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Continuous service for notice pay preserved on transfer

22 September 2017

The European Court of Justice (“ECJ”) has considered an interesting TUPE issue concerning continuous service, arising in a case referred by the Swedish Labour Court.

The dispute centred on the notice periods to which a number of employees were entitled on termination. The applicable notice was derived from collective agreements and based on the individual’s length of continuous service. The employees had transferred to the respondent employer under the Swedish equivalent of TUPE some years previously, with the bulk of their service having been with the transferor. Whether their service with the transferor counted for these purposes made a significant difference to the notice payments due. 

Swedish law contains a similar principle to the one in the UK allowing a transferee to make changes to terms derived from collective agreements after one year from the date of transfer, provided the changes are no less favourable overall (regulation 4(5B) of TUPE). The relevant terms of the transferee’s collective agreement in this case were in fact identical to the terms of the transferor’s collective agreement, but both were silent as to whether the employer was required to take into account service with a previous employer.

The transferee employer argued that the EU Acquired Rights Directive did not require service with the transferor to be taken into account in determining notice rights under a collective agreement. Further, the transferee argued that, as more than one year had elapsed since the transfer, it was no longer bound by the transferor’s collective agreement. 

Rejecting these arguments, the ECJ pointed out that that the Directive’s objective is to safeguard the rights of employees on a transfer by ensuring their employment continues on the same terms previously enjoyed. Although length of service is not a right as such, it is used to determine certain rights of employees (including financial rights on termination). The transferee must maintain those rights in the same way as the transferor, and to fail to take into account previous service would defeat that principle. 

The ECJ concluded that where (as in this case) the transferor’s collective agreement has not been terminated and is worded identically to the transferee’s collective agreement, the employees could not be subjected to less favourable working conditions than those that applied before the transfer. When dismissing employees more than one year after the transfer, the transferee should therefore include the service they acquired with the transferor in the calculation of their overall length of service for notice purposes.

Unionen v Almega Tjänsteförbunden ISS Facility Services AB [2017] EUECJ C-336/15 – judgment available here

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