Commercial Law for Employers: Personal Data; Collective Redundancy and TUPE

In this month’s ‘Commercial Law for Employers’ article, Kevin McVeigh, Partner and Head of the Corporate and Commercial Department in EDG Solicitors, reviews three very interesting cases. Peter Nowak v Data Protection Commissioner considers the concept of “personal data” and the boundaries of the collection, storage and use of personal information; Małgorzata Ciupa and Others v II Szpital Miejski concerns collective redundancies and the obligation to consult with the employees in question; and Securitas v ICTS Portugal is a TUPE decision that helpfully clarifies the extent to which the Acquired Rights Directive applies when equipment necessary for the provision of services is taken over by the transferee.

Peter Nowak v Data Protection Commissioner

Key Issues: Personal Data – Examination Script - Protection of Individuals

Reference: Case C-434/16, CJEU (Second Chamber), 20 December 2017

Legislation: Directive 95/46/EC

Mr Nowak was a trainee accountant who passed first level accountancy examinations and three second-level examinations set by the Institute of Chartered Accountants of Ireland (‘the CAI’). However, Mr Nowak failed the Strategic Finance and Management Accounting examination, which allowed candidates to make use of documents (an open book examination).

After he had failed that examination for the fourth time, in the autumn of 2009, Mr Nowak submitted a challenge to the result of that examination. After that challenge was rejected in March 2010, he submitted, in May 2010, a data access request, under Section 4 of the data protection legislation, seeking all the personal data relating to him held by the CAI. By letter of 1 June 2010, the CAI sent 17 documents to Mr Nowak, but refused to send to him his examination script, on the ground that it did not contain personal data, within the meaning of the data protection legislation.

Mr Nowak then contacted the Data Protection Commissioner with a view to challenging the reason given for the refusal to disclose his examination script. In June 2010 the Data Protection Commissioner replied to him by email to state, inter alia, that ‘exam scripts do not generally fall to be considered [for data protection purposes] … because this material would not generally constitute personal data’.

That reply from the Data Protection Commissioner was followed by correspondence between Mr Nowak and the Commissioner which culminated, on 1 July 2010, in Mr Nowak submitting a formal complaint. By letter of 21 July 2010, the Data Protection Commissioner informed Mr Nowak that, after consideration of the case, he had identified no substantive contravention of [the data protection legislation] and that, in accordance with Section 10(1) (b)(i) of that legislation, which covers frivolous or vexatious complaints, there would be no investigation of the complaint. The letter stated, further, that the material over which Mr Nowak sought to exercise ‘a right of correction is not personal data to which Section 6 of the [data protection legislation] applies’.

Mr Nowak brought an action against that decision before the Circuit Court. That court held that the action was inadmissible on the ground that, since the Data Protection Commissioner had not initiated an investigation of a complaint, there was no decision against which legal proceedings could be brought. In the alternative, that court held that the action was unfounded, since the examination script did not constitute personal data.

Mr Nowak brought an appeal against the judgment of that court before the High Court, which upheld the decision. The judgment of the High Court was, in turn, upheld by the Court of Appeal. The Supreme Court, which allowed an appeal against the judgment of the Court of Appeal, held that the action brought by Mr Nowak against the decision of the Data Protection Commissioner was admissible. However, the Supreme Court is uncertain whether an examination script can constitute personal data, within the meaning of Directive 95/46, and therefore decided to stay the proceedings and to refer to the Court of Justice of the European Union (CJEU) a number of questions for a preliminary ruling.

Consideration by CJEU

It is not disputed that a candidate at a professional examination is a natural person who can be identified, either directly, through his name, or indirectly, through an identification number, these being placed either on the examination script itself or on its cover sheet. Contrary to what the Data Protection Commissioner appears to argue, it is of no relevance, in that context, whether the examiner can or cannot identify the candidate at the time when he/she is correcting and marking the examination script.

