TUPE newsletter series PART 1 – scoping: when is CBA No. 32bis applicable and what should you be mindful of?
13 Jun 2023
In recent months, we've seen an increase in the number of transformation projects. The underlying reasons are often very different, ranging from carve-outs in light of the search for potential investors up to corporate simplifications to obtain a more sound corporate governance or transfer pricing model. Although the ‘people aspect’ is often not the (sole) driver for these transformation projects, it’s a crucial consideration in both the preparation and implementation phase.
One of the first things to consider from an employment law perspective is whether or not the transformation will trigger the so-called ‘TUPE-Directive’ (i.e. Council Directive 2001/23/EC of 12 March 2001 - hereafter ‘the Directive’) and – from a Belgian perspective – Collective Bargaining Agreement (CBA) No. 32bis (which is the transposition of the Directive into Belgian legislation). These aim to safeguard employees’ rights in the event of a change of employer resulting from a contractual transfer of (part of) an undertaking.
In a series of newsletters, we want to give you a better understanding of the scope and obligations that come with CBA No. 32bis. In this first newsletter, we’ll focus on the scope of application of CBA No. 32bis.
Whether or not CBA No. 32bis applies to a specific situation largely depends on whether or not a number of conditions are met. Below, we’ll outline the general principles of each of those conditions, as well as include examples to make them more tangible.
Change of employer
In order for CBA No. 32bis to apply, there must be a change in the natural person or legal entity that operates the business and, as a result, has obligations towards the employees. In other words: there must be a change of the legal employer.
This immediately excludes share deals from the scope of the CBA. In a share deal, a company comes under the control of another company or individual as a result of the purchase of all or a part of the shares. In such a case, there is a new ‘economic’ employer and the economic decision-making power will be transferred, but the legal entity that entered into the agreement with the employees doesn’t change. An asset deal, which is - a bit oversimplified - the sale of a companies’ underlying assets (one of which is often the employees), may on the other hand result in a possible change of employer.
An example to highlight this difference is a carve-out in anticipation of a sale. Firstly, a part of the business is carved-out and transferred to a newly established company (NewCo). This will result in a change of employer and – provided the part of the business constitutes a going concern (see below) – will therefore trigger the application of CBA No. 32bis. Afterwards, the shares of the NewCo are sold to a third party which, although it results in a change of ownership and economic control, doesn’t result in a change of legal employer and therefore doesn’t trigger the application of CBA No. 32bis.
Transfer by virtue of an agreement?
The Dutch version of the Directive, as well as CBA No. 32bis, stipulate that – in order for an operation to classify as a transfer of undertaking within the meaning of the Directive/CBA – it must involve a transfer that occurs by virtue of an agreement. However, this requirement is not included in all other language versions of the Directive; the English version for example merely mentions a ‘legal transfer’. In this respect, the European Court of Justice (ECJ) has ruled that there’s no requirement of contractual relationship between transferor and transferee for the Directive/CBA No. 32bis to be applicable. As a result, the mentioning of ‘by virtue of an agreement’ as a constitutive element in the Dutch version of the Directive has become mute; a transfer of undertaking can of course be the result of a direct contractual arrangement, but it doesn’t have to be.
In a situation where a company that held a concession for the sale of a specific brand of cars terminated that concession, and whereby the concession was later transferred by the owner of the brand to another company, the ECJ ruled that the Directive/CBA No. 32bis was applicable, although there was no contractual relationship between the two concession holders.
Transfer of an undertaking, business – or a part of it – as a going concern
In order for a transfer to fall within the scope of application of the CBA no. 32bis, it must concern the transfer of an undertaking, business – or a part of it – as a going concern. As such, the transfer must relate to a separable economic entity, being an organised ‘body of means’, i.e. a stand-alone business unit that is an organised structure of assets with a specific (economic) purpose, that maintains its identity post-transfer.
Assessing whether this holds true takes place at the time of the transfer and should take into account all factual elements, including (but not limited to):
nature of the involved enterprise or business;
transfer of assets such as buildings and movable property;
the number of employees being transferred;
activities performed before and after the transfer;
transfer of clientele;
Each of these elements is not decisive on its own, and they must all be considered together in the assessment. In our experience, Belgian labour courts generally give a rather broad interpretation to the scope of application CBA No. 32bis. As such, it’s crucial to consider whether or not the part that transfers can be considered a separable economic entity that maintains its identity post-transfer.
The Brussels Labour Court found there to be a transfer of undertaking as going concern in the situation whereby a company decided to change the caterer for the exploitation of its company restaurant. The catering activities were – and continued to be – entirely exercised on the company premises by means of company-provided equipment, which was all transferred to the new caterer. The clientele (being the employees) was considered to be transferred as well. The fact that the company – and not the caterer – continued to own the premises and equipment required for the exploitation of the restaurant doesn’t detract from the fact that this operation constituted a transfer of undertaking in the meaning of the Directive/CBA No. 32bis. This meant that the previous caterer’s employees that worked in the company restaurant automatically transferred to the new caterer, by virtue of law.
The above shows that the practical assessment of whether or not the Directive/CBA No. 32bis applies, is highly factual. As such, and considering the purpose of this legislation (i.e. the protection of employees), the Directive/CBA can often be triggered even when not expected. This can have a considerable impact in terms of procedure and effect on the employees, something we’ll discuss in our next newsletter in this series. It’s therefore highly recommendable to clearly verify upfront whether a particular transaction falls under the application of the Directive/CBA No. 32bis.
If you have any questions regarding CBA no. 32 or the TUPE-Directive, don’t hesitate to get in touch with any of our specialists; we’d love to hear from you!
