Koumentakis

Tag: eu law

  • Transfer of business & employment relationships

    Transfer of business & employment relationships

    The entrepreneur has the right, in the context of their business freedom and action, to make the best decisions. Some of their decisions can significantly change the current state of their business. Others may even mean the change of the person who operates and exploits it. Sale, acquisitions, mergers, and secessions are (not infrequently) business decisions, which may mean what the law considers a “transfer of business”. However, when the “transfer of business” occurs, its legal consequences occur automatically. Some of them also concern the automatic transfer of employment relations to the new business. This possibility can be positive. But it can also be dangerous. Especially for the one who acquires them.

    The regulatory framework of the institution of the transfer of business

    EU law

    The first attempt to regulate the issue of business transfer at the level of the European Union took place in 1977 with Directive 77/187. It was subsequently amended in 1998 by Directive 98/50. It was finally codified with the current 2001/23.

    The central goal of the first Directive (: 77/187) was the protection of employees and the maintenance of jobs and working conditions. And all this in the case of the change in the structure of the business that is carried out through the transfer of businesses, facilities or parts of facilities to other entrepreneurs. Also, the convergence of the level of protection between the rights of the Member States, and eventually the regulation of a single market.

    In its recent decisions, however, the ECJ, deviating from its till then established case law, accepts that the Directive also seeks to protect the interests of the person acquiring the business. It has characteristically considered that the Directive “… does not have the sole purpose of safeguarding, in the event of a business transfer, the interests of employees, but seeks to ensure a fair balance between their interests on the one hand and the interests of the transferee, on the other…” ECJ C-426/11, Alemo-Herron etc).

    National law

    The legislator’s concern for the protection of employees’ rights, in case of transfer of the business, was manifested early (and) at the level of national law. With the provisions, specifically, of articles 6 §1 L. 2112/1920 and 9 §1 Royal Decree 16 / 18.7.1920 which provide that the change in any way of the employer’s person does not affect the application of the provisions which have been adopted in favor of the employees for the termination of the employment contract. Article 8 of the Presidential Decree of 8.12.1928 stipulated that, in case of enlistment, when a change of the employer’s person occurs, the obligations established by this legislation for employers are automatically transferred to the new employer. Furthermore, according to article 6 par. 2 L. 3239/1955, the obligations and rights arising from a collective employment contract are automatically transferred to the successors of the employer bound by it.

    In addition to the above fragmentary arrangements the P.D. 572/2002 was initially issued, in order for the Greek legislation to be harmonized with Directive 77/187. Then, in view of the newer Directive 98/50, the current P.D. no. 178/2002 was issued. (which abolished the previous PD 527/1988).

    The conditions of the “business transfer”

    Directive 2001/23 provides that: “… as transfer, within the meaning of this Directive, we consider the transfer of an entity that retains its identity, which is understood as a set of organized resources for the purpose of conducting economic activity, either main or secondary. (Article 1 §1 b).

    In order for there to be a “transfer of business” and for the implementation of the specific Directive and the P.D. 178/2002, the following conditions must be met:

    (a) The transferee shall be an “economic entity” prior to the transfer.

    (b) For this economic entity a transfer should take place, which presupposes on the one hand the change of the control and on the other hand the preservation of its identity.

    The designation of a unit as an economic entity

    From article 1 §1.b. of the Directive and the established case law of the ECJ, it appears that there are two elements that characterize a unit as an economic entity. Specifically:

    (a) it should be a set of organized resources, ie a set consisting of human resources, materials and intangibles; and

    (b) the organized resources should pursue a certain economic purpose (even non-profit).

    The ECJ, in addition, considers that the transfer should concern a, on a permanent basis, organized economic unit. That is, the activity of the latter should not be limited to the execution of a specific project only.

    It should also be noted that the ECJ has ruled that the entity is not identified with the very activity it carries out. This assumption leads to the conclusion that if we have a transfer of activity it does not mean, without a doubt, that there is a transfer of the entity.

