Case C-458/12, Lorenzo Amatori – transfer of undertakings and Telecom Italia

For the purposes of the EU’s transfer of undertakings Directive 2001/23 is there a transfer of a part of an undertaking where, at the time of the transfer, the part which was transferred could hardly have been said to be functionally autonomous; and where, even 8 months after the transfer, that part was making no profit for the transferee and the losses were being borne by the transferor?

Facts
Lorenzo Amatori was working for a part of Telecom Italia. In January 2010 a company called the Shared Service Center took the place of a part of the Telecom Italia company.

In February 2010, Telecom Italia then split its ‘IT Operations’ service from its innovation and planning departments. IT Operations was then integrated into Telecom Italia’s ‘Information Technology’ service. These services remained subject to the rules that governed Telecom Italia’s ‘Governance’ service. And during this time, the Telecom Italia employees who worked in ‘IT Operations’ continued to work together in reciprocal collaboration with those Telecom Italia employees who were working in innovation and planning.

In April 2010, the IT Operations service was transferred to the Shared Service Center. After the transfer, the people at IT Operations continued to work predominantly for Telecom Italia. And in the 8 months following the completion of the transfer, the Shared Service Center made no profits – indeed its losses were borne by Telecom Italia.

Lorenzo Amatori and the other claimants objected to the way Telecom Italia had effected the transfer through relying on an exception in the Italian Civil Code. That is to say, Article 2112 of the Italian Civil Code provides that the consent of a to-be-transferred employee is not required where a functionally autonomous part of an organised economic activity is being transferred, and at the moment when the transfer happens both the transferor and the transferee agree that this is the case. In circumstances such as these, the Civil Code provision states that the employee’s labour relationship will be continued with the transferee.

The claimants in this case say that that provision of the Italian Civil Code should not have been applied to the present transfer. First, at the time of the transfer, the part of the undertaking that was being transferred could not have been said to have been a functionally autonomous economic entity. Second, after the transfer, the claimants and the others continued to have reciprocal working relationships with the employees of Telecom Italia. Consequently, the claimants were of the view their consent was required and that without it the transfer of the employment relationships to the Shared Service Center was void. In this way, the claimants submitted that their employment relations were still with Telecom Italia.

At the Tribunale di Trento, Judge Flaim recognised that there were two measures in Directive 2001/23 which were applicable. The first was Article 1(1)(b). It states: ‘… there is a transfer within the meaning of this Directive where there is a transfer of an economic entity which retains its identity, meaning an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary.’ The second was Article 3(1), which states ‘The transferor’s rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer shall, by reason of such transfer, be transferred to the transferee’.

Judge Flaim acknowledged that these EU legislative provisions have been interpreted by the CJEU. For example, in Case C-232/04, Nurten Güney-Görres, the CJEU stated that for Directive 2001/23 to be applicable, the transfer must relate to a stable economic entity, whose activity is not limited to performing one specific works contract. The term ‘entity’ thus refers to an organised grouping of persons and assets facilitating the exercise of an economic activity which pursues a specific objective.

In C-232/04, Nurten Güney-Görres the CJEU had also gone on to say that in order to determine whether the conditions for the transfer of an organised economic entity were met, it was necessary to consider all the facts characterising the transaction in question, including: the type of undertaking concerned; whether or not its tangible assets, such as buildings and movable property, were transferred; the value of its intangible assets at the time of the transfer; whether or not the majority of its employees were taken over by the new employer; whether or not its customers were transferred, the degree of similarity between the activities carried on before and after the transfer; and the period, if any, for which those activities were suspended. The CJEU expressly stated that each of these circumstances were single factors which were to be considered when making the overall assessment.

In light of this, Judge Flaim decided to ask Question 1 of the CJEU. He had his doubts that the transferred part was really financially autonomous at or before the date of the transfer. In his referring order he explained a judgment of the Italian Corte di Cassazione which had been handed down in 2004, and whose principles had been applied again by that court in 2009. In the 2004 judgment, the Corte di Cassazione had been concerned about the concept of ‘part of an undertaking’. If it was interpreted broadly, then it would cover and justify every outsourcing activity that was really designed just to get rid of people. This would enable the social and economic costs of collective redundancy to be avoided.

