In Case C-29/91,
REFERENCE to the Court under Article 177 of the EEC Treaty by the Kantongerecht (Cantonal Court), Groningen, for a preliminary ruling in the proceedings pending before that court between
Dr Sophie Redmond Stichting
and
Hendrikus Bartol and Others,
on the interpretation of Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses (OJ 1977 L 61, p. 26),
THE COURT,
composed of: O. Due, President, R. Joliet, F.A. Schockweiler and F. Grévisse, (Presidents of Chambers), J.C. Moitinho de Almeida, G.C. Rodríguez Iglesias and M. Diez de Velasco, Judges,
Advocate General: W. Van Gerven,
Registrar: H.A. Ruehl, Principal Administrator,
after considering the written observations submitted on behalf of:
° the Dr Sophie Raymond Stichting, by R. Van Asperen, of the Groningen Bar,
° Hendrikus Bartol and others, by T.Y. Miedema and G.W. Brouwer, of the Groningen Bar,
° the Commission of the European Communities, by B.J. Drijber and K. Banks, of its Legal Service, acting as Agents,
having regard to the Report for the Hearing,
after hearing the oral observations of the Dr Sophie Redmond Stichting at the hearing on 12 February 1992,
after hearing the Opinion of the Advocate General at the sitting on 24 March 1992,
gives the following
Judgment
1 By order of 21 January 1991, received at the Court on 28 January 1991, the Kantongerecht, Groningen, referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a series of questions on the interpretation of Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses (hereinafter referred to as "the directive").
2 The questions arose in proceedings between, on the one hand, the Dr Sophie Redmond Stichting, a foundation (hereinafter referred to as "the Redmond Foundation"), and, on the other, Hendrikus Bartol and eight other persons.
3 It appears from the case-file that the plaintiff in the main proceedings is a foundation engaged, inter alia, in the provision of assistance to drug addicts from certain groups in Dutch society. The defendants are employees of the foundation bound to it by employment contracts to which the provisions of the Dutch Civil Code apply.
4 The Municipality of Groningen, which used to grant the foundation subsidies which were its sole resources, ceased to do so with effect from 1 January 1991 and transferred them to another foundation engaged in assisting drug addicts, namely the Sigma Foundation.
5 The Redmond Foundation, which was now without any resources, applied to the Kantongerecht, Groningen, under Article 1639w of the Civil Code to set aside its contracts of employment with such members of its staff as were not taken on by the Sigma Foundation.
6 Since some of the defendants in the main proceedings relied upon the provisions of Article 1639aa et seq., which were inserted into the Dutch Civil Court in order to transpose the directive into national law, the Kantongerecht, which is a court of first and last instance, was prompted to consider the interpretation of the directive and decided to stay the proceedings until such time as the Court had given a preliminary ruling on the following questions:
"(a) Does 'transfer of an undertaking ... to another employer as a result of a legal transfer or merger' within the meaning of Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses also cover the situation in which the subsidizing body decides to terminate the subsidy paid to one legal person, as a result of which the activities of that legal person are fully and definitively terminated, and simultaneously to switch it to another legal person with identical or comparable aims and objects, it being intended by and agreed between the two legal persons and the subsidizing body not only that, so far as possible, the clients/patients of the first legal person should be 'switched' to the second legal person but also that, thereupon, a lease should be granted to the second legal person of the immovable property leased by the first legal person from the subsidizing body and that, so far as is possible (and desirable), use should be made of the 'knowledge and the resources (e.g. staff)' of the first legal person?
(b) For the purpose of answering the foregoing question, does it make any difference that the inventory of the first legal person is not also transferred to the second legal person?
(c) Is it of any significance, for the purpose of answering Question (b), whether the untransferred inventory consists exclusively or well-nigh exclusively of aids for the purposes of the abovementioned social and recreational function?
(d) Can (the transferred part of) the undertaking still be said to retain its identity if the abovementioned social and recreational function of the first legal person is not transferred but the function of providing assistance is?
(e) For the purpose of answering Question (d), does it make any difference whether the social and recreational activities must be regarded as constituting a separate object or solely as an aid for the purposes of an optimum provision of assistance?
(f) For the purposes of answering the above questions, does it, lastly, still make any difference that the (intended) transfer of the activities of the first legal person to the second was not brought about in the first instance by (an) agreement(s) to that end between the subsidizing body and the two legal persons but by a decision, based on a change of policy on the part of the subsidizing public body, to terminate the subsidy paid to the first legal person and to switch it to the second legal person?"
7 Reference is made to the Report for the Hearing for a fuller account of the facts of the case, the procedure and the written observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.
8 Article 1(1) of the directive provides as follows:
"This directive shall apply to the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger".
9 The six questions submitted by the Kantongerecht are concerned in fact with two separate aspects of the directive' s scope, as defined by Article 1. Part of the first question and the sixth question are concerned with the interpretation of the expression "legal transfer", the other questions with the expression "transfer of an undertaking, business or part of a business". In order to answer the national court' s questions, it is appropriate to examine successively the possible difficulties of interpretation raised by those two expressions, regard being had to the concerns expressed by that court.
