CJEC, 3rd chamber, November 12, 1992, No C-209/91

THE COURT (Third Chamber),

1 By order of 30 July 1991, received at the Court on 6 August 1991, the Soe- og Handelsretten i Koebenhavn (Maritime and Commercial Court, Copenhagen), referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty three questions on the interpretation of Article 1(1) and Article 3(2) 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, hereinafter "the Directive").

2 The questions arose in proceedings between, on the one hand, Anne Watson Rask and ISS Kantineservice A-S (hereinafter "ISS") concerning, inter alia, the date of payment of her wages and, on the other, Anne Watson Rask and Kirsten Christensen and ISS in relation to items making up their wages.

3 The plaintiffs in the main proceedings were employed first by the Philips company (hereinafter "Philips") in one of its four canteens and, as from 1 January 1989, by ISS, which took over the management of the four canteens on that date under an agreement concluded with Philips on 2 December 1988.

4 According to the order for reference, the agreement between Philips and ISS provided that ISS would assume full and entire responsibility for managing Philips' s canteens, including menu planning, purchasing, preparation, dispatch and all administrative functions, together with staff recruitment and training.

5 ISS also agreed to take over, as from 1 January 1989, Philips's permanent canteen staff on the same terms and conditions as regards wages and seniority. It was pursuant to that undertaking that ISS employed the plaintiffs in the main proceedings.

6 In return, Philips agreed to pay ISS, first, a fixed monthly fee to cover "all ordinary operating expenditure, such as direct or indirect remuneration, insurance, work clothes, management and supervisory and administrative costs" and, secondly, the costs of various products, such as disposable plates and packaging, serviettes and cleaning materials. In addition, Philips made available to ISS without charge approved sales and production premises, the necessary canteen equipment, electricity, heating and telephones, and carried out general maintenance of the premises and equipment and refuse removal.

7 The main proceedings arise out of changes made unilaterally by ISS (a) in the day on which the wages of the transferred employees were paid, which was moved from the last Thursday in the month to the last working day in the month, and (b) in items going to make up those employees' wages, although the total amount of their wages remained unchanged in accordance with the stipulations of the agreement.

8 Mrs Watson Rask asked for her wages to be paid on the last Thursday in the month as had formerly been the practice. She also asked, together with Mrs Christensen, that she should be paid various allowances which Philips had formerly paid. ISS would not accede to those requests and dismissed Mrs Watson Rask, who had refused to continue working on those terms.

9 Before Soe- og Handelsretten i Koebenhavn, where Mrs Watson Rask brought an action for compensation for wrongful dismissal and she and Mrs Christensen sought payment of the allowances at issue, ISS argued that, contrary to what the plaintiffs in the main proceedings claimed, the agreement with Philips did not constitute a transfer of an undertaking within the meaning of the Directive or of Danish Law No 111 of 21 March 1979 on the legal position of employees on the transfer of undertakings, which had been passed in order to implement the Directive, and accordingly that, in any event, ISS was not bound to maintain the terms and conditions as regards wages strictly identical to those of Philips.

10 Since Soe- og Handelsretten i Koebenhavn considered that an interpretation of the Directive was necessary in order to decide these cases, it referred the following questions to the Court for a preliminary ruling:

"(1) Is Council Directive 77-187-EEC applicable in a case where one undertaking, Undertaking A, contracts to operate the canteen in another undertaking, Undertaking B, and where:

° Undertaking A, in return for a fixed monthly fee, is to cover 'all ordinary operating expenditure, such as direct or indirect remuneration, insurance, work clothes, personnel management and supervisory and administrative costs' ;

° Undertaking B makes the following available without charge: approved sales and production premises, including lockable storage areas, canteen equipment, electricity, heating and telephones, wardrobe facilities for the canteen staff, and carries out refuse removal;

° Undertaking B pays the costs of disposable plates, packaging, serviettes and cleaning materials;

° Undertaking A offers undertaking B's canteen staff employment with the same pay and seniority as they had before?

(2) Is the answer to Question 1 any different in so far as the operation of the canteen is only a facility for undertaking B's employees and thus does not concern that undertaking's general production?

(3) Is it incompatible with Article 3(2) of Directive 77-187-EEC to alter the time when wages are paid to the employees and-or to alter the composition of the employees' wages if it is otherwise provided that the total amount of the wages remains unchanged?"

11 Reference is made to the Report for the Hearing for a fuller account of the facts, the applicable Community legislation, the procedure and the observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.

