Whether the winning of a tender amounts to a transfer of undertaking
Suzen v Zehnacker Grebaudereinigung GmbH Krakenkausservice  IRLR 255 is authority that the mere loss of a service contract from one contractor to another is not automatically a transfer of undertaking. In that case, a school had contracted out cleaning operations to cleaning company A. and later contracted it out to company B. and the ECJ held there was no transfer of undertaking from A to B.
“…Article 1(1) of the directive is to be interpreted as meaning that the directive does not apply to a situation in which a person who had entrusted the cleaning of his premises to a first undertaking terminates his contract with the latter and, for the performance of similar work, enters into a new contract with a second undertaking, if there is no concomitant transfer from one undertaking to the other of significant tangible or intangible assets or taking over by the new employer of a major part of the workforce, in terms of their numbers and skills, assigned by his predecessor to the performance of the contract.”
Suzen was applied in Dignan v Sheehan Security Corporation Ltd  16 ELR 222 to find no transfer of undertaking occurred. One security company was hired to replace another. There was no asset transfer from the previous security company.
In Shiels and others v. Integrate Ireland Ltd. 2010 ELR 41 the claimants failed on an application under the transfer of undertaking Regulations. The claimants were employees of the first named respondent which delivered language courses, funded by the Department. The Department moved the funding to VECs to provide language classes. The Rights Commissioner held there was no transfer of undertaking such that the VECs were required to employ the claimants. While the teaching activities previously undertaken by the first named respondent did transfer to a number of the VECs, there was no significant transfer of assets. The transfer of teaching activities was not to one legal entity but to a number of separate legal entities.
Suzen was applied In Barry v. ISS Facility Services and Noonan Services Group Ltd. (EAT 22/11/10). The second respondent lost out on a cleaning contract of the first respondent. The EAT held that no transfer of undertaking applied. No transfer of assets occurred.
In Kirk v. Trim Transport Ltd. and Dundalk Trinity Transport Ltd. (EAT 12/2/09) a contract for a truck route was lost from the first respondent to the second respondent, as a result of which the claimant was dismissed. The EAT held there was no transfer of undertaking:-
“ None of the workforce involved in the activity save for the appellant transferred to the new entity.
None of the assets, tangible or intangible, respondent 1 were transferred save for the profit from the contract. When this is weighed against the other factors mentioned above the Tribunal does not consider it to have sufficient significance to outweigh them. It follows that the Transfer of Undertaking Directive does not apply in this case.”
In Brinks Security v. European Commission (2009/C256/39) the applicant sought to annul a decision of the EU Commission refusing to award it a tender for the provision of security and surveillance of the commissions buildings. One of the arguments of the applicant was that the new tenderer should have been required to give an undertaking to take over the employment contracts of the personnel employed by the applicant assigned to the contract. The ECJ said it was not a transfer of undertaking and stated:-
“[A] transfer of an undertaking between the previous and the new contractor depended on the latter taking over a major part, in terms of their number and skills, of the employees assigned by the applicant to carry out the contract …”
In Top Security v. Sadlier 2017 IEHC 134 the claimants were employed by security Company A. The contract went out to tender and Company B won. Company A had won the contract from Company C years previously and had treated that as a transfer of undertaking. The EAT held there was a transfer of undertaking to Company B. 5 of 8 employees of Company A, assigned to the location, went on to work for Company B. The goodwill had transferred. The EAT applied Abler v. Sodexho 2014 IRLR 168 – the failure to take over staff was not determinative. The High Court refused to overturn the EAT decision and gave it curial deference.
There is a strong argument that the winning of a tender does not amount to a transfer of undertaking unless you can point to a significant transfer of assets and employees.
Even where there is no significant transfer of tangible assets or employees, Top Security v. Sadlier is authority that it may still be a transfer of undertaking in particular if intangible assets transferred to the winning tenderer.
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