The expression "legal transfer"
10 In its judgment in Case 135/83 Abels v Bedrijfsvereniging voor de Metaalindustrie en de Electrotechnische Industrie [1985] ECR 469, paragraphs 11, 12 and 13, the Court held that the scope of the provision at issue could not be appraised solely on the basis of a textual interpretation on account of the differences between the language versions of the provision and the divergences between the laws of the Member States with regard to the concept of legal transfer.
11 It has therefore given that concept a sufficiently flexible interpretation in keeping with the objective of the directive, which is to safeguard employees in the event of a transfer of their undertaking, and has held that the directive is applicable wherever, in the context of contractual relations, there is a change in the natural or legal person who is responsible for carrying on the business and who incurs the obligations of an employer towards employees of the undertaking (see, most recently, the judgment in Case 101/87 Bork International v Foreningen af Arbejdsledere i Danmark [1988] ECR 3057, paragraph 13).
12 The Court has considered in particular that the directive was applicable where premises were leased, the lease was rescinded and the owner took over the operation of the undertaking (judgment in Case 287/86 Landsorganisationen i Danmark for Tjenerforbundet i Danmark v Ny Moelle Kro [1987] ECR 5465), in a case where a restaurant was leased, the lease terminated and the business leased to a new lessee who carried on the business (judgment in Case 324/86 Tellerup v Daddy' s Dance Hall [1988] ECR 739) and even where a bar-discothèque was transferred pursuant to a lease-purchase agreement and restored to its owner by a judicial decision (judgment in Joined Cases 144 and 145/87 Berg v Besselsen [1988] ECR 2559).
13 As the Court observed in its judgment in Bork International, cited above, paragraph 14, where, upon the expiry of a lease, the lessee ceases to be the employer and a third party becomes the employer thereafter under a contract of sale concluded with the owner, the resulting operation may fall within the scope of the directive as defined in Article 1(1) thereof. The fact that in such a case the transfer is effected in two stages, inasmuch as the undertaking is first restored by the lessee to the owner who then transfers it to the new owner, does not prevent the directive from applying.
14 The operation to which the Kantongerecht' s questions relate, as described in the order for reference, is comparable in structure. The situation in question is where a municipality which finances, through subsidies, the activities of a foundation engaged in providing assistance for drug addicts decides to discontinue the subsidies, and thus causes the foundation to cease its activities and transfer them to another foundation carrying on the same activities.
15 Admittedly, the national court asks in its sixth question whether the fact that the transfer decision was taken unilaterally by the public authority and was not the result of an agreement concluded by it with the subsidized bodies renders the directive inapplicable in this case.
16 That question must be answered in the negative.
17 In the first place, there is a unilateral decision both where an owner decides to change his lessee and where a public body changes its policy on subsidies. In that connection, it is inappropriate to take account of the nature of the subsidy, which is granted by a unilateral act coupled with certain conditions in some Member States and by subsidy contracts in others. In every case, the change in the recipient of the subsidy is carried out in the context of contractual relations within the meaning of the directive and the relevant case-law (judgments in Berg, cited above, paragraph 19, and in Bork International, cited above, paragraphs 13 and 14). What is more, although the Redmond Foundation, in its observations to the Court, disputes that any agreements were concluded, the Kantongerecht expressly observes in the grounds of its order that "both the plaintiff and the Sigma Foundation have declared themselves ready to cooperate actively in the 'transfer' of the plaintiff' s clients/patients to the Sigma Foundation and a working party for the 'Incorporation of the Activities of the Redmond Foundation into the Sigma Foundation' has come into being".
18 Secondly, as the Commission emphasizes in its observations, moreover, the fact that in this case the origin of the operation lies in the grant of subsidies to foundations or associations whose services are allegedly provided without remuneration does not exclude that operation from the scope of the directive. The directive, as has already been stated, is designed to ensure that employees' rights are safeguarded, and covers all employees who enjoy some, albeit limited, protection against dismissal under national law (judgments in Case 105/84 Foreningen af Arbejdsledere i Danmark v Danmols Inventar [1985] ECR 2639, paragraph 27, and in Case 237/84 Commission v Belgium [1986] ECR 1247, paragraph 13). According to the order for reference, the employees concerned are subject to the Dutch Civil Code.
19 At the hearing, counsel for the plaintiff in the main proceedings put forward another argument, based on the fact that the Redmond Foundation is in a situation comparable to insolvency, which is expressly excluded from the scope of the directive by the Court' s case-law owing to the serious risk, in the event of the application of the directive to insolvency, of a general deterioration in the working and living conditions of workers, contrary to the social objectives of the Treaty (judgment in Abels, cited above, paragraph 23).
20 That new argument, which was not put forward in the written observations submitted to the Court and is not supported by any document in the case-file, cannot be accepted. It appears from the judgment in Abels, cited above, that only transfers relating to undertakings declared insolvent are excluded from the scope of the directive. Even on the assumption, which is by no means established, that the Redmond Foundation was experiencing difficulties in honouring its commitments at the date of the transfer, that fact alone would not be sufficient to exclude the said transfer from the scope of the directive (see, in particular, the judgment in Danmols Inventar, cited above, paragraphs 9 and 10).