Since EU law required that the economic unity retains its identity after the transfer, the Corte di Cassazione had held that labour relationships towards the transferee will only be continued if the economic entity enjoys organisational and economic autonomy over the production of goods and services. If that were not the case, then an employer so-minded could identify various elements of property and bundle these together. It could then claim it was a part of the undertaking. And it could do this simply for the purposes of bringing the transfer within the scope of the exception in the Italian Civil Code. The employer could transfer off superfluous employees to a transferee that was a close associate, and permit the transferee to change the existing terms and conditions in the labour contract (collective agreement and permanence of employment).

Judge Flaim also asked a second question. Was the exception in the Italian Civil Code compatible with EU law? He was particularly concerned here with the fact that in the case before him the transferor retained a dominant control over the transferee company, and the respective business risks were difficult to distinguish. The judge noted that the CJEU had not provided any clear guidance as to which circumstances needed to be taken into account when determining whether there was a transfer of a stable organised economic entity.

Questions Referred
According to the Curia website, the Tribunale di Trento has asked:

1. As regards the ‘transfer of a part of a business’, does European Union legislation (in particular, Article 1(1)(a) and (b) of Council Directive 2001/23/EC of 12 March 2001, read in conjunction with Article 3(1) thereof) preclude a rule of national law, such as that laid down in the fifth paragraph of Article 2112 of the [Italian] Civil Code, which permits the transferee to take over the employment relationships of the transferor, without the consent of the employees transferred being necessary, even where the part of the business transferred is not a functionally independent economic entity already existing before the transfer and identifiable as such by the transferor and the transferee at the time when it is transferred?

2. As regards the ‘transfer of a part of a business’, does European Union legislation (in particular, Article 1(1)(a) and (b) of Council Directive 2001/23/EC of 12 March 2001, read in conjunction with Article 3(1) thereof) preclude a rule of national law, such as that laid down in the fifth paragraph of Article 2112 of the [Italian] Civil Code, which permits the transferee to take over the employment relationships of the transferor, without the consent of the employees transferred being necessary, even where, after the transfer, the transferor undertaking wields in-depth and supreme control over the transferee, a relationship which manifests itself through a tight commercial bond and the commingling of business risk?

Comment
In the continued push towards liberalisation, the telecoms sectors across the EU are undergoing profound legal change.

In the Lorenzo Amatori reference noted above, Telecom Italia has been trying to use transfer of undertakings law to change the employment relations of those people who look after the infrastructure of its telecommunications network, and those people who develop the necessary software.

In Denmark, it is access to the telecoms infrastructure itself which is being fought over. Denmark’s telecoms incumbent, TDC, was already obliged by the Danish regulatory authority to provide rival companies with access to TDC’s copper and cable-TV networks, which can also be used to deliver wholesale access to broadband services. Now the issue is whether that obligation extends by analogy to providing access to TDC’s fibre-optic communications network. The purpose of extending the obligation is to ensure that rival companies can compete with TDC. See further, Case C-556/12, TDC – proportionate duties on a national incumbent for access to its fibre-optic network.

Update – 3 February 2014
The CJEU is scheduled to hand down its judgment in Amatori on 6 March 2014.

Update – 6 August 2014
Judgment

A version of the CJEU’s judgment in Case C-458/12, Lorenzo Amatori ECLI:EU:C:2014:124 is reproduced below. The reproduction is not authentic. Only the versions of the document published in the ‘Reports of Cases’ or the ‘Official Journal of the European Union’ are authentic. The source of the reproduction is the Eur-Lex Europa web site. The information on that site is subject to a disclaimer and a copyright notice.

 

JUDGMENT OF THE COURT (Ninth Chamber)

6 March 2014 ( )

(Request for a preliminary ruling – Social policy – Transfer of undertakings – Safeguarding of employees’ rights – Directive 2001/23/EC – Transfer of employment relationships in the event of a legal transfer of part of a business that cannot be identified as a pre-existing autonomous economic entity)

In Case C‑458/12,

REQUEST for a preliminary ruling under Article 267 TFEU from the Tribunale di Trento (Italy), made by decision of 20 September 2012, received at the Court on 11 October 2012, in the proceedings

Lorenzo Amatori and Others

v

Telecom Italia SpA,

Telecom Italia Information Technology Srl, formerly Shared Service Center Srl,

THE COURT (Ninth Chamber),

composed of M. Safjan, President of the Chamber, J. Malenovský (Rapporteur) and A. Prechal, Judges,

Advocate General: N. Wahl,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

–        Mr Amatori and Others, by R. Bolognesi, avvocato,

–        Telecom Italia SpA and Telecom Italia Information Technology Srl, formerly Shared Service Center Srl, by A. Maresca, R. Romei and F.R. Boccia, avvocati,

–        the Italian Government, by G. Palmieri, acting as Agent, and L. D’Ascia, avvocato dello Stato,

–        the European Commission, by C. Cattabriga and J. Enegren, acting as Agents,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

gives the following

Judgment

1        This request for a preliminary ruling concerns the interpretation of 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 (OJ 2001 L 82, p. 16).