For information to be treated as ‘personal data’ within the meaning of Article 2(a) of Directive 95/46, there is no requirement that all the information enabling the identification of the data subject must be in the hands of one person. It is also undisputed that, in the event that the examiner does not know the identity of the candidate when he/she is marking the answers submitted by that candidate in an examination, the body that set the examination, in this case the CAI, does, however, have available to it the information needed to enable it easily and infallibly to identify that candidate through his identification number, placed on the examination script or its cover sheet, and thereby to ascribe the answers to that candidate.

Accordingly, if information relating to a candidate, contained in his or her answers submitted at a professional examination and in the comments made by the examiner with respect to those answers, were not to be classified as ‘personal data’, that would have the effect of entirely excluding that information from the obligation to comply not only with the principles and safeguards that must be observed in the area of personal data protection, and, in particular, the principles relating to the quality of such data and the criteria for making data processing legitimate, established in Articles 6 and 7 of Directive 95/46, but also with the rights of access, rectification and objection of the data subject, provided for in Articles 12 and 14 of that directive, and with the supervision exercised by the supervisory authority under Article 28 of that directive.

The CJEU held that: Article 2(a) of Directive 95/46/EC must be interpreted as meaning that, in circumstances such as those of the main proceedings, the written answers submitted by a candidate at a professional examination and any comments made by an examiner with respect to those answers constitute personal data, within the meaning of that provision.

Why is this decision important?

The concept of “personal data” is rarely out of the news these days. The rise of social media and cases such as Schrems v Facebook are testing the boundaries of the collection, storage and use of personal information. The General Data Protection Regulation (GDPR), which becomes enforceable from 25 May 2018, will replace Directive 95/46/EC and enhance protection for individuals in this area. All employers should be taking advice on the impact of GDPR in their organisation.

Małgorzata Ciupa and Others v II Szpital Miejski

Key Issues: Social Policy – Collective Redundancies

Reference: Case C-429/16, CJEU (Tenth Chamber), 21 September 2017

Legislation: Directive 98/59/EC

Ms Ciupa and Others are employed by the Łódź Hospital under full-time employment contracts of unlimited duration. From 2009 the financial losses of the Łódź Hospital increased from year to year. In 2013 it was decided that the Łódź Hospital should become a commercial company, in preference to liquidation, which would have involved the loss of more than 100 jobs. On conversion, it was not intended to reduce jobs, so that the Łódź Hospital would be able to retain its contract with the national health fund for the provision of medical services. After exhausting all savings opportunities not affecting wages, the Łódź Hospital found itself forced to reduce the level of remuneration of its entire workforce. It therefore proposed a temporary 15% pay cut to all employees. About 20% of the employees accepted the cut. The other employees were given a notice of amendment of working and pay conditions on the ground of the ‘need to carry out restructuring of the [Łódź Hospital’s] personnel costs dictated by the difficult financial situation’. The letter proposed that the employees, after expiry of the notice period, would receive a pay cut that would apply until 1 February 2015.

Ms Ciupa and Others brought an action before the District Court for Łódź-Śródmieście, Łódź, Poland, seeking for the amendment of their working and pay conditions to be declared inapplicable. The court dismissed the action. The Łódź Hospital, while consulting employees who were members of the trade union organisation within the company individually on the proposed amendment, did not contemplate effecting a collective redundancy, and therefore did not initiate the procedure applicable to redundancies.

According to the referring court, which is hearing the appeal brought by Ms Ciupa and Others, the case-law of the Supreme Court, Poland, on the question of whether the employer is subject to the obligations laid down in the relevant Polish Law when he gives his employees a notice of amendment, is unclear.

Under Polish law, where an employer contemplates effecting collective redundancies, he is required to consult the trade union organisations operating at the establishment. The consultations thus relate to what is ‘contemplated’ by the employer, not to the amendments accepted or to the terminations of employment contracts that may follow from refusals by employees. An employer who contemplates giving notices of amendment to his employees must, therefore, take account of the number of notices in order to determine whether the amendments contemplated are covered by the provisions on collective redundancies and consequently whether he is required to consult the trade unions.