    The concept of an economic entity, in addition to the business as a whole, also includes its individual parts. The division of the business, however, according to the ECJ, must have functional autonomy without, necessarily, being required to be complete (ECJ, C-664/17, Hellenic Shipyards).

    The concept of the transfer of the entity

    After the existence of the entity is confirmed, based on the two, above-mentioned criteria, the verification of the existence of its transfer follows. Specifically, it is verified:

    (a) Whether the transferred entity retains its identity after the transfer.

    (b) Whether there is a change in the entity. That is, if the person in charge of the operation of the business changes, without it mattering whether its ownership is transferred.

    Maintaining the identity of the entity

    According to the case law of the ECJ, the decision to maintain (or not) the identity of the entity depends on the overall assessment of the circumstances of each case. In the above context, the ECJ considers some elements as crucial for the establishment of identity retention.

    These are:

    (i) the transfer or not of tangible assets (equipment and facilities);

    (ii) the transfer or not of intangible assets and their value (including: trade marks, patents, distinctive titles);

    (iii) the hiring or not of a significant part of the workforce by the new entrepreneur,

    (iv) the transfer or not of the customers,

    (v) the degree of similarity of the activities carried out before and after the transfer; and

    (vi) the duration of any interruptions of the specific (under v) activities.

    The above elements do not need to be cumulative. Instead, they are taken as indications in the context of the specific circumstances that apply in each individual case.

    It is crucial, however, to distinguish whether an entity that survives the change of its control is transferred. Conversely, if some assets of the business are simply sold without continuing to operate with each other, then a transfer is not considered to take place.

    Change in the control of the economic entity

    The transfer of a business presupposes the change of its operator. The operator of the economic entity means the natural or legal person who exploits it and operates it in its name and on its behalf (1553/2002 Supreme Court). The operator is also the employer of the employees of the business. When there is a change of the operator, the employer also changes.

    Consequences of the transfer of business

    The automatic transfer of the employment relationship

    According to our national law (: article 4 §1 PD 178/2002), through the transfer of the economic entity-and from the time of its realization, all the (existing) rights and obligations that the transferor has from the employment contracts (or relationships), are transferred to the successor. This is a transfer by law of all the employment relationships (1478/2006 Supreme Court). From the time of the transfer, then, the successor employer automatically enters the position of the previous one (employer), in terms of rights and obligations arising from the employment relationships. At the same time, with the transfer of employment relations, the new employer is obliged to comply with the working conditions provided by collective labor agreements, arbitration decisions and labor regulations (: article 4 §2 PD 178/2002).

    Protection against dismissals

    The transfer of a business or establishment does not in itself constitute a reason for dismissal of employees (article 5 §1 PD 178/2002). This regulation introduces, therefore, an independent reason for the invalidity of the dismissal and complements the protection provided by the general provision (: article 4 §1 PD 178/2002).

    It is argued, of course, that the provision of article 5 §1 PD 178/2002 does not prohibit dismissals, when they are a consequence of taking measures in order to rationalize and consolidate the business, in view of improving its sales prospects. In any case, however, the violation of article 5 §1 by the successor brings all the consequences of the invalid termination (obligation to pay arrears of wages, claim for actual employment, etc.).

    The entrepreneur, of course, is the one to plan for the future of their business. However, their adoption of the best, according to them, relevant options is not, in principle, without consequences. Employment relations are important and should, in this context, be taken into account.

    However, it is important to point out that the adoption of one or the other option does not only concern the entrepreneur who, possibly, transfers their business. It concerns, respectively, perhaps even more, the businessman that acquires the business.

    The evaluation of the individual data, based on the assumptions mentioned above, is crucial in this context. It is absolutely necessary to reduce the “legal risk” and, consequently, to reduce the related business risk.

