Select Committee on European Communities Twenty-Second Report


  1.    The Acquired Rights Directive[1] is one of a small number of European Community legislative measures aimed at protecting workers. It is concerned with the situation where a business or part of a business is transferred. The Directive gives affected employees protection in three main ways: by providing for the automatic transfer of employees' terms and conditions of employment on the transfer of an undertaking, by making certain dismissals unlawful, and by giving employees' representatives rights to information and consultation. The Directive has not been easy to apply in practice and has proved to be particularly controversial in relation to contracting-out and out-sourcing arrangements. It has given rise to a large number of cases being referred from national courts to the European Court of Justice for interpretative guidance. The Directive is implemented in the United Kingdom by the Transfer of Undertakings (Protection of Employment) Regulations 1981[2] (the TUPE Regulations).

  2.    Though it was only in February 1996 that the Committee presented a detailed Report[3] to the House on the Commission's proposal to amend the Directive, there have been a number of important developments. The Commission has presented a revised draft of its proposal. The European Court of Justice has given its judgment in the Süzen case[4]. There has also been a change of Government in the United Kingdom.

  3.    The Commission's amended proposal takes into account amendments put forward by the European Parliament and the respective opinions of the Economic and Social Committee and the Committee of the Regions. Significantly the Commission has withdrawn its attempt to clarify the definition of the transfer of a business or part of a business by seeking to exclude a transfer of only an activity. Other important changes relate to liability for pre-transfer debts to employees, the application of the Directive in insolvency situations, and the information and consultation provisions. The Commission has, in addition to presenting its amended proposal, published a Memorandum in which it sets out guidelines on the application of the (existing) Directive. It describes the key provisions of the Directive, referring to appropriate rulings of the European Court. The Memorandum also contains a "twenty questions and answers" guide for employees' and employers' representatives.

  4.    In March 1997, the European Court gave its judgment in Süzen, a case involving a second generation contract. Mrs Süzen was employed by Zehnacker and was assigned to cleaning operations in a secondary school in Bonn-Bad-Godesberg, Germany, under a cleaning contract between the school and Zehnacker. That contract was terminated by the school with effect from 30 June 1994. Zehnacker dismissed Mrs Süzen and seven other employees. The school then contracted the cleaning of its premises to Lefarth, with effect from 1 August 1994. Mrs Süzen challenged her dismissal in the Arbeitsgericht (Employment Court), Bonn, which sought clarification from the European Court of Justice of the applicability of the Acquired Rights Directive in the situation in which a person who has entrusted the cleaning of its premises to a first undertaking terminates its contract with the latter and, for the performance of similar work, enters into a new contract with a second undertaking. The European Court held that the Directive does not apply "if there is no concomitant transfer from one undertaking to the other of significant tangible or intangible assets or taking over by the new employer of a major part of the workforce, in terms of their numbers and skills, assigned by his predecessor to the performance of the contract".

  5.    The Government is in the course of conducting a major review of employment legislation, European and domestic. It has recently conducted public consultation on the Acquired Rights Directive and the TUPE Regulations and on employees' information and consultation rights on transfers of undertakings and collective redundancies[5]. The Government has also announced that it will also be publishing a White Paper on Fairness at Work, which will include proposals on trade union recognition. All this is at a time when the United Kingdom occupies the Presidency of the Council of the European Union with the concurrent responsibilities of taking forward the proposed revision of the Acquired Rights Directive as well as other measures having an impact on employer/employee relations.

  6.    Sub-Committee E (Law and Institutions), whose members are listed in Appendix 1, carried out an enquiry into the main changes introduced by the Commission's amended proposal. Witnesses were invited to give views on the following issues in particular:

      (1)  the abandonment by the Commission of its attempt to define, in Article 1(1) of the Directive, a transfer of an undertaking;

      (2)  the adequacy of the Commission's Memorandum, in particular in the light of the Süzen case;

      (3)  the requirement of the joint liability for pre-transfer debts;

      (4)  the practicality of the proposals relating to insolvency situations;

      (5)  the effect of the proposed amendment to Article 6(5) concerning consultation with employee representatives.

  7.    The Committee received the evidence listed in Appendix 2. Several parties additionally supplied copies of their responses to the Government's two consultation exercises[6]. The Committee also heard evidence from Ian McCartney, MP, Minister of State, Department of Trade and Industry. Appendix 3 contains a comparative table setting out the texts of the current Directive, the Commission's initial proposal and the amended proposal. Appendix 4 sets out the Commission's Explanatory Memorandum. The evidence, both written and oral, is printed with the Report. We are grateful to all those who assisted in this enquiry.

1   Directive 77/187/EEC on the approximation of the laws of Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses.

[1977] OJ L61/27. Back

2   SI 1981 No 1794, as amended. Back

3   Transfer of Undertakings: Acquired Rights, 5th Report, 1995-96, HL Paper 38. Back

4   Case C-13/95, Ayse Süzen v. Zehnacker Gebäudereinigung GmbH Krankenhausservice:

[1997] ECR 1-1259.  Back

5   European Acquired Rights Directive and Transfer of Undertakings (Protection of Employment) Regulations 1981 (The TUPE Regulations): Public Consultation (Doc URN 98/513), and Employees' Information and Consultation Rights on Transfers of Undertakings and Collective Redundancies: Public Consultation (Doc URN 97/988). Back

6   These are not printed with the Report. Copies have been placed in the library of the House. Back

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