In those circumstances, the Regional Court, Łódź, Labour and Social Insurance Division No VII, Poland decided to stay the proceedings and to refer a following question to the Court of Justice of the European Union (CJEU) for a preliminary ruling.

Consideration by CJEU

It is ultimately for the referring court, which has sole jurisdiction to assess the facts, to determine in the light of all the circumstances of the case whether the temporary reduction of remuneration at issue is to be regarded as a significant change.
However, even if the referring court were to consider that the notice of amendment at issue in the main proceedings is not covered by the concept of ‘dismissal’, a termination of the contract of employment following the employee’s refusal to accept a change such as that proposed in the notice of amendment must be regarded as constituting a termination of an employment contract which occurs on the employer’s initiative for one or more reasons not related to the individual workers concerned, within the meaning of the second subparagraph of Article 1(1) of Directive 98/59, so that it must be taken into account for calculating the total number of redundancies.

Consequently, since the decision to issue the notices of amendment necessarily meant for the Łódź Hospital that collective redundancies were contemplated, it was for the hospital, in so far as the conditions defined in Article 1(1) of Directive 98/59 were satisfied, to carry out the consultations provided for in Article 2 of that directive.

That conclusion is all the more compelling in that the purpose of the obligation of consultation laid down in Article 2 of the directive, namely to avoid terminations of employment contracts, or to reduce their number, and to mitigate the consequences, and the objective pursued by the notices of amendment, according to the referring court, namely to avoid individual redundancies, coincide to a large extent. Where a decision entailing an amendment of working conditions may enable collective redundancies to be avoided, the consultation procedure provided for in Article 2 of the directive must start when the employer contemplates making such amendments.

The CJEU held that: Article 1(1) of Council Directive 98/59/EC must be interpreted as meaning that a unilateral amendment of conditions of pay by the employer, to the detriment of the employees, which, in the event of an employee’s refusal, entails the termination of the contract of employment is capable of being regarded as a ‘redundancy’ within the meaning of that provision, and Article 2 of that directive must be interpreted as meaning that an employer is required to carry out the consultations provided for in Article 2 where he contemplates effecting such a unilateral amendment of the conditions of pay, in so far as the conditions laid down in Article 1 of the directive are satisfied, which is for the referring court to ascertain.

Why is this decision important?

Employers always need to act cautiously when contemplating the redundancy of any employees. The contemplation of the action can itself give rise to an obligation to consult with the employees in question. This judgment shows that a unilateral decision by an employer to amend pay and conditions may also require consultation.

Securitas v ICTS Portugal

Key Issues: Transfer of Undertaking – Employee Rights – Tenders

Reference: Case C-200/16, CJEU (Tenth Chamber), 19 October 2017

Legislation: Directive 2001/23/EC

Mr Resendes and 16 other persons, in their capacity as employees of ICTS, performed security guard duties until 14 July 2013 in the facilities (marina, port, dock) of Portos dos Açores SA located in Ponta Delgada (Portugal), under a contract between Portos dos Açores and ICTS. They were, inter alia, responsible for monitoring the entry and exit of persons and goods, by means of video surveillance devices, in accordance with rules laid down for them by ICTS. Their employer also provided them with uniforms and radio equipment.

On 17 January 2013, Portos dos Açores launched a call for tenders for the provision of security guard and preventive security services in its facilities in Ponta Delgada. On 17 April 2013, that contract was awarded to Securitas. The employees of ICTS maintain before the referring court that, on 17 June 2013, ICTS informed them in writing that, following the award of the contract to Securitas with effect from 15 July 2013, their employment contracts would, from that date, be transferred to Securitas.

On 14 July 2013, an employee of ICTS surrendered to an employee of Securitas the radio equipment used by the employees of ICTS in the facilities of Portos dos Açores, having received instructions from his employer to that effect. Securitas then surrendered that equipment to Portos dos Açores. Securitas began performing its security guard services on 15 July 2013. It provided the security guards assigned to the performance of those services with radio equipment belonging to it and identical uniforms featuring the logo of the undertaking. Securitas also informed Mr Resendes and the other 16 persons concerned that they were not part of its staff and that ICTS remained their employer.