The first and second questions

12 In its first two questions, the national court essentially seeks to establish whether Article 1(1) of the Directive is to be interpreted as meaning that the Directive is capable of applying to a situation in which one businessman by a contract assigns to another businessman responsibility for running a facility for staff, which was formerly managed directly, in return for a fee and various advantages, details of which are laid down by the agreement between them.

13 Mrs Watson Rask, Mrs Christensen and the Commission propose that those questions, as thus reformulated, should be answered in the affirmative. They argue that such an agreement transfers responsibility for running the facilities in question to the other party to the agreement, who thereby becomes the employer of the staff assigned to those facilities. The plaintiffs in the main proceedings also argue that the transfer relates to "part of a business" within the meaning of the Directive, on the ground that the facilities transferred constitute an independent economic entity within the transferor undertaking.

14 For its part, the defendant in the main proceedings contends that an agreement such as that described by the national court does not bring about a "transfer of an undertaking" within the meaning of the Directive, unless the directive is given an excessively wide scope. It argues, on the one hand, that an agreement of the type in question does not effect a transfer within the meaning of the Directive, since it gives the party with whom the agreement is made neither full and entire responsibility for running the operation, in particular, as regards customers and the setting of prices, nor ownership of the assets needed for running the operation. It further contends that such an agreement relates to a facility which cannot be described as an "undertaking" within the meaning of the Directive in view of the fact that it is ancillary to the transferor' s business.

15 According to the Court' s case-law (see Joined Cases 144 and 145-87 Berg v Besselsen [1988] ECR 2559, paragraph 17), the Directive is applicable whenever, in the context of contractual relations, there is a change in the legal or natural person who is responsible for carrying on the business and who by virtue of that fact incurs the obligations of an employer vis-à-vis the employees of the undertaking, regardless of whether or not ownership of the undertaking is transferred.

16 The protection prescribed by the Directive applies in particular ° by virtue of Article 1(1) ° where the transfer relates only to a business or to part of a business, that is to say, to part of an undertaking. In such an event, it extends to the employees assigned to that part of the business, because, as the Court held in Case 186-83 Botzen v Rotterdamsche Droogdok Maatschappij [1985] ECR 519, paragraph 15, an employment relationship is essentially characterized by the link existing between the employee and the part of the undertaking to which he is assigned to carry out his duties.

17 Thus, where one businessman entrusts, by means of an agreement, responsibility for running a facility of his undertaking, such as a canteen, to another businessman who thereby assumes the obligations of employer vis-à-vis the employees assigned to that facility, the resulting transaction may fall within the scope of the Directive, as defined in Article 1(1). The fact that in such a case the activity transferred is merely an ancillary activity for the transferor without a necessary connection with its company objects cannot have the effect of excluding that transaction from the scope of the Directive. Nor does the fact that the agreement between the transferor and the transferee relates to provision of services exclusively for the benefit of the transferor in return for a fee, details of which are laid down by the agreement, preclude the applicability of the Directive.

18 It is for the national court to assess whether all the facts set out in its order for reference characterize a "transfer of an undertaking" within the meaning of the Directive. Accordingly, it is appropriate, in any event, to remind it that it should take account of the following considerations (see, most recently, Case C-29-91 Redmond Stichting v Hendrikus Bartol and Others [1992] ECR I-3189, paragraphs 23 and 24).

19 First, the decisive criterion for establishing whether there is a transfer for the purposes of the Directive is whether the entity in question retains its identity, as indicated inter alia by the fact that its operation is actually continued or resumed.

20 Secondly, in order to determine whether those conditions are met, it is necessary to consider all the facts characterizing the transaction in question, including the type of undertaking or business, whether or not tangible assets, such as buildings and movable property, are transferred, the value of intangible assets at the time of the transfer, whether or not the majority of employees are taken over by the new employer, whether or not customers are transferred and 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. It should be noted, however, that all those circumstances are merely individual factors in the overall assessment which must be made and cannot therefore be considered in isolation.

21 Accordingly, the reply to be given to the national court's first two questions is that Article 1(1) of the Directive is to be interpreted as meaning that the Directive may apply in a situation in which one businessman, by a contract, assigns to another businessman responsibility for running a facility for staff, which was formerly managed directly, in return for a fee and various advantages, details of which are laid down by the agreement between them.

The third question

22 In its third question, the national court essentially asks whether Article 3 is to be interpreted as meaning that the transferee is bound to maintain the terms and conditions agreed between the employees and the transferor with regard to wages, in particular as regards the date on which wages are paid and the items making them up, even if the total amount of the wages remains unchanged.