2        The request has been made in proceedings between Mr Amatori and 74 other applicants and Telecom Italia SpA (‘Telecom Italia’) and Telecom Italia Information Technology Srl, formerly Shared Service Center Srl (‘TIIT’), concerning the classification as a ‘transfer of part of an undertaking’ of the contribution by Telecom Italia of assets in the form of an information technology section called ‘IT Operations’ to TIIT.

 Legal context

 European Union law

3        Council Directive 2001/23 repeals Council Directive 77/187/EEC of 14 February 1977 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 businesses (OJ 1977 L 61, p. 26), as amended by Council Directive 98/50/EC of 28 June 1998 (OJ 1998 L 201, p. 88).

4        Recital 3 in the preamble to Directive 2001/23 provides as follows:

‘It is necessary to provide for the protection of employees in the event of a change of employer, in particular, to ensure that their rights are safeguarded.’

5        Article 1(1)(a) and (b) of that directive provides:

‘(a)      This Directive shall apply to any transfer of an undertaking, business, or part of an undertaking or business to another employer as a result of a legal transfer or merger.

(b)      Subject to subparagraph (a) and the following provisions of this Article, there is a transfer within the meaning of this Directive where there is a transfer of an economic entity which retains its identity, meaning an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary.’

6        The first subparagraph of Article 3(1) of the directive provides:

‘The transferor’s rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer shall, by reason of such transfer, be transferred to the transferee.

…’

7        The first and fourth subparagraphs of Article 6(1) of Directive 2001/23 state as follows:

‘If the undertaking, business or part of an undertaking or business preserves its autonomy, the status and function of the representatives or of the representation of the employees affected by the transfer shall be preserved on the same terms and subject to the same conditions as existed before the date of the transfer by virtue of law, regulation, administrative provision or agreement, provided that the conditions necessary for the constitution of the employee’s representation are fulfilled.

If the undertaking, business or part of an undertaking or business does not preserve its autonomy, the Member States shall take the necessary measures to ensure that the employees transferred who were represented before the transfer continue to be properly represented during the period necessary for the reconstitution or reappointment of the representation of employees in accordance with national law or practice.’

8        Under Article 8 of Directive 2001/23:

‘This Directive shall not affect the right of Member States to apply or introduce laws, regulations or administrative provisions which are more favourable to employees or to promote or permit collective agreements or agreements between social partners more favourable to employees.’

 Italian law

9        Article 2112(1) and (5) of the Civil Code, in the version deriving from Article 32 of Legislative Decree No 276/2003 on the application of the powers in matters relating to employment and the labour market laid down by Law No 30 of 14 February 2003 (decreto legislativo n. 276 – Attuazione delle deleghe in material di occupazione e mercato del lavoro, di cui alla legge 14 febbraio 2003 n. 30) of 10 September 2003 (Ordinary Supplement to the GURI No 235 of 9 October 2003, ‘the Civil Code’), in force at the material time, provides:

‘1.      In the event of a transfer of an undertaking, the employment relationship shall continue with the transferee …

For the purposes and the effects of the present Article, the transfer of a business includes any transaction that, as a consequence of a legal transfer or merger, entails a change in the ownership of an organised economic activity, whether profit-making or not, existing before the transfer, that maintains its identity in the transfer, irrespective of the agreement or the measure pursuant to which the transfer is carried out, including the usufruct or lease of the business. The provisions of the present Article shall apply also to the transfer of part of the business, understood as a functionally autonomous part of an organised economic activity, identified as such by the transferor and the transferee at the time of its transfer’.

10      Furthermore, it is clear from the order for reference that the last sentence of Article 2112(5), in the version before that legislative decree, provided:

‘The provisions of this Article shall also apply to the transfer of part of an undertaking, understood as a functionally autonomous part of an organised economic activity within the meaning of this paragraph , existing as such before the transfer and retaining its own identity during the transfer.’

