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Case update:
Colino Siguenza v Ayuntamiento de Valladolid
Taking on tendered contracts

Case update: Colino Siguenza v Ayuntamiento de Valladolid – taking on tendered contracts

Published: 5th October 2018
Area: Corporate & Commercial
Author: Danielle Humphries

On 7 August 2018 the Court of Justice of the European Union (CJEU) held that a five month suspension of an undertaking’s activities did not preclude a TUPE transfer.

Background

The claimant, Mr Colino Siguenza, was employed from 11 November 1996 as a music teacher at the Municipal Music School of Valladolid in Spain (School). Initially the School was managed directly by the municipal administration of Valladolid. From 1997 the municipal administration of Valladolid ceased management of the School and through a series of calls for tenders for its management appointed Musicos y Escuela as the contractor for management of the School. The business of the School, including the management of the premises, facilities and instruments necessary to provide the service, continued as before under Musicos y Escuela. Musicos y Escuela also took over some of the workers who had been employed at the School by the municipal administration of Valladolid and this included Mr Colino Siguenza.

As a result in the reduction in numbers of students the municipal administration of Valladolid refused to pay the sums owed to Musicos y Escuela and on 19 February 2013 Musicos y Escuela requested the termination of the service contract as a result.

On 31 March 2013 Musicos y Escuela ceased its activity 2 months before the end of the academic school year. All staff were dismissed. On 1 April 2013 Musicos y Escuela returned the premises, instruments and facilities for the operation of the School back to the municipal administration of Valladolid.

In August 2013 the municipal administration of Valladolid assigned the management of the School to In-pulso Musical and, as it had previously done with Musicos y Escuela, transferred the premises, facilities and instruments necessary to provide the service to In-pulso Musical. In-pulso Musical began its activities in September 2013 and, following a new tender procedure, was appointed as manager of the School for 2014-15 and 2015-16. In-pulso Musical did not hire any of the employees who had worked in the School previously and who were collectively dismissed by Musicos y Escuela.

Legal action was brought against Ayuntamiento de Valladolid and others which resulted in the Tribunal Superior de Justicia de Castilla y Leon seeking a preliminary ruling from the CJEU on whether, in the circumstance of the above case, the suspension of activities of an undertaking for 5 months precluded a TUPE transfer.

Ruling

The CJEU took the view that a 5 month suspension of an undertaking’s activities did not preclude a TUPE transfer. The CJEU acknowledged that the decisive criterion for establishing the existence of a transfer within the meaning of the directive is whether the entity in question retains its identity “as indicated by the fact…that its operation is actually continued or resumed.” The CJEU highlighted a number of factors to consider to determine if this criterion is met.

In this case the CJEU took particular note of the fact that whilst the School’s activities ceased for 5 months, 3 of that 5 month period consisted of holiday. Consequently, the CJEU held that the suspension of the School’s activities and the failure by the new contractor In-pulso Musical to employ any of Musicos y Escuela’s dismissed employees could not “preclude the possibility that the economic entity at issue…retained its identity and that there was therefore a transfer of undertaking within the meaning of” the directive. The CJEU held that it was for the referring court to decide if such a transfer had occurred.

However, it is worth noting that even if a TUPE transfer is found by the local courts to have occurred, they will also have to consider whether the dismissals were related to the transfer and, even if they were, whether they were then fair because they were for an economic, technical or organisational reason. Given that it appears the dismissals were because the service was closing, the service had not been assigned to In-pulso Musical or any other provider and Musicos y Escuela would not have the funds to pay the staff, a finding that the dismissals were nonetheless fair seems likely.

The above ruling illustrates that education institutions will still need to consider TUPE and its implications in relation to awarded tender contracts, even if the tendered activity ceases for a period of time.

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