23 Article 3 of the Directive provides:

"1. The transferor' s rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer within the meaning of Article 1(1) shall, by reason of such transfer, be transferred to the transferee.

Member States may provide that, after the date of transfer within the meaning of Article 1(1) and in addition to the transferee, the transferor shall continue to be liable in respect of obligations which arose from a contract of employment or an employment relationship.

2. Following the transfer within the meaning of Article 1(1), 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.

Member States may limit the period for observing such terms and conditions, with the proviso that it shall not be less than one year."

24 The plaintiffs in the main proceedings argue that the transferee is obliged by Article 3 of the Directive to maintain the terms and conditions of employment and remuneration which were agreed with the transferor, in particular as regards the date on which wages are to be paid.

25 The Commission and ISS maintain that the transferee may alter the terms and conditions laid down by the contract of employment or employment relationship in so far as this is permitted by national law in situations other than the transfer of an undertaking.

26 According to the Court's case-law (see, in particular, Case C-362-89 D' Urso and Others v EMG [1991] ECR I-4105, paragraph 9), the Directive is intended to safeguard for workers affected by a transfer of an undertaking their existing rights under their contracts of employment or employment relationships.

27 However, as the Court held in Case 324-86 Foreningen af Arbejdsledere i Danmark v Daddy' s Dance Hall [1988] ECR 739, paragraph 16, the Directive is intended to achieve only partial harmonization, essentially by extending the protection guaranteed to workers independently by the laws of the individual Member States to cover the case where an undertaking is transferred. It is not intended to establish a uniform level of protection throughout the Community on the basis of common criteria. Thus the Directive can be relied on only to ensure that the employee is protected in his relations with the transferee to the same extent as he was in his relations with the transferor under the legal rules of the Member State concerned.

28 Consequently, in so far as national law allows the employment relationship to be altered in a manner unfavourable to employees in situations other than the transfer of an undertaking, in particular as regards their terms and conditions of remuneration, such an alteration is not precluded merely because the undertaking has been transferred in the meantime and the agreement has therefore been made with the new employer. Since by virtue of Article 3(1) of the Directive the transferee is subrogated to the transferor' s rights and obligations under the employment relationship, that relationship may be altered with regard to the transferee, to the same extent as it could have been with regard to the transferor, provided that the transfer of the undertaking itself may never constitute the reason for that amendment (judgment in Daddy' s Dance Hall, paragraph 17).

29 It should also be borne in mind that, by virtue of Article 3(2) of the Directive, the transferee is bound to continue to observe the terms and conditions of employment 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. The Member States may limit the period for observing such terms and conditions, subject to the proviso that it must not be less than one year.

30 Within the framework of those rules, it is for the national court to assess the extent, under national law, of the transferor' s obligations, whether they arise under a contract of employment, an employment relationship or a collective agreement.

31 Consequently, the reply to the third question should be that Article 3 of the Directive is to be interpreted as meaning that, upon a transfer, the terms and conditions of the contract of employment or employment relationship relating to wages, in particular those relating to the date of payment and the composition of wages, cannot be altered even if the total amount of the wages remains the same. The Directive does not, however, preclude an alteration of the employment relationship with the new employer in so far as the applicable national law allows such an alteration to be made in situations other than the transfer of an undertaking. Furthermore, the transferee is also bound to continue to observe the terms and conditions of employment 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.

Costs

32 The costs incurred by the Commission of the European Communities, which has 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 court, the decision on costs is a matter for that court.

On those grounds,

THE COURT (Third Chamber),

in answer to the questions referred to it by Soe- og Handelsretten i Koebenhavn by order of 30 July 1991, hereby rules:

(1) 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 is to be interpreted as meaning that the directive may apply in a situation in which one businessman by a contract assigns to another businessman responsibility for running a facility for staff, which was formerly managed directly, in return for a fee and various advantages, details of which are laid down by the agreement between them.

(2) Article 3 of the directive is to be interpreted as meaning that, upon a transfer, the terms and conditions of the contract of employment or employment relationship relating to wages, in particular those relating to the date of payment and the composition of wages, cannot be altered even if the total amount of the wages remains the same. The directive does not, however, preclude an alteration of the employment relationship with the new employer in so far as the applicable national law allows such an alteration to be made in situations other than the transfer of an undertaking. Furthermore, the transferee is also bound to continue to observe the terms and conditions of employment 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.