    It is absolutely necessary, therefore, to dispassionately assess the (legal) data, in order to make the best possible (and of course more ensuring-for everyone) decisions.-

     

    Stavros Koumentakis
    Managing Partner

     

    P.S. A brief version of this article has been published in MAKEDONIA Newspaper (May 23, 2021).

     

    Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.

  • Standby Contracts

    Standby Contracts

    Standby Contracts: Blessing or a curse?

    I. Preamble

    Numerous companies are called upon to satisfy drastically changing needs. Sometimes, those needs are emerging as a result of circumstances no one could predict. It is, of course, not possible for a business to employ a significant, at times, number of employees just because “maybe, at some point, some of them may be necessary”. The costs involved would be unbearable. And, consequently, deterrent.

    A suitable solution for such businesses (and such cases) are the so called “standby contracts”. The business-employer agrees with specific employees that the latter will be available and ready to offer their work. As long as the relevant need arises. (Of course) For a fee.

    Standby contracts are an institution that, unfortunately, is not provided for by law. But how does case-law approach this institution?

     

    II. The concept of employment

    “In the beginning was…” (one could argue) the concept of employment, under labor law. And that one would have a strong argument. The existence of employment is a prerequisite for the application of the provisions of labor law.

    The importance of the concept of employment is fundamental. We have yet to manage, however, to agree on how employment is determined. Or, to take it a bit further, to include in a legal text a (commonly accepted) definition of it. The distinction of an employment contract from contracts and concepts close to it often proves very difficult.

    Theories on what constitutes employment vary and are constantly changing. And what is changing as well is what case-law considers as criteria for identifying employment. The Supreme Court has found that: “for the purposes of the application of the provisions of labor law, employment shall normally mean the provision of the employee’s intellectual or physical activity, which is carried out under the control of the employer and is intended to achieve an economic result”.. This assumption may, however, give rise to the misconception that employment requires the positive action of the employee in order to be understood as such. However, the Supreme Court makes clear, that “… there is an employment relationship even when simply the freedom of the employee is restricted, when the latter undertakes the obligation to be standby and ready to offer their work, when this is required by the employer”. (indicatively SC 814/2014).

    It is settled case-law that one’s readiness for work is a form of employment. Standby contracts, however, are not provided for by law. The results of this particular regulatory gap is the difficulties in defining employment and its various forms. Most importantly: the uncertainty and ambiguity around the rules that govern it.

     

    III. The forms of a standby contract

    1. In general

    Case-law distinguishes two basic forms of a standby contract:

    (a) actual standby contract and

    (b) non-actual standby contract (mere or on call).

    The criterion for this distinction is the degree to which the employee is standby.

    Case-law has found in some cases that there are “intermediate standby stages”. These are contracts found between the two aforementioned categories. Contracts that are entered into in the context of the freedom of contract (CC 361) and are characterized by the intensity of the alertness required from the employee (indicatively: SC 110/2014, SC 8114/2014, SC 70/2010).

    It is for the competent Court to determine the degree to which an employee is standby at any given point. Also, the degree to which an employee is required to be alert. Depending on the ruling of the court, the standby contract will fall into one of the two basic categories mentioned above.

     

    2. Actual standby contracts

    When actually standby, the employee must:

    (a) Be for a specific period at a predetermined location (in the business or outside of it) and

    (b) Maintain their mental and physical alertness so as to be able to offer their services the moment the employer or circumstances so require.

    That is, it is not a simple restriction of the employee’s freedom. The employee, when actually standby, is required to, simultaneously, constantly be alert and available to the employer. And do so for the time predetermined by the employer.

     

    3. Non-actual standby contract

    In cases of non-actual standby contracts, the employee is obliged to (only) partially limit their freedom of movement for the employer. Ultimate goal; the employee’s availability and ability to offer their work at any time. In non-actual standby contracts, the employee also retains the ability to rest or be away from the workplace. The employee is even entitled to engage in other (irrelevant) occupations. That is to say, they are not required to be physically and spiritually alert. In these cases, we are talking about mere or on call standby.