Consequently, they brought actions before the Tribunal do Trabalho de Ponta Delgada (Labour Court, Ponta Delgada, Portugal) against Securitas and ICTS requesting that Securitas or, in the alternative, ICTS be ordered to acknowledge that they are part of its staff and to pay their salaries plus interest for late payment from 15 July 2013 or, for three of them, compensation for wrongful dismissal. That court upheld the actions. It held that there had been a transfer of a business between the two companies and that the employment contracts of the former employees of ICTS had been transferred to Securitas. As a result, it classified their dismissal by Securitas as ‘wrongful’ and ordered that company to reinstate the majority of the persons concerned and pay them various salary claims and compensation.

Securitas brought an appeal against that judgment before the Tribunal da Relação de Lisboa (Court of Appeal, Lisbon), which upheld the judgment given at first instance. Securitas consequently brought an exceptional appeal on a point of law before the Supremo Tribunal de Justiça (Supreme Court, Portugal). That court has doubts, in essence, as to whether the replacement of ICTS by Securitas for the provision of security guard services in the facilities of Portos dos Açores, following the award to Securitas of a service contract, falls within the notion of a ‘transfer of an undertaking [or] business’ within the meaning of Article 1(1)(a) of Directive 2001/23.

In those circumstances, the Supreme Court decided to stay the proceedings and to refer a number of questions to the Court of Justice of the European Union (CJEU) for a preliminary ruling.

Consideration by CJEU

Directive 2001/23 (known as the Acquired Rights Directive) is applicable whenever, in the context of contractual relations, there is a change in the natural or legal person responsible for carrying on the undertaking and entering into the obligations of an employer towards employees of the undertaking. There is no need, in order for the Directive to be applicable, for there to be any direct contractual relationship between the transferor and the transferee: the transfer may take place through the intermediary of a third party. It follows that the lack of a contractual link between the two undertakings successively entrusted with managing the surveillance and security of port facilities has no bearing on the question as to whether or not the Directive is applicable to a situation such as that at issue in the main proceedings.

Where, however, the activity is based essentially on equipment, the fact that the former employees of an undertaking are not taken over by the new contractor to perform that activity, as in the case in the main proceedings, is not sufficient to preclude the existence of a transfer of an economic entity which retains its identity, within the meaning of the Directive. Any other conclusion would run counter to the principal objective of the Directive, which is to ensure the continuity, even against the wishes of the transferee, of the employment contracts of the employees of the transferor.

The referring court will have to determine whether such assets were made available to ICTS and Securitas by Portos dos Açores. In that regard, it should be recalled that the fact that the tangible assets essential to the performance of the activity at issue in the main proceedings and taken over by the new contractor did not belong to its predecessor but were merely provided by the contracting entity cannot preclude the existence of a transfer of an undertaking within the meaning of the Directive 2001/23. However, only the equipment that is actually used in order to provide the security guard services, excluding the facilities that are the subject of those services, must, where appropriate, be taken into consideration for the purpose of establishing the existence of a transfer of an entity which retains its identity within the meaning of the Directive.

The CJEU held that: Article 1(1)(a) of Council Directive 2001/23/EC must be interpreted as meaning that, where a contracting entity has terminated the contract concluded with one undertaking for the provision of security guard services at its facilities, then concluded a new contract for the supply of those services with another undertaking, which refuses to take on the employees of the first undertaking, that situation falls within the concept of a ‘transfer of an undertaking [or] business’ within the meaning of that provision, when the equipment essential to the performance of those services has been taken over by the second undertaking.

Why is this decision important?

The Acquired Rights Directive is implemented in the UK by the TUPE Regulations. Over the years, the Directive (and the TUPE Regulations) has been held by various courts and tribunals to apply to the transfer of almost every employment arrangement. Outsourcing and the replacement of service providers following competitive tender procedures is a situation which has been the subject of much jurisprudence. This judgment helpfully clarifies the extent to which the Directive applies when equipment necessary for the provision of services is taken over by the transferee.