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Global employment briefing: Spain, October 2018

  • Spain
  • Employment law


New joint and several liability for some transfers of undertakings

The European Court of Justice (“ECJ”) has decided (Case C-60/17) that Directive 2001/23/EC (regarding Transfer of Undertakings – Protection of Employment) applies to transfers of services from one contracting entity to a new contractor. Specifically, where the services are mainly provided by the workforce and a relevant part of the employees are transferred to the new provider as a result of a duty of subrogation in the applicable collective bargaining agreement for security companies (which is considered an activity based on manpower, “CBA-led transfer”).

The facts are that a museum in Santiago de Compostela decided to change its provider of security services. The transfer was mandatory in accordance with the CBA for private security companies. This obliges the new contractor to subrogate certain employees of the transferor and establishes that the transferee is not liable for the transferor’s employment debts with employees affected by the transfer.

However, an employee who was transferred decided to bring a claim against both companies seeking unpaid salary accrued prior to the transfer. He argued that the CBA-led transfer triggered a TUPE transfer in accordance with the Statute of Workers which provides for joint and several liability for both transferor and transferee.

The High Court of Justice of referred two preliminary issues to the ECJ:

  • whether there can be a TUPE transfer in accordance with Directive 2001/23/EC when a company ceases to provide services and the new contractor assumes an essential part of the employees assigned to the service because the transfer of employment is established by the CBA. The ECJ has confirmed this is the case
  • whether the exclusion of the transferee’s liability under the CBA regarding debts prior to the transfer is consistent with Directive 2001/23/EC. The ECJ did not answer this second question considering that it fell outside its jurisdiction

The High Court of Justice of Galicia has now addressed the second question. It decided that as the ECJ considered that a CBA-led transfer may entail a TUPE transfer, then both companies are joint and severally liable for any employment debt prior to the transfer in accordance with the Statute of Workers. Therefore the limitation of liability in favour of the transferee set forth in the CBA is not consistent with Spanish law.

As this solution is contrary to the current case-law from the Spanish Supreme Court (which deemed that CBA-led transfers are exclusively governed by the provisions set forth in the CBA and that the liability regime in the Statute of Workers does not apply to them), a new court ruling from the Supreme Court is expected in the forthcoming months.