Restructuring and transfer of business in times of covid-19

A recent summary judgment by the President of the Brussels Labour Court illustrates that the Covid-19 pandemic can have particularly harmful consequences in the context of outsourcing contracts. This judgment also underlines the importance of complying with the procedure of information and consultation in the event of a transfer of undertaking.

The facts that gave rise to this intervention by the court occurred in the context of canteen catering for the European Commission. In 2014, before the outbreak of the pandemic, the Commission had entrusted several catering companies with the operation of these catering activities in several lots. Lot A of the tender had been entrusted to catering firm X and lot B to catering firm Y. Through a subcontract concluded in 2016, company X also operated the lot awarded to Y. In this context, Y's staff had been transferred to X.

These concessions would end on 31 December 2020. Then, in 2019, the Commission announced that a new tender procedure would be opened in April 2020 for the operation of the catering from 1 January 2021. Company X applied, Company Y did not. The candidature of X was not accepted.

In the meantime, the Covid-19 pandemic had broken out and the company restaurants had been closed due to successive lockdowns and compulsory teleworking. For this reason, the Commission decided to cancel the new tender scheduled from 1 January 2021, as it was expected that the restaurants would, at best, only be able to reopen from September 2021. As a consequence of that decision, Company X asked Company Y to re-employ the workers it had taken over from Company Y in 2016 through a transfer of undertaking under CLA n° 32bis. This collective agreement means that, if certain conditions are met, the employment contracts of employees connected to a company (or a part thereof) are automatically transferred in the event of a transfer of undertaking.

Company Y did not respond to this request.

This situation naturally led to concerns among trade unions who urged Company X to take a position on the fate of the employees taken over from Company Y in 2016. In addition, the trade unions believed that the company also had to initiate a collective dismissal procedure since it seemed that, as a result of the European Commission's decisions, there was not much future for the catering business.

Subsequently, Company X terminated the subcontracting agreement with Company Y with immediate effect and on the same day it is announced at an extraordinary meeting of the Works Council that the workers previously taken over from Company Y will be transferred back to Company Y pursuant to Collective Labour Agreement No 32bis. Company Y responded by saying that it disputed the fact that the workers in question were transferred to it under Collective Labour Agreement No. 32bis.

This situation placed the workers in question in a precarious situation: Company X was of the opinion that it was no longer the employer of these employees (as, in its opinion, they were automatically transferred to Company Y through the application of the Collective Bargaining Agreement No 32bis), while Company Y was of the opinion that no such transfer took place and, consequently, the workers must remain in the service of Company X. As a result, the workers were left without income, as they no longer received any salary, nor were they eligible for temporary unemployment benefits.

In response, the trade unions and some of the workers initiated summary proceedings before the President of the Labour Court. They essentially asked the court to order company X to start the procedure of information and consultation in the case of collective redundancies and to order the suspension of the transfer of that company's staff to company Y.

The court granted the second claim: it ordered the suspension of the transfer of the workers to company Y for 12 months as company X had apparently not complied with the information and consultation procedures in the case of a transfer of undertaking. In the event of such a transfer, the employer is obliged to inform and consult the works council in advance. This information and consultation must be effective and must not present staff representatives with a fait accompli by first terminating the subcontract and then announcing a transfer of staff without genuine involvement of the works council. By not respecting these obligations, the employees have been left in a vacuum, as it is uncertain who is their employer (and therefore who is responsible for paying wages or applying the temporary unemployment system). As a result of the suspension of the transfer of the workers from company X to company Y, company X had to re-employ the workers concerned.

Further, the trade unions are instructed by the judge to initiate proceedings on the merits before the labour court in order to have it assessed whether or not this case involves a transfer of undertaking to which Collective Labour Agreement no. 32bis applies.

This case illustrates the importance of proper compliance with the procedures for information and consultation of the consultation bodies in the event of a transfer of undertaking under Collective Labour Agreement No. 32bis. These procedures require the timely and effective involvement of the works council before decisions are made. The works council must be given the opportunity to have an informed exchange of views in which its members can formulate their suggestions, opinions and objections. If an employer does not respect these obligations, there is a risk that the transfer of staff will be frozen by the court, as this case illustrates.

Nicholas Thoelen – attorney Claeys & Engels


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