council Directive 98-50-EC of 29 June 1998 amending Directive 77-187 (OJ 1998 L 201 p. 88), the period for the transposition of which expires on 17 July 2001, replaced Article 1(1) of Directive 77-187 with the following text:

'(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.

(c) This Directive shall apply to public and private undertakings engaged in economic activities whether or not they are operating for gain. An administrative reorganisation of public administrative authorities, or the transfer of administrative functions between public administrative authorities, is not a transfer within the meaning of this Directive.

National legislation

8. Article L. 122-12 of the Code du Travail (French Labour Code) provides:

'Cessation of an undertaking shall not, except in cases of force majeure, release an employer from his obligation to give notice of dismissal and, where necessary, to pay the compensation prescribed in Article L. 122-9.

If any change arises in the legal situation of the employer, in particular by reason of succession, sale, merger, transformation of business assets or incorporation, all contracts of employment in force on the date of that change shall continue to exist as between the new employer and the workforce of the undertaking.

9. The compensation prescribed in Article L. 122-9 of the Code du Travail is the compensation for dismissal.

The dispute in the main proceedings and the questions submitted for preliminary ruling

10. Mr Mayeur was recruited by APIM as an employee, with effect from 1 September 1989, under a contract of unspecified duration.

11. Under Article 3 of its statutes, the object of APIM, a non-profit-making association, was to promote, propagate and make known by all possible means and in all areas the opportunities offered by the City of Metz and its 'Zone d'Attraction, in order to permit and encourage the development, establishment and creation of a range of activities. To that end, APIM, either directly or through others, published and distributed brochures, magazines and leaflets. As part of this activity, APIM produced a magazine entitled Vivre à Metz ('Living in Metz).

12. Mr Mayeur was responsible for the publicity activities of APIM. In that capacity, his duties were to canvass traders in the city and advertisers, to collect funds for the publishing of advertisements in the magazine Vivre à Metz, to draw up contracts and invoices, and to draft a monthly account detailing the commitments entered into.

13. Following dissolution of APIM and after its activities had been taken over by the City of Metz, Mr Mayeur was informed, on 16 September 1997, that he had been dismissed for the following economic reason: cessation by APIM of its activities.

14. On 10 February 1998 Mr Mayeur brought proceedings against APIM before the Labour Tribunal in Metz seeking an order requiring it to pay to him the sum of FRF 177 262 as compensation for unfair dismissal, plus interest at the statutory rate from the date of his application.

15. In support of his action, Mr Mayeur states that he is the only employee to lose his job as a result of APIM being dissolved and its activities being taken over by the City of Metz.

16. Mr Mayeur cites the case-law of the Cour de Cassation (French Court of Cassation) to the effect that, while the provisions of Article L. 122-12 of the Code du Travail are not applicable where an activity carried out by a legal person governed by private law is transferred to a 'public institution of an administrative nature, which is a legal person established under public law and subject to the rules of public law, those provisions do, in contrast, apply where the same activity carried out by a legal person governed by private law is transferred to a legal person established under public law which is subject to the rules of private law and regarded as being a 'public institution of an industrial or commercial nature within the meaning of French law.

17. Mr Mayeur submits that this case-law runs counter to both the letter and objective of Directive 77-187, and requests that the provisions of that directive be applied to him.

18. The Labour Tribunal notes that Article L. 122-12 of the Code du Travail covers the various situations in which a contract of employment is transferred from one private entity to another, but is silent as to the situation in which such an entity is transferred to a public body.

19. The Labour Tribunal finds that, under the case-law of the Court of Cassation, only employees of undertakings transferred to public institutions of an industrial or commercial nature are covered by the provisions of Directive 77-187. It questions whether such an interpretation does not have the result of restricting the scope of Article 1 of Directive 77-187, even though Directive 77-187 is general in scope and does not contain any such exclusion. It points out that the Court has given a broad interpretation to Directive 77-187 by requiring contracts of employment to be maintained in circumstances where the transfer is not the result of a merger or a legal transfer. Employees are protected by Community law even where there is no legal connection between successive operators.

