Transfer of equipment

The Court of Justice of the European Union (CJEU) has held in Securitas v ICTS Portugal and anor that there can be a transfer of an undertaking in circumstances where the activity carried out by a new contractor is done by utilising the same equipment as the previous contractor. That is the case whether or not the new contractor took on the employees assigned to that work.

Basic facts

ICTS provided security services at a port in Portugal under a contract between the port and the company. The guards employed by ICTS were responsible for monitoring the entry and exit of people and goods using video surveillance devices belonging to the port. However the rules for operating the equipment were issued to the guards by ICTS.  

The contract was put out to tender and awarded to Securitas. Just before the contract took effect, an ICTS employee handed over the equipment they had used to monitor the port to a Securitas employee. Securitas then handed it back to the port. ICTS told the guards that their employment would transfer but Securitas argued that they were still employed by ICTS and no transfer had occurred. 

The guards brought claims against both Securitas and ICTS.

Relevant law

Article 1(1)(b) of the Transfer of Undertakings Directive states that there is a transfer of an undertaking where there is “a transfer of an economic entity which retains its identity meaning an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary”.

Decisions of lower courts

The local labour court held that there had been a transfer of an undertaking between the two companies and therefore the employment contracts of the ICTS guards had transferred to Securitas. The Court of Appeal upheld that judgment.

The Supreme Court of Portugal then asked the CJEU to consider whether the situation amounted to a transfer of an economic entity under Article 1(1) of the Directive. The Court had doubts whether the replacement of ICTS by Securitas for the provision of security guard services amounted to a transfer of an undertaking.

Decision of CJEU

In order to decide whether there had been a transfer, the CJEU held that it was necessary to consider all the facts. This included looking at the type of undertaking or business; whether or not its tangible assets had transferred; whether or not the majority of its employees had been taken on by the new employer; and the degree of similarity between the activities carried on before and after the transfer.

However, the degree of importance to be attached to each criterion for determining whether or not there had been a transfer varied depended on the activity being carried out.

So for instance, if the activity was based essentially on manpower and the transferee did not take on the majority of the employees, there would not be a transfer as the economic entity had not retained its identity. Conversely, if the activity was based essentially on equipment (as was found to be the situation in this case), as opposed to manpower, there could be a transfer even if the employees were not taken on by the new contractor. The CJEU concluded however that it was a matter for the referring court to decide whether there had been a transfer of an undertaking, taking into account all of the facts characterising the transaction. The case therefore was remitted back to the Supreme Court of Portugal to consider this.