TUPE and the Heineken effect: reaching employees in other group companies

In the Albron Catering case, involving the sale of Heineken’s in-house catering division, the European Court of Justice has applied a wide interpretation of the Acquired Rights Directive, the EU parent of our Transfer of Undertakings Regulations (TUPE). This ruling extends the reach of the Directive from employees with a contractual relationship with the transferor to those assigned to the transferor’s business but employed by another company in the same group.

In this case the claimant and 70 or so other workers were employed by a service company owned by Heineken, but worked for an operating company which supplied catering to employees in the Heineken group. When the catering operation was sold to Albron, these employees sought the protection of the Dutch equivalent of TUPE and argued that their contracts of employment had been automatically transferred. The ECJ said that the Directive applied not only where the employees assigned to the business had a contractual relationship with the transferor, but also where they had an "employment relationship", albeit that the contractual employer was another company in the transferor’s group.

Like its Dutch equivalent, on its face TUPE applies only to contractual employees of the transferor. Except where the contractual arrangements are a sham, our domestic courts have not so far been prepared to look behind them. This decision will change things. For transferors in the public sector, the relevant provision of the Acquired Rights Directive has direct effect, meaning that the literal meaning of TUPE can be ignored. In the case of private sector transfers, employees will be able to argue that TUPE must be interpreted to give effect to the Directive, even if it means reading in extra words to achieve that.