20. According to the Labour Tribunal, the activity performed by Mr Mayeur was a commercial and profit-making activity which contributed directly to the funding of the magazine Vivre à Metz. Further, it is common ground that the activity of APIM was taken over as a whole and continued by the City of Metz, which continues to produce and distribute that magazine in the same form.

21. Since it considered it to be necessary, in order to decide the case before it, to obtain clarification as to the concept of 'transfer of an undertaking within the meaning of Article 1(1) of Directive 77-187, the Labour Tribunal, Metz, decided to stay proceedings and to refer the following two questions to the Court for a preliminary ruling:

'(1) Is 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 applicable where the activity of a legal person governed by private law is transferred to a legal person governed by public law?

(2) Must application of Directive 77-187-EEC of 14 February 1977 be excluded where the activity is transferred to a public service of an administrative nature?

22. The concept of a 'public service of an administrative nature is a concept of French administrative law which the Court has no jurisdiction to interpret when giving a ruling under Article 234 EC. The Court can only provide the national tribunal with an interpretation of Community law which may assist it in deciding the case in the main proceedings.

23. In those circumstances, the questions referred by the national tribunal, which it is appropriate to examine together, should be understood as asking in substancewhether, and under what conditions, Directive 77-187 applies in the case where a municipality, which is a legal person governed by public law acting within the framework of the specific rules of administrative law, takes over activities concerning publicity and information on the services which it offers to the public, where such activities were previously carried out, in the interests of that municipality, by a non-profit-making association which was a legal person established under private law.

24. The French Government notes at the outset that, although it was an association subject to the rules of private law, APIM was in reality a public service entrusted with a task in the general interest, with the result that the taking-over of its activity by the City of Metz should be considered as a reorganisation of the structures of public administration, a matter falling outside the scope of Directive 77-187, in line with paragraph 14 of the Court's judgment in Case C-298-94 Henke v Gemeinde Schierke and Verwaltungsgemeinschaft 'Brocken [1996] ECR I-4989.

25. In support of this line of argument, the French Government relies on a number of factors.

26. First, it claims that APIM had a strong and undeniable link with the City of Metz, since it was created on the initiative of the Mayor of Metz, it was directed by elected representatives or municipal officials, and its resources were derived in the main from municipal grants, and not from receipts obtained in return for services provided.

27. Second, the French Government submits that APIM carried out its essential activity, namely promotion of the City of Metz and the attraction of economic activities to the territory of that municipality, on behalf of the latter and with a public-interest objective.

28. It should be noted that, in paragraph 14 of Henke, cited above, the Court held that the reorganisation of structures of the public administration or the transfer of administrative functions between public administrative authorities does not constitute a 'transfer of an undertaking within the meaning of Directive 77-187. From this the Court inferred, in paragraphs 17 and 18 of that judgment, that the concept of a 'transfer of an undertaking, business or part of a business, within the meaning of Article 1(1) of that directive, does not apply to the transfer of administrative functions involving the exercise of public authority from a municipality to an administrative collectivity.

29. On the other hand, the transfer of an economic activity from a legal person governed by private law to a legal person governed by public law does in principle fall within the scope of Directive 77-187.

30. In the first place, Directive 77-187 applies, by virtue of Article 1(1), to the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger.

31. Second, Directive 77-187 defines, in Article 2, the transferee as being '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 business.

32. The Court has consistently held that the concept of an undertaking, within the meaning of Article 1(1) of Directive 77-187, covers any stable economic entity, that is to say, an organised grouping of persons and assets facilitating the exercise of an economic activity which pursues a specific objective (see, most recently, Case C-234-98 Allen and Others v Amalgamated Construction [1999] ECR I-8643, paragraph 24). Such a concept is independent of the legal status of that entity and the manner in which it is financed.

33. Articles 1(1) and 2(b) of Directive 77-187 do not therefore permit the transfer of an economic activity from a legal person governed by private law to a legal person governed by public law to be excluded from the scope of Directive 77-187 solely on the ground that the person to whom the activity is transferred is a public-law body. Only the reorganisation of structures of the public administration or the transfer of administrative functions between public administrative authorities are excluded, by the judgment in Henke, from the scope of that directive.

