The Supreme Court has ruled in a case, which concerned the question whether the Transfer of Undertakings Act ("the Act") applied in connection with the tender procedure concerning the bus route between Viborg and Herning with the result that a group of employees could not claim outstanding salary from the tenderer that won the tender.

In the autumn of 2011, Midttrafik put out the bus route between Viborg and Herning for tender.  Brande Buslinier ApS won the tender and took over 19 out of 20 employees from the former operator of the route, Skjern Bilen. The employees taken over by Brande Buslinier ApS kept their seniority, salary and employment terms from the former employer, Skjern Bilen.

Shortly after Brande Buslinier ApS' take-over of the route, Skjern Bilen became subject to bankruptcy proceedings, and the employees raised a claim for outstanding salary against Brande Buslinier ApS. Lønmodtagernes Garantifond, which normally covers salary claims in connection with an employer's bankruptcy, rejected to cover the claims because the business had been transferred.

The question was then whether the Act applied in connection with the tender, and whether the employees could raise their salary claims against Brande Buslinier ApS as the acquirer of Skjern Bilen based on the Act.

No transfer of buses

The Act applies in case of transfer of a financial entity which maintains its identity.
Referring to the case law of the European Court of Justice, the Supreme Court found that, when assessing whether a financial entity has been transferred, it is necessary to take into consideration all circumstances in connection with the transfer. The assessment depends on the activity performed by the company and its production and operation methods.

When operating public bus transport, the physical elements (the buses) are important elements in the company's operation and not the labour according to case law. If no transfer is made of important physical elements between the two entities, i.e. the buses, an entity has not been transferred according to the Act.

Both bus companies used leased buses for the operation of the route, and Brande Buslinier ApS did not take over the buses used by Skjern Bilen. In addition to the employees, Brande Buslinier ApS only took over ticket tables, drivers' bags, coin tables and change at a total value of approx. DKK 61,000.

The Supreme Court: Not covered by the Act

Like the Western High Court, the Supreme Court found that no important physical elements had been transferred from Skjern Bilen to Brandes Buslinier ApS and, consequently, the transfer was not covered by the Act. Further, it was without any importance to the assessment of whether the transfer was covered by the Act that both companies used leased buses.

As no important physical elements were transferred between Skjern Bilen and Brande Buslinier Aps, the take-over was not covered by the Act. Consequently, the employees could not raise a salary claim against Brande Buslinier ApS.

Did the Act apply according to a separate agreement?

It appeared from the tender specifications that the Act was to be complied with, and that the new contract holder would therefore be placed in a position as when acquiring a business. The question was therefore whether an agreement had been made in connection with the tender according to which the Act was to be complied with even if the requirements of the Act had not been met.

The Supreme Court found that it did not appear clearly from the tender specifications that the acquirer of the agreement would take over the obligations vis-á-vis the employees, or that the employees were to be assigned rights under the Act.

The Supreme Court further found that the tender specifications were an agreement between Midttrafik and Brande Buslinier ApS, and that special reasons must exist in order for an agreement to be considered to contain conditions on third parties' (the employees') rights. The Supreme Court found that no special reasons existed in the agreement, and the employees' salary claim against Brande Buslinier ApS was therefore dismissed.

Comments

The Supreme Court ruling confirms previous case law according to which it is decisive in relation to the supply of bus routes to assess whether a transfer has taken place which is covered by the Act and whether "important physical elements, meaning buses, have been transferred. The fact that leased buses were used cannot result in the transfer being covered by the Act, unless the same leased buses are made available to the acquirer.

A reference to the Act in the tender specifications does also not automatically result in the Act applying with the consequence that the acquirer must take over the obligations of the transferred employees.

contacts

Jonas Enkegaard

Partner

Maria Schmiegelow

Attorney