11      Furthermore, the order for reference states that, if there is no ‘transfer of an undertaking or part of an undertaking’ within the meaning of Article 2112(5) of the Civil Code, the transfer of employment contracts by the employer is covered by Article 1406 of the Civil Code. That article provides that that transfer requires the employee’s consent.

 The dispute in the main proceedings and the questions referred for a preliminary ruling

12      In February 2010, Telecom Italia carried out an internal reorganisation.

13      Before that reorganisation, the structure of Telecom Italia included a division called the ‘Technology and Operations Division’, made up of a number of sections including, in particular, the ‘Information Technology’ Section. The latter was a single structure which covered IT operational activities: innovation, design, implementation, operations, applications and operation of infrastructure. During that internal reorganisation, Telecom Italia subdivided that section into a dozen sections including ‘IT Operations’, ‘IT Governance’ and ‘Engineering’. The ‘Engineering’ Section included the innovation and design activities.

14      Three subdivisions, including the ‘Software and test factory’ Unit which were attached to the IT Operations Section.

15      After the creation of the IT Operations Section, the employees assigned to the ‘Engineering’ Section and the ‘Software and test factory’ Unit continued to collaborate with one another.

16      Furthermore, after the creation and transfer of the IT Operations Section, the ‘Software and test factory’ Unit received specific instructions from Telecom Italia.

17      On 28 April 2010, Telecom Italia transferred that section to its subsidiary TIIT in the form of a contribution in kind to TIIT’s capital. The applicants in the main proceedings, assigned to that section, continued, without having consented to it, their employment relationship with the transferee in accordance with Article 2112(1) of the Civil Code.

18      Taking the view that that legal transfer could not be classified as a transfer of part of an undertaking within the meaning of Article 2112(5) of the Civil Code, the applicants in the main proceedings brought an action before the Tribunale di Trento (District Court, Trento), sitting as an employment tribunal, seeking a declaration that that transfer could not be relied on against them and that, consequently, their employment relationship with Telecom Italia had continued.

19      In support of their application, the applicants in the main proceedings argued that, before the contribution of the IT Operations Section to the capital of TIIT, that section had not constituted a functionally autonomous subdivision within the structure of Telecom Italia. Moreover, that section had not existed before the transfer. Furthermore, the overriding power exercised by the transferor over the transferee also prevents that legal transfer from being classified as a transfer of an undertaking.

20      Furthermore, as a result of the contribution of assets in the form of the IT Operations Section, TIIT continued to carry out the greater part of its activities for Telecom Italia.

21      In those circumstances, the Tribunale di Trento decided to stay proceedings and to refer the following questions to the Court for a preliminary ruling:

‘1.      As regards the “transfer of a part of a business”, does European Union legislation (in particular, Article 1(1)(a) and (b) of [Directive 2001/23], read in conjunction with Article 3(1) thereof) preclude a rule of national law, such as that laid down in the fifth paragraph of Article 2112 of the Civil Code, which permits the transferee to take over the employment relationships of the transferor, without the consent of the employees transferred being necessary, even where the part of the business transferred is not a functionally autonomous economic entity already existing before the transfer and identifiable as such by the transferor and the transferee at the time when it is transferred?

2.      As regards the “transfer of a part of a business”, does European Union legislation (in particular, Article 1(1)(a) and (b) of [Directive 2001/23], read in conjunction with Article 3(1) thereof) preclude a rule of national law, such as that laid down in the fifth paragraph of Article 2112 of the Civil Code, which permits the transferee to take over the employment relationships of the transferor, without the consent of the employees transferred being necessary, even where, after the transfer, the transferor undertaking exercises extensive and overriding powers over the transferee, a relationship which manifests itself through a tight commercial bond and the commingling of business risk?’

 Consideration of the questions referred for a preliminary ruling

 The first question

22      By its first question, the referring court asks essentially whether Article 1(1)(a) and (b) of Directive 2001/23 must be interpreted as precluding national legislation, such as that at issue in the main proceedings that, on the transfer of part of an undertaking, allows the transferee to take over the employment relationships from the transferor if that part of the undertaking does not constitute a functionally autonomous economic entity which already existed at the time of its transfer.

 Admissibility

23      Telecom Italia and TIIT consider the first question to be inadmissible, in so far as it proceeds on an unfounded premise that the section that was the subject of the transfer had to be an entity which existed before the transfer. The concept of ‘pre­existence’ is unknown in the wording of Article 2112 of the Civil Code, Directive 2001/23 and the case-law of the Court alike.