34. That interpretation, which is consistent with the objectives of Directive 77-187, namely to ensure the continuity of employment relations existing within an economic entity, irrespective of any change in its ownership, is further corroborated by Article 1(1)(c) of Directive 77-187, as amended by Directive 98-50, which is not applicable to the dispute in the main proceedings in this case. That provision states that Directive 77-187 is to apply to public undertakings engaged in economic activities, but that an administrative reorganisation of public administrative authorities, or the transfer of administrative functions between public administrative authorities, is not a transfer within the meaning of the directive.

35. In the present case, contrary to the contention of the French Government, the transfer of activities here in question does not constitute a reorganisation of structures of the public administration or a transfer of administrative functions between public administrative authorities within the meaning of Henke.

36. It is evident from the order for reference that the situation at issue in the main proceedings is that of a transfer of an economic activity between two distinct entities.

37. First, it is clear from the order for reference that APIM was a private non-profit-making association which had legal personality separate from that of the City ofMetz. The fact that APIM was created on the initiative of the Mayor of that city, that it was directed by elected representatives, and that its resources were derived in the main from municipal grants does not alter the fact that APIM was an entity distinct from that which took over its activities (see, in this regard, paragraph 17 of the judgment in Allen and Others, cited above).

38. Second, it is also clear from the order for reference that APIM carried out publicity and information activities on behalf of the City of Metz in connection with the services which the latter offers to the public.

39. Activity of this kind, consisting in the provision of services, is economic in nature and cannot be regarded as deriving from the exercise of public authority.

40. The transfer of an economic activity such as that carried out by APIM cannot be excluded from the scope of Directive 77-187 solely on the ground that it is carried out for a non-profit-making purpose or in the public interest. The Court has already held that the directive is applicable to the transfer of an activity providing help to drug addicts carried out by a foundation, a non-profit-making legal person governed by private law (Case C-29-91 Redmond Stichting v Bartol and Others [1992] ECR I-3189), and to the transfer of an activity consisting in the provision of home help for disadvantaged persons, awarded by a public-law body to a legal person governed by private law (Joined Cases C-173-96 and C-247-96 Sánchez Hidalgo and Others [1998] ECR I-8237).

41. It should be noted that Article 1(1)(c), first sentence, of Directive 77-187, as amended by Directive 98-50, expressly confirms that Directive 77-187 applies to undertakings engaged in economic activities, whether or not they are operating for gain.

42. Third, it is clear from the order for reference that the activity of APIM was taken over and continued in its entirety by the City of Metz.

43. The national tribunal does not, however, provide any details on the measure which allowed the City of Metz to take over the activity of APIM.

44. It should be noted in this regard that the aim of Directive 77-187 is to ensure continuity of employment relationships within an economic entity, irrespective of any change of ownership. The decisive test for establishing the existence of a transfer within the meaning of Directive 77-187 is whether the entity in question retains its identity, as indicated inter alia by the fact that its operation is actually continued or resumed (Case 24-85 Spijkers v Benedik [1986] ECR 1119, paragraph 11, and, most recently, Allen and Others, paragraph 23).

45. While the lack of a contractual link between the transferor and the transferee may point to the absence of a transfer within the meaning of Directive 77-187, it cannotbe conclusive in that regard (see, to this effect, Case C-13-95 Süzen v Zehnacker Gebäudereinigung [1997] ECR I-1259, paragraph 11, and Sánchez Hidalgo and Others, cited above, paragraph 22).

46. Directive 77-187 is applicable wherever, in the context of contractual relations, there is a change in the natural or legal person who is responsible for carrying on the business and who thereby incurs the obligations of an employer towards employees of the undertaking (Case 324-86 Tellerup v Daddy's Dance Hall [1988] ECR 739, paragraph 9, and Süzen, cited above, paragraph 12).

47. In the case at issue in the main proceedings, the City of Metz took over in its entirety the activity of APIM and continued to carry it out. That municipality thus appears as the new legal person responsible for operating the undertaking.

48. In those circumstances, it is necessary to determine whether, as pointed out in paragraph 44 of this judgment, the decisive test for establishing the existence of a transfer within the meaning of Directive 77-187, namely that the entity in question retains its identity after the transfer, has been satisfied.

