Pre-existence under Italian Law and the Amatori's case

21 November 2014

According to the European Court, the Council Directive 2001/23/EC of 12 March 2001 does not exclude national legislation allowing the transferee to take over the employment relationship from the transferor in cases in which there was not a functionally autonomous economic entity existing before the transfer.

The question for the European Court in the Amatori's case was whether on the creation of a shared service vehicle by an operation company, employees working in the service concerned, automatically transfer to the shared service company even where:

  • the part of the business transferred was not a functionally independent economic entity already existing before the transfer and identifiable as such by the transferor and the transferee at the time of the transfer, and
  • after the transfer, the transferor undertaking wielded "in depth and supreme" control over the transferee, a relationship which manifested itself through a "tight commercial bond" and the "commingling of business risk".

According to the Court:

Article 1(1)(a) and (b) of Council Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses must be interpreted as meaning that it does not preclude national legislation, such as that at issue in the Amatori proceedings, which permits the transferee to take over the employment relationship from the transferor if the part of the undertaking to be transferred does not constitute a functionally autonomous economic entity existing before the transfer.

Article 1(1)(a) and (b) must be interpreted as not precluding national legislation which enables the transferee to take over the employment relationships from the transferor if, after the transfer of part of an undertaking concerned exercises extensive, overriding powers over the transferee.

The Court, however, missed - in our view - the real point raised by Amatori: whether the lack of autonomy of the transferred part of business, even after the transfer does not speak against the effectiveness of the transfer which, under Italian law, is the condition for the automatic continuation (without consent) of employees' relationship with transferor. The Italian perspective might be different from other countries' one, since most employees are fully protected against termination, and much less protected against a transfer they do not like, either because they will lose their protection against unfair termination or because the new employer is less solid than the former one.

 

This article is part of the Southern Europe Employment Law Update for December 2014

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