    The Greek law does not distinguish the meaning of mere or on call standby. It puts them, as a whole, in the broader category of non-actual standby.

    In contrast, the Court of Justice of the European Union considers this distinction to be significant (from merely being standby to being on call). Indeed, in both cases, the employee does not have to be constantly alert. The differences, however, between these two categories of standby is not without significance.

    The difference between the two, lies on whether or not a restriction is imposed by the employer on the employee on where they can be (on top of the time restriction).

    In particular, in cases of mere standby duty, the employee is not entitled to be away from the workplace, which is determined by the employer.

    On the other hand, when the employee is on call, they freely choose where they will be. One necessary condition: to be reachable at all times. That is, the employee must ensure that, should the employer call them, they will be able to provide, within reasonable time, their work (indicatively.: Case C-151/02 (Jaeger)).

     

    IV. The legal importance of distinguishing between actual and non-actual standby contracts

    1. Regarding the application (or not) of the provisions of labor law

    The distinction of the various types of standby contracts made by Greek case-law is not without significance. This is because each type is approached differently.

    In particular, the actual standby contract is fully equated with “normal” work (work offered when an employee takes some positive action) in the eyes of the law. And this, regardless of if the employee will, at the end, be required to provide their work or not. Therefore, all provisions of labor law apply in this case.

    On the other hand, a non-actual standby contract is treated by Greek case-law as a peculiar form of work. This is why it does not fall within the regulatory scope of all the provisions of labor law.

     

    2. Regarding the remuneration of employees

    The importance of the above distinction (actual/non-actual) is highlighted when dealing with the issue of the salaries owed.

    In particular:

    (a) In cases when an employee is actually standby, case-law applies, with no exception, all the provisions of labor law regarding the salaries owed. Specifically: the minimum wage limits and increases. Also, the allowances for night and overtime work. Finally, the increments related to work provided on Sundays, holidays or rest days.

    (b) In the case of non-actual standby contracts, however, such treatment (as the one described under a) is not reserved. Case-law exempts non-actual standby contracts from the protective provisions of labor law with regards to the minimum wages provided for by Collective Agreements. Also, from the surcharges and compensation due for overtime and night work. Lastly, from the increments related to work provided on Sundays and other public holidays.

    The specific exemptions mentioned above do not, however, mean that the employee concerned (being on non-actual standby duty) is not entitled to a remuneration for the restriction of their freedom. According to Greek case law, the remuneration to be paid to this employee is contractually agreed (between the employer and the employee). However, the remuneration agreed may be lower (or substantially lower) than the statutory minimum wage. In the event, however, that the salary is not contractually agreed upon, the ‘ordinary’ salary (653 CC) is paid. And ordinary wages may, in fact, be lower than the legal minimum wage.

    It is a fact that in case of a non-actual standby contract, a great number of protective provisions regarding the remuneration of the employees do not apply. However, case-law accepts, in these cases, that the provisions regarding the holidays, holiday and leave pay, do still apply. And that so do the provisions regarding the termination of employment contracts and the dismissal compensation owed.

     

    3. Regarding the working time limits

    3.1. The establishment of maximum working time

    One of the main concerns of the protective provisions of labor law is the protection of the health of the employee. This objective is achieved, inter alia, by the establishment of maximum permissible working time limits. This aims to: (a) prevent the exploitation of the employee’s financial need for work; and (b) ensure a reasonable time for rest and participation in social life.

    3.2. The connection between the maximum working time and actual standby duty.

    From the aforementioned, it becomes clear that the provisions setting time limits fully apply to the actual standby contract.

    However, the same is not true of the non-actual standby contract. Case-law does not accept the application of the relevant provisions in this type of employment contract. We are therefore led to the conclusion that the employer could agree with an employee (who is on non-actual standby duty), the latter’s availability to provide work around the clock.