49. The mere fact, not disputed in the main proceedings, that the activity engaged in by the old and the new employer is similar does not justify the conclusion that an economic entity has been transferred. An entity cannot be reduced to the activity entrusted to it. Its identity also emerges from other factors, such as its workforce, its managerial staff, the way in which its work is organised, its operating methods or indeed, where appropriate, the operational resources available to it (see Süzen, paragraph 15, and Sánchez Hidalgo and Others, paragraph 30).

50. The French Government and APIM argue that the taking-over of the latter's activity by the City of Metz, in the form of a public administrative service, entailed substantial alterations to the method of management and operation and to the conditions under which the transferred entity functioned. French public law requires legal persons governed by public law which take over, in the form of a public administrative service, an activity hitherto carried out by a legal person governed by private law to comply with specific rules relating to management, operation and functioning. Furthermore, they submit, it is not possible for a public body which takes over an activity previously carried out by a legal person governed by private law to maintain contracts of employment concluded by that legal person inasmuch as the officers of public administrative services are officials governed by public law, recruited under special rules and procedures, their status being determined by administrative law.

51. The French Government and APIM refer in this regard to the case-law of the French Cour de Cassation to the effect that the provisions of national law transposing Directive 77-187 are not applicable where, as in the case in the main proceedings, the legal person governed by public law carries on the activity which it has taken over in the form of a public administrative service and, consequently,according to the rules of public law. Under that case-law, the taking-over of the activity in such a form involves cessation of the undertaking.

52. In order to determine whether the conditions for the existence of a transfer have been met, and in particular whether the entity in question in the main proceedings retained its identity after being taken over by the City of Metz, it is for the national tribunal to take into consideration all the facts which go to characterise 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 goodwill is transferred, the degree of similarity between the activities carried on before and after the transfer, and the period, if any, for which those activities are suspended. However, those circumstances are merely single factors in the overall assessment which must be made and cannot therefore be considered in isolation (see, in particular, Spijkers, paragraph 13, Süzen, paragraph 14, Sánchez Hidalgo and Others, paragraph 29, and Allen and Others, paragraph 26).

53. As the Advocate General notes in paragraph 102 of his Opinion, it cannot be ruled out that, in certain circumstances, factors such as organisation, operation, financing, management and the applicable legal rules identify an economic entity in such a way that any alteration of those factors resulting from transfer of that entity would lead to a change in its identity.

54. That, however, does not appear to be the situation in the case in the main proceedings here. First, it is clear from the order for reference that the City of Metz took over in its entirety and pursued the activity of APIM while continuing, in the same form, to produce and distribute the magazine Vivre à Metz; second, APIM was already in reality operating, according to the French Government, as a public service entrusted with a task in the general interest.

55. It is for the national tribunal to establish, in light of all of the foregoing factors, whether there has been a transfer in the case in the main proceedings.

56. As regards any obligation, prescribed by national law, to terminate contracts of employment governed by private law in the case of transfer of an activity to a legal person governed by public law, such an obligation constitutes, in accordance with Article 4(2) of Directive 77-187, a substantial change in working conditions to the detriment of the employee resulting directly from the transfer, with the result that termination of such contracts of employment must, in such circumstances, be regarded as resulting from the action of the employer.

57. The answer to the questions submitted must be that, on a proper construction of Article 1(1) of Directive 77-187, that directive applies where a municipality, a legal person governed by public law operating within the framework of specific rules ofadministrative law, takes over activities relating to publicity and information concerning the services which it offers to the public, where such activities were previously carried out, in the interests of that municipality, by a non-profit-making association which was a legal person governed by private law, provided always that the transferred entity retains its identity.

Costs

58. The costs incurred by the French Government and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national tribunal, the decision on costs is a matter for that tribunal.

On those grounds,

THE COURT,

in answer to the questions referred to it by the Conseil de Prud'hommes de Metz by judgment of 14 April 1999, hereby rules:

On a proper construction 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, that directive applies where a municipality, a legal person governed by public law operating within the framework of specific rules of administrative law, takes over activities relating to publicity and information concerning the services which it offers to the public, where such activities were previously carried out, in the interests of that municipality, by a non-profit-making association which was a legal person governed by private law, provided always that the transferred entity retains its identity.