EU Ruling Could Affect Protection Of On-Site Staff

U.S. companies planning transatlantic agency consolidations should be aware of a recent landmark ruling on employment legislation by the European Court of Justice.

Although the ruling involved the dismissal of an office cleaner in Germany, it is expected to have a significant impact on companies that have a travel agency on-site.

Under a 20-year-old EU directive on business transfers, a travel agency that wins an account with an in-plant from a rival is obliged to re-employ the same staff on the same terms and conditions. Similarly, the incumbent agency is obliged to let the in-plant employees move to the incoming agency if they so wish.

This has proved to be a mixed blessing for corporate clients. Although it has given them a chance to hold on to in-plant staff that they liked at the incumbent agency, it also has made it more difficult to get rid of those whom they did not like.

But the recent ruling by the ECJ-which has jurisdiction over the whole European Union-against the employee, Ayse Suzen, has changed the situation.

Suzen lost her job when her employer lost its cleaning contract to a new agency, and the new agency did not offer her a position. The ECJ ruled that the new agency was not compelled to offer her employment because the change of agency did not involve a transfer of assets.

"The high watermark of protection for employees has been passed,'' commented leading U.K. employment barrister Paul Epstein. Previously, the main criterion for applying Transfer of Undertakings (Protection of Employees) regulations-or TUPE, as it is known in the United Kingdom-was "whether there was the transfer of an identifiable unit of economic activity," Epstein said. "Now the greater emphasis is on whether assets and the majority of the workforce are being transferred."

Sue Kavanagh, human resources director for Carlson Wagonlit Travel UK, said the news is mixed for corporate clients. She believes it will now be easier to get rid of undesirable in-plant staff but also more difficult to retain good ones, whom incumbent agencies may now transfer without giving them an option to remain at the client.

Kavanagh said it would be a positive development if TUPE were to disappear. "Over the last few years we have found that staff who become involved in a TUPE situation can play off one employer against the other in order to increase their benefits package,'' she said. "This can affect our customers.''

Kavanagh said she had no knowledge of a suggestion by Caldwell Associates president John Caldwell that some travel agencies in the United Kingdom had exploited TUPE to undermine rivals. Caldwell told the recent Institute of Travel Management annual conference that when some agencies know they are about to lose an account with an in-plant, they transfer the worst staff in the agency into the in-plant and give them a handsome pay rise. Under this poison-pill tactic, the incoming agency is obliged to take on the substandard employees of its rival at inflated salary levels.