    However, this extreme assumption is obstructed by EU law.

    3.3. The connection of mere standby duty with EU law

    Mere standby duty is connected with EU law via the adoption of three Directives, regulating the organization of working time. These are: (a) Directive 93/104/EC, which has been transposed into Greek law by P.D. 88/1999 (B) Directive 2000/34/EC, which amended Directive 93/104 and transposed it into Greek law by P.D. 76/2005, and lastly (c) Directive 2003/88/EC, which codified the provisions of the two previous Directives.

    EU law, therefore, provides for maximum working time limits. It requires, at the same time, that the employee be provided with at least eleven (11) consecutive hours of rest within 24 hours. Directive 93/104/EC distinguishes time between ‘working time’ and ‘rest time’. These two concepts are mutually exclusive.

    The ECJ accepts that working time is the time during which the employee is at work, at the disposal of their employer, and perform their duties in accordance with national laws or practices.

    3.4. The time while the employee is on call is not considered working time

    Moreover, the ECJ consistently held that the time while on mere standby is working time. On the basis of this assumption, protective provisions setting working time limits apply in these cases (of mere standby). Indeed, at this point the distinction of the ECJ between the concepts of mere standby and standby on call (as discussed under III.3) is essential. This is because the latter is treated differently by law.

    In particular, the ECJ does not consider as a working time the time the employee is on call. In such cases, working time starts when the employee receives a call to provide the agreed work. The end of the working time coincides with the completion of the assigned task. As a consequence, only for this period (start-end) the working time limits apply.

    3.5. Deviations from working time limits

    The needs of a business may, provided the employee agrees, lead to deviations from the maximum working time (Article 17 of Directive 93/104). Some of those deviations will mostly occur under actual or, mainly, mere standby. However, in such cases it is mandatory, in accordance with the ECJ, to provide the employees concerned with equivalent periods of compensatory rest at intervals, immediately following the corresponding working time. In addition, such a reduction in the daily rest period should not result in exceeding the maximum weekly working hours.

     

    V. Technology and standby

    The employee’s continued availability/standby by utilizing/using digital technology should be equated with on call duty. A readiness to provide work that is practically possible through a laptop, a tablet and even the employee’s smartphone.

    The employee is at the disposal of their employer (only theoretically?) on a continuous basis. The employee can, and is no longer unusual, undertake and perform a task that does not require their physical presence.

    It is obvious that reading a professional e-mail could be seen as tantamount to interfering with the employee’s private life and time. And it can happen at any time. Off-hours included. So, combining digital technology with the non-application of legal work time limits regarding the on call standby duty is problematic. This is because it may deprive the employee, at least in part, of their right to rest.

     

    VI. In conclusion

    Standby contracts for specific activities, sectors and businesses are, undisputedly, a real and present need. Many businesses are adopting standby contracts and they have seen positive results because of them. And those contracts also have satisfactory (and often desirable) results for employees.

    So, there can be no doubt that the existence of standby contracts is absolutely necessary.

    The legality of this conclusion is not in dispute. Their regulatory framework, however, is only determined by case law. Unfortunately, there is no relevant legislation. This inevitably results in legal uncertainty. Of course, for employees as well. But especially for businesses.

    The involvement of the legislator proves necessary. After all, it is the legislator who is able to make the necessary adjustments.

    The basis for a legislation on standby contracts should be based on: (a) the particular circumstances of particular sectors and businesses, (b) their increased need to have employees on standby at specific times and/or for specific activities and (c) the potential of digital technology and the reality that it shapes.

    The relevant legislative intervention is not a luxury.

    It is simply an undue need.

    stavros-koumentakis

    Stavros Koumentakis
    Senior Partner

    P.S. A brief version of this article has been published in MAKEDONIA Newspaper (March 8th, 2020).

     

    Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.

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