Academic Board Insight: Case C-298/18, 27 February 2020, Grafe and Pohle

By Luca Ratti (University of Luxembourg)

When does an activity qualify as labour intensive and when, on the contrary, asset intensive, for the purpose of applying to its transfer the provisions of Directive 2001/23? The recent case Grafe and Pohle (link to the summary) provides new criteria to assess the nature of the service provided. The case regarded a public tender for the provision of bus transport services. The incoming undertaking (OSL) recruited the majority of the previous provider’s drivers and management staff, but did not intend to purchase or lease its buses, depots and other operating facilities, or to use its workshop services. Relying on previous case C-172/99 (Oy Liikenne), OSL did not re-hire some workers (amongst which the two claimants), who then claimed to be protected under Article 1(1), Directive 2001/23.

On 27 February 2020, the CJEU held that Article 1(1) must be interpreted as meaning that the fact that that entity does not take over those resources cannot necessarily preclude the classification of that takeover of activity as a transfer of an undertaking. According to the Court, in fact, 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. The Court left the referring judge (the German Labour Court of Cottbus-Senftenberg) to assess the retention of the identity by the economic entity.

The particular facts of the case are relevant from an interpretative point of view, because running a bus service requires per se substantial operating resources, which may have lead to a different interpretation in line with the Oy Liikenne jurisprudence. As noted by AG Sharpston in her conclusions delivered on 11 July 2019, the difficulty lies «in assessing what weight is to be attached to the various factors». Therefore, continues the AG, «it is not simply a question of whether the personnel or the tangible assets (the buses) were transferred to the new operator». Rather, it is the rationale of Article 1 to be given priority in the interpretation of the facts. And because such rationale is the protection of employees in the event of a change of employer, one should not conclude in the sense that the refusal of the new contractor to take on tangible assets does automatically exclude a transfer of undertakings. In particular, buses were neither purchased nor leased because new environmental restrictions did not allow running buses more than 15 years old. Given this factual element, AG Sharpston concluded that other elements should be taken into account, such as the provision of the same service for the same routes and the re-hiring of the majority of employees. The Oy LIikenne case, in fact, does not preclude national courts from arriving to a different conclusion if another set of factual elements suggests that the economic entity retained its identity.

The CJEU (fourth chamber) agreed with its AG that all the facts characterizing the transaction concerned should be taken into account. The degree of importance of each element, in fact, «vary according to the activity carried on and the production or operating methods employed in the undertaking» (para 24). The fact that there is no transfer of operating resources, concludes the CJEU, «does not therefore necessarily preclude the taking over of the activity concerned from being classified as a ‘transfer of undertaking’ within the meaning of Article 1(1) of Directive 2001/23» (para 35).

Concretely, it means that even activities normally qualified as asset-based can, by reason of the concrete facts of the transaction, be transferred in the meaning of Directive 2001/23, provided that they retain their identity, which condition may be inferred from the re-hire of the majority of personnel and the continuation of the same activity by the new service provider (para 39).