Change in bus service provider was not a transfer of undertaking

A bus company was in charge of bus routes in Uppsala. However, after a tender, the company lost the contract to another service provider. As a result, the company no longer had bus routes in Uppsala. In response, the company terminated the bus drivers in the region due to redundancy. Notice of termination was given so that the last day of work was six months later, on the last day of the contract with the region.

As part of taking over the bus routes, the new service provider took over 22 of the company’s 196 buses. It also took over four of its nine bus depots. Moreover, the new service provider was looking to hire new employees and began having tests and interviews. However, the company had no information on whether its employees had applied to the positions or whether any employment contracts had been signed. On that basis, it did not consider that the change of activities was covered by the rules on transfers of undertakings.

No identity despite hiring employees

The activity that shifted to the new service provider had not retained its identity at the time the terminations took place. When the terminations took place, the company was unaware and could not have predicted how many of its employees, if any, would be hired by the new service provider. For that reason, the rules on transfers of undertakings did not apply and did not prevent the terminations from taking place.

As part of its assessment, the Labour Court took a close look at how the activities shifted. On one hand, the company was aware that the new service provider intended on hiring as many employees as possible, due to a shortage in the region. The company also knew that interviews and tests were taking place at the time terminations were issued. On the other hand, no employment contracts were signed when the employees received notice of termination. The first employment contract was not signed until four months after the employees had their last day of work.

Therefore, it was unclear how many employees would transfer, if any. The Labour Court also noted that only a few buses were taken over by the service provider.

IUNO’s opinion

Employees enjoy certain rights when the rules on transfers of undertakings apply. However, the rules only apply when the activity that shifts retains its identity. It depends on the business activity whether identity is retained and requires a case-by-case assessment of the assets that are taken over by the new service provider. In the case of bus services, it usually plays a role whether the buses are taken over or not.

IUNO recommends companies to carefully assess whether the special rules may come into play as the termination procedure is different when the rules apply. To avoid the risk of claims for compensation, companies should investigate if assets and employees are to be taken over or not. We have previously written about a Danish case here, where a change of buses was a transfer of undertaking.

[The Swedish Labour Court’s decision of 10 May 2023 in case 29/23]