21 Accordingly, the answer to the national court' s questions or parts of questions relating to the interpretation of the expression "legal transfer" within the meaning of Article 1(1) of Directive 77/187 must be that that provision is to be interpreted as meaning that the expression covers a situation in which a public authority decides to terminate the subsidy paid to one legal person, as a result of which the activities of that legal person are fully and definitively terminated, and to transfer it to another legal person with a similar aim.
The expression "transfer of an undertaking, business or part of a business"
22 In its judgment in Case 24/85 Spijkers v Benedik [1986] ECR 1119, the Court specified the conditions under which the factual circumstances capable of being described as a transfer of an undertaking within the meaning of the directive had to be assessed. Three points should be called to mind in that regard.
23 First, the decisive criterion for establishing whether there is a transfer for the purposes of the directive is whether the entity in question retains its identity, as indicated inter alia by the fact that its operation is actually continued or resumed (judgment in Spijkers, cited above, paragraphs 11 and 12).
24 Secondly, in order to determine whether those conditions are met, it is necessary to consider all the facts characterizing the transaction in question, including the type of undertaking or business, whether or not the business' s tangible assets, such as buildings and movable property, are transferred, the value of its intangible assets at the time of the transfer, whether or not the majority of its employees are taken over by the new employer, whether or not its customers are transferred and the degree of similarity between the activities carried on before and after the transfer and the period, if any, for which those activities were suspended. It should be noted, however, that all those circumstances are merely single factors in the overall assessment which must be made and cannot therefore be considered in isolation (judgment in Spijkers, cited above, paragraph 13).
25 Lastly, it is for the national court to make the necessary factual appraisal, in the light of the criteria for interpretation specified by the Court, in order to establish whether or not there is a transfer in the sense indicated (judgment in Spijkers, cited above, paragraph 14).
26 In this case, it is stated in the order for reference that the transfer of subsidies from the one foundation to the other has the following characteristics: the Redmond Foundation ceased its activities; the two foundations pursue the same or a similar aim; the Sigma Foundation partially absorbed the Redmond Foundation; the two foundations cooperated in finalizing the transfer operations; it was agreed that the Redmond Foundation' s knowledge and resources would be transferred to the Sigma Foundation; the premises rented by the Redmond Foundation were leased to the Sigma Foundation; and the latter offered new employment contracts to some of the Redmond Foundation' s former employees.
27 All those facts are essential if not decisive features of a transfer and may be used to interpret and apply Article 1 of the directive.
28 In its second, third, fourth and fifth questions, the Kantongerecht describes the particular circumstances in which certain property is used and certain activities carried on and asks whether they are capable of altering the manner in which the aforesaid factors are to be categorized for the purpose of establishing whether or not there is a transfer.
29 As regards the movables, the fact that they were not transferred does not seem in itself to prevent the directive from applying, and it is for the national court to appraise their importance by incorporating them in the overall assessment which has to be made, as pointed out in paragraph 24.
30 The same observation applies to the social and recreational activities, it being understood that the mere fact that those activities are said to have constituted an independent function is not sufficient to rule out the application of the aforementioned provisions of the directive, which were laid down not only for transfers of undertakings, but also for transfers of businesses or parts of businesses, with which activities of a special nature may be equated.
31 Accordingly, the reply to the national court' s questions relating to the interpretation of the expression "transfer of an undertaking, business or part of a business" within the meaning of Article 1(1) of Directive 77/187 must be that that provision is to be interpreted as meaning that that expression refers to the case in which the entity in question has retained its identity. In order to ascertain whether or not there has been such a transfer in a case such as that which is the subject of the main proceedings, it is necessary to determine, having regard to all the factual circumstances characterizing the operation in question, whether the functions performed are in fact carried out or resumed by the new legal person with the same or similar activities, it being understood that activities of a special nature which constitute independent functions may, where appropriate, be equated with a business or part of a business within the meaning of the directive.
Costs
32 The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court.
On those grounds,
THE COURT,
in answer to the questions referred to it by the Kantongerecht, Groningen, by order of 21 January 1991, hereby rules:
1. Article 1(1) of Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses is to be interpreted as meaning that the expression "legal transfer" covers a situation in which a public authority decides to terminate the subsidy paid to one legal person, as a result of which the activities of that legal person are fully and definitively terminated, and to transfer it to another legal person with a similar aim.
2. The expression "transfer of an undertaking, business or part of a business" contained in the same article refers to the case in which the entity in question has retained its identity. In order to ascertain whether or not there has been such a transfer in a case such as that which is the subject of the main proceedings, it is necessary to determine, having regard to all the factual circumstances characterizing the operation in question, whether the functions performed are in fact carried out or resumed by the new legal person with the same or similar activities, it being understood that activities of a special nature which constitute independent functions may, where appropriate, be equated with a business or part of a business within the meaning of the directive.
