-
Summary
The Austrian Supreme Court has ruled that it is a transfer of an undertaking where workers employed by a temporary employment agency are later re-employed by a new temporary employment agency and hired out to the same user undertaking. The plaintiff employee was found to have an ongoing employment relationship with the new temporary employment agency.
-
Background
Pursuant to Section 3(1) of the Employment Contract Law Adaptation Act (Arbeitsvertragsrechts-Anpassungsgesetz, ‘AVRAG’), in the event of a transfer of an undertaking, all employment contracts belonging to the undertaking concerned are automatically transferred to the acquiring undertaking by operation of law. In the event of a transfer of business, the acquiring entity takes over the employment relationships existing at the time of the transfer. The transferred employment relationships retain their seniority and all original agreements, including the amount of remuneration. The Austrian Supreme Court generally follows the European Court of Justice in deciding on a business transfer case, citing its relevant case law.
-
Facts
The plaintiff in the case at hand was a worker employed by a temporary work agency. This agency had one major client, a user undertaking, to which it continuously assigned up to 40 temporary agency workers based on a contract for their assignment. The user undertaking had already recruited most of these workers when engaging the temporary work agency, while the others were recruited by the agency based on job profiles provided by the user undertaking. Each year, about five to ten temporary agency workers were taken over as permanent staff by the user undertaking. On the other hand, new temporary agency workers were continuously sought and recruited by the temporary work agency for assignment to the user undertaking.
On instructions from the user undertaking, the employment contracts were concluded with exclusivity clauses stipulating that the temporary agency workers could only be assigned to this particular user undertaking. Furthermore, the content of the employment contracts, including remuneration, was determined by the user undertaking and each new employment contract had to be approved by them. The role of the temporary work agency was reduced to formally acting as the employer and managing the financial aspects of the employment relationship (so-called payrolling). The temporary work agency used specialized software developed specifically for the user undertaking to administer the employment relationships.
The contract for the assignment of temporary agency workers between the temporary work agency and the user undertaking was subsequently terminated by the user undertaking effective from 31 December 2015, destroying the economic basis of the agency. Due to exclusivity clauses in the employment contracts, the temporary work agency could not assign the temporary agency workers to other clients. Therefore, most of the employment contracts were terminated by mutual consent.
However, the temporary agency workers who were assigned to the user undertaking subsequently continued working there. Some temporary agency workers were directly hired as permanent staff by the user undertaking while others formally signed employment contracts with the new temporary work agency (the respondent in this case) that was replacing the old one. There was no transfer of other personnel between the former temporary work agency and the respondent. Further, the former temporary work agency did not hand over any documents or software previously used to administer the employment relationships.
At that time, the plaintiff temporary agency worker was on (unpaid) parental leave and therefore her employment contract could not be terminated without prior approval of the employment court. When she wanted to resume her assignment at the end of her parental leave in September 2018, she was informed by the respondent temporary work agency that she would no longer be employed since the contract for assignment with the user undertaking had ended.
Subsequently, the temporary agency worker filed a claim seeking a declaratory judgment that she had a valid employment contract with the respondent temporary work agency as a result of a transfer of business. -
Judgment
Overruling the decisions of the lower courts, the Austrian Supreme Court concluded that the underlying facts constituted a transfer of business, which subsequently meant the plaintiff temporary agency worker’s employment contract transferred to the new temporary work agency.
In its reasoning, the Supreme Court first emphasized that for a business transfer preserving the identity of the economic unit is decisive – meaning the organizational concentration of operating resources for pursuing the economic activity. Further, the Supreme Court emphasized that the factual transfer is decisive in determining whether a business transfer occurred, not the existence of a legal transaction between the former and new owner.
In applying existing principles developed in previous case law, the Supreme Court stressed the importance of an overall assessment of the facts and circumstances to determine if a transfer of business occurred. To evaluate whether an economic unit was transferred, and subsequently whether there was a transfer of business under Section 3 AVRAG, all facts characterizing the transaction must be considered. Here, particular significance was given to the type of enterprise, as this is a key factor in weighing the importance of various means of production and the workforce when assessing a business transfer.
The transferred economic unit does not necessarily have to include substantial tangible or intangible assets, since certain sectors depend on simple resources like human labour. Therefore, an organized group of workers assigned a specific task may constitute an economic unit itself, without other resources existing.
Regarding the facts of the case, the Supreme Court held that the core economic activity of the temporary work agency was the assignment of temporary agency workers to one major client (the user undertaking). These workers were specifically selected by the client for its needs and sometimes even recruited directly by the client. The temporary work agency was the formal employer, while all other employment functions were carried out by the user undertaking. The considerable number of up to 40 temporary agency workers managed for a single user undertaking was deemed to constitute the essential characteristics of an organized economic unit. These temporary agency workers had been chosen by the user undertaking for its particular tasks and needs and had – in some cases – already worked there for many years. Therefore, it was necessary for a new temporary work agency to take on (most of) these temporary agency workers. Otherwise, the user undertaking would have had to either refrain from using a large number of workers selected by it, or from using its preferred assignment model. Only by continuing to employ these temporary agency workers, albeit after formal re-hiring, was the new temporary work agency able to guarantee the user undertaking uninterrupted continuation of the services previously provided.