24      In that connection, it must be observed that that plea of inadmissibility, in that it refers to Article 2112 of the Civil Code, raises the issue, not of the admissibility of the first question, but of the jurisdiction of the Court.

25      While, under the first paragraph of Article 267 TFEU, the Court has jurisdiction to give a preliminary ruling on the interpretation of treaties and on the validity and interpretation of acts adopted by the institutions, bodies, offices or agencies of the Union, the interpretation of national law does not fall within its jurisdiction.

26      However, contrary to Telecom Italia and TIIT’s submissions, the referring court does not seek an interpretation of its national law which it has undertaken itself.

27      Furthermore, whether the concept of ‘pre-existence’ is unknown to Directive 2001/23 does not exceed the jurisdiction of the Court, because it does not relate to the admissibility of that question, but concerns its substance (see, by analogy, Joined Cases C‑457/11 to C‑460/11 VG Wort and Others [2011] ECR I‑0000, paragraph 46).

28      Thus, it is clear from all the foregoing considerations that the first question referred by the Tribunale di Trento is admissible.

 Substance

29      As a preliminary point, it must be recalled that Directive 2001/23 is applicable wherever, in the context of contractual relations, there is a change in the natural or legal person responsible for carrying on the business who incurs the obligations of an employer towards employees of the undertaking (see, Case C‑463/09 CLECE [2011] ECR I‑95, paragraph 30 and the case-law cited).

30      According to settled case-law, in order to determine whether there is a ‘transfer’ of the undertaking within the meaning of Article 1(1) of Directive 2001/23, the decisive criterion is whether the entity in question keeps its identity after being taken over by the new employer (Case C‑108/10 Scattolon [2011] ECR I‑7491, paragraph 60 and the case-law cited).

31      That transfer must relate to a stable economic entity whose activity is not limited to performing one specific works contract. Any organised grouping of persons and of assets enabling the exercise of an economic activity pursuing a specific objective, and which is sufficiently structured and autonomous, constitutes such an entity (see Joined Cases C‑127/96, C‑229/96 and C‑74/97 Hernández Vidal and Others [1998] ECR I‑8179, paragraphs 26 and 27; Case C‑458/05 Jouini and Others [2007] ECR I‑7301, paragraph 31; and Scattolon, paragraph 42).

32      It follows, for the purpose of the application of that directive, that the economic entity concerned must have a sufficient degree of functional autonomy, the concept of autonomy referring to the powers granted to those in charge of the group of workers concerned, to organise, relatively freely and independently, the work within that group and, more particularly, to give instructions and allocate tasks to subordinates within the group, without direct intervention from other organisational structures of the employer (Scattolon, paragraph 51 and the case­law cited).

33      That finding is supported by the first and fourth subparagraphs of Article 6(1) of Directive 2001/23, relating to the representation of workers, according to which that directive is intended to apply to any transfer satisfying the conditions laid down in Article 1(1) thereof, whether or not the economic entity transferred retains its autonomy in the transferee’s organisational structure (C‑466/07 Klarenberg [2009] ECR I‑803, paragraph 50).

34      The use of the word ‘preserved’ in the first and fourth subparagraphs of Article 6(1) means that the independence of the entity transferred must, in any event, exist before the transfer.

35      Thus, in the main proceedings, if it should prove that the entity transferred did not, before the transfer, have sufficient functional autonomy, which it is for the national court to ascertain, that transfer would not be covered by Directive 2001/23. In such circumstances, there would be no obligation arising under that directive to safeguard the rights of the workers transferred.

36      None the less, that directive is not to be read as prohibiting a Member State from providing for the safeguard of employees’ rights in the situation described in the preceding paragraph of this judgment.

37      Recital 3 in the preamble to Directive 2001/23 states that ‘it is necessary to provide for the protection of employees in the event of a change of employer, in particular, to ensure that their rights are safeguarded’.

38      Thus, that recital sets out the risk to employees’ rights represented by the change of employer and the need to protect workers from that risk by the adoption of appropriate measures.

39      Therefore, the mere lack of functional autonomy of the entity transferred cannot, in itself, prevent a Member State from ensuring in its national law for the safeguarding of employees’ rights after the change of employer.

40      That finding is supported by Article 8 of Directive 2001/23, which provides that the directive does not affect the right of Member States to apply or introduce laws, regulations or administrative provisions which are more favourable to employees.

