ECJ – Meaning of “transfer of a business”

Air Atlantis provided charter flights. When it was wound up the employees, the applicants in the current case, were dismissed as part of the collective redundancy exercise. The main shareholder of Air Atlantis, TAP, started to operate some of the routes using the aircraft, offices, equipment, other assets and employees of Air Atlantis. The applicants brought proceedings seeking reinstatement and compensation for unfair dismissal on the basis that they should have transferred to TAP under the Acquired Rights Directive; and the matter was referred to the ECJ to determine whether a majority shareholder taking over the subsidiaries’ activities constituted a relevant transfer.

The ECJ held that there had been a transfer under the Acquired Rights Directive and that the decisive factor to establish this was that the entity had retained its identity, which was evidenced by the fact that the activity continued or resumed. With a business such as air transport, the transfer of the tangible assets was also a key factor. In this case the majority shareholder had taken over the charter flight routes including aircraft leases, assets, activities and employees. The ECJ considered that the fact that they were integrated into the TAP structure and did not retain an autonomous individual identity was irrelevant – there was a functional link between the assets and staff and the activities which they carried out were being preserved and continued, which allowed TAP to continue with the same activities. As such it held that a TUPE transfer had taken place.

This legal update is provided for general information purposes only and should not be applied to specific circumstances without prior consultation with us.

For further details on any of the issues covered in this update please contact Gemma Ospedale, Partner in Employment on 020 7583 2222.