In this specific situation, the Supreme Court considered the conditions for a transfer of business were met, regardless of no material personnel management resources being transferred between the temporary work agencies. The organizational economic entity in this case was deemed to be the group of temporary agency workers, who were exclusively assigned to one user undertaking, and constituted the key factor for the former temporary work agency’s economic activity. Thus, there was not only a transfer of the contract, but also a transfer of the temporary agency workers critical to fulfilling the particular contract for the assignment. -
Commentary
This case is interesting because it gave the Supreme Court the chance to refine its own case law on a business transfer involving a temporary work agency. In a previous judgment (8 ObA 64/07f) the Court had pointed out that temporary work agencies by definition barely employ any workers in their ‘own business’ as an organizational unit, but rather these workers are assigned to other employers (user undertakings) as employees. It was therefore questionable for the Court how and whether the ‘two-stage test’ – the existence of an organizational unit with the old employer/the existence of an organizational unit with essentially identical ‘operational means and appearance’ with the new business owner – could be applied.
Consequently, the Court referred this question to the ECJ who answered it in the case Jouini (C-458/05, ECLI:EU:C:2007:512). The ECJ held that Directive 2001/23/EC on transfer of undertakings applies to a situation where part of the administrative personnel [words emphasized by the commentator] and part of the temporary workers are transferred to another temporary employment business in order to carry out the same activities in that business for the same clients and the assets affected by the transfer are sufficient in themselves to allow the services characterizing the economic activity in question to be provided without recourse to other significant assets or to other parts of the business (paragraph 38). As the Supreme Court found that the lower courts had not assessed whether the assets affected by the transfer are sufficient in themselves to allow the services of a temporary work agency the case was referred to the court of first instance.
In the current case the respondent referred to this decision of the Supreme Court and argued that there was no business transfer since no administrative personnel of the former temporary work agency had transferred to its business. The Court countered this argument pointing out that the current case was different since it involved an atypical form of assignment of workers, the so-called payrolling. In such a situation, the economic entity to be transferred was characterized by the group of temporary agency workers, who were exclusively assigned to one user undertaking. Therefore, the conditions for a transfer of business were met, regardless of no personnel management resources being transferred to the respondent. -
Comment from other jurisdiction
Germany (Nina Stephan and Tim Rossmann, Luther Rechtsanwaltsgesellschaft mbH): The decision at hand is not only interesting from an Austrian point of view. The question of whether and when the takeover of a contract is not only a subsequent service but constitutes or could constitute a transfer of undertaking is also an issue in Germany.
Several years ago, for example, the German Federal Labour Court (Bundesarbeitsgericht, ‘BAG’, see decision of 25 June 2009 – 8 AZR 258/08) had to deal with the question in connection with a call centre of what happens when a company employs a large number of employees, all of whom were previously employed by another company, without the company as such or any operating resources being (legally) transferred to the ‘new’ employer. The operation of the call centre was closed down and the majority of the employees were recruited by a newly established call centre. Similar to the decision of the Austrian Supreme Court in the present case, the BAG, after assessing all the circumstances (type of company, transfer of all tangible and intangible assets, value of the intangible assets at the time of the transfer, takeover of the main company by the new owners, takeover of the customer base, similarity of the new activity compared to the old one and the duration of any interruptions), assumed that there was a transfer of undertaking as it considered the transferred employees to be an economic unit of the closed call centre which had created its identity.
In another case, in which the BAG actually also had to deal with the takeover of temporary workers (see BAG decision of 12 December 2013 – 8 AZR 1023/12), however, the BAG clarified that a takeover of (all) employees can only constitute an economic unit if they can be deployed without the use of further operating resources and rejected a transfer of undertaking. In this case, a temporary employment agency had taken over (only) 14 temporary workers from another temporary employment agency for a certain customer as a gravure printer and continued the assignment with these workers for the same customer. In the BAG’s view, this was not sufficient to constitute an economic unit because, among other things, they could not be deployed without the use of further administrative staff and other operating resources.
In view of this, it is not unlikely that the German courts would also have considered this to be a transfer of undertaking.Subject: People who transfer/refuse to transfer
Parties: Unknown
Court: Oberster Gerichtshof (Austrian Supreme Court)
Date: 30 August 2022
Case number: OGH 8 Ob A 82/21y
Internet publication: Not available
DOI: 10.5553/EELC/187791072023008003006
European Employment Law Cases |
|
Case Reports | 2023/25 Transfer of business concerning temporary work agencies (AT) |
Trefwoorden | People who transfer/refuse to transfer |
Auteurs | Andreas Tinhofer en Gaudenz Küenburg |
DOI | 10.5553/EELC/187791072023008003006 |
Toon PDF Toon volledige grootte Samenvatting Auteursinformatie Statistiek Citeerwijze |
Dit artikel is keer geraadpleegd. |
Dit artikel is 0 keer gedownload. |
Aanbevolen citeerwijze bij dit artikel
Andreas Tinhofer en Gaudenz Küenburg, "2023/25 Transfer of business concerning temporary work agencies (AT)", European Employment Law Cases, 3, (2023):130-132
Andreas Tinhofer en Gaudenz Küenburg, "2023/25 Transfer of business concerning temporary work agencies (AT)", European Employment Law Cases, 3, (2023):130-132
The Austrian Supreme Court has ruled that it is a transfer of an undertaking where workers employed by a temporary employment agency are later re-employed by a new temporary employment agency and hired out to the same user undertaking. The plaintiff employee was found to have an ongoing employment relationship with the new temporary employment agency. |