41      That directive is intended to achieve only partial harmonisation of the area in question. It is not intended to establish a uniform level of protection throughout the European Union on the basis of common criteria, but to ensure that the employee is protected in his relations with the transferee to the same extent as he was in his relations with the transferor under the legal rules of the Member State concerned (Case C‑209/91 Watson Rask and Christensen [1992] ECR I‑5755, paragraph 27, and Case C‑4/01 Martin and Others [2003] ECR I‑12859, paragraph 41).

42      Having regard to all the foregoing considerations, the answer to the first question is that Article 1(1)(a) and (b) of Directive 2001/23 must be interpreted as not precluding national legislation, such as that at issue in the main proceedings, which, on the transfer of part of the undertaking, permits the transferee to take over the employment relationship from the transferor if that part of the undertaking does not constitute a functionally autonomous economic entity existing before the transfer.

 The second question

43      By its second question, the national court asks essentially if Article 1(1)(a) and (b) of Directive 2001/23 must be interpreted as precluding national legislation, such as that at issue in the main proceedings, which allows the transferee to take over the employment relationships from the transferor if, after the transfer of part of an undertaking concerned, the transferor exercises extensive, overriding powers over the transferee.

 Admissibility

44      Telecom Italia and TIIT take the view that the second question is inadmissible since it requires an assessment of the facts.

45      In that connection, it must be observed that the question referred by the national court asking whether Directive 2001/23 is also applicable if, after the transfer of part of an undertaking, the transferor exercises extensive, overriding powers over the transferee concerns the interpretation of that directive and, therefore, of European Union law.

46      Since, pursuant to the first subparagraph of Article 267 TFEU, the Court has jurisdiction to give preliminary rulings on the interpretation of European Union law, the second question referred by the Tribunale di Trento is admissible.

 Substance

47      First of all, it does not appear from any provision of Directive 2001/23 that the European Union legislature contemplated that application of that directive would be conditional on the autonomy of the transferee vis-à-vis the transferor.

48      Next, it must be recalled that the Court has previously held that Directive 77/187, as amended by Directive 98/50, which was repealed and replaced in substance by Directive 2001/23, is intended to cover any legal change in the person of the employer if the other conditions it lays down are also met and that it can, therefore, apply to a transfer between two subsidiary companies in the same group, which are distinct legal persons each with specific employment relationships with their employees. The fact that the companies in question not only have the same ownership but also the same management and the same premises and that they are engaged in the same works makes no difference in this regard (Case C‑234/98 Allen and Others [1999] ECR I‑8643, paragraph 17).

49      Nothing justifies a parent company’s and its subsidiaries’ uniform conduct on the market having greater importance in the application of the directive than the formal separation between those companies which have distinct legal personalities. That outcome, which would exclude transfers between companies in the same group from the scope of the directive, would be precisely contrary to the directive’s aim, which is, according to the Court, to ensure, so far as possible, that the rights of employees are safeguarded in the event of a change of employer by allowing them to remain in employment with the new employer on the terms and conditions agreed with the transferor (Allen and Others, paragraph 20).

50      Therefore, a situation such as that at issue in the main proceedings, in which the transferor undertaking exercises extensive, overriding powers over the transferor which manifests itself through a tight commercial bond and the commingling of business risk, cannot, in itself, prevent the application of Directive 2001/23.

51      Finally, a different interpretation would enable the objective of that directive which aims, according to the settled case-law of the Court, to ensure the continuity of employment relationships existing within an economic entity irrespective of any change of ownership to be circumvented with ease (Klarenberg, paragraph 40 and the case-law cited).

52      Have regard to all the foregoing considerations, the answer to the second question is that Article 1(1)(a) and (b) of Directive 2001/23 must be interpreted as not precluding national legislation such as that at issue in the main proceedings which enables the transferee to take over the employment relationship if, after the transfer of part of an undertaking concerned, the transferor exercises extensive and overriding powers over the transferee.

 Costs

53      Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Ninth Chamber) hereby rules:

1.      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 main proceedings, which, on the transfer of part of the undertaking, permits the transferee to take over the employment relationship from the transferor if that part of the undertaking does not constitute a functionally autonomous economic entity existing before the transfer.

2.      Article 1(1)(a) and (b) must be interpreted as not precluding national legislation, such as that at issue in the main proceedings, 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.

[Signatures]


Language of the case: Italian.