Transfer of the undertaking

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Labour Law

 Lecture 09B
    9.3. Transfer of the undertaking 1

The Directive on Transfer of the undertaking has
as its main objective: to ensure that – in case of a
change of employer - the employees remain in
employment on the terms and conditions agreed
at the transferor.

At least for some period, and then?
    9.3. Transfer of the undertaking 2

Some concepts:
Transferor (cedente)    former employer
Transferee (cessionario) new employer
Employees: all employees (according to national notions) of
a transferred undertaking
   9.3. Transfer of the undertaking 3

When is there a transfer in the sense of the
A first key element of the answer lies in the fact,
whether the employees are confronted with a new
legal employer or not (Berg/Busschers case).
A second key element is, whether or not the
economic entity where the employees worked,
has retained its identity.
    9.3. Transfer of the undertaking 4

The Directive is also applicable
- on intra-concern transfers (Europièces case)
- in a situation in which a public body terminates a subsidy
to an employer, while another legal person takes over.
(S. Redmond case)
- If a company outsources certain activities to an
(Watson case).
-If a company outsources cleaning operations, even is such
a work is carried out by a single employee
-(Scmidt case)
   9.3. Transfer of the undertaking 5

The radical Schmidt case has been nuanced in
the later Süzen case.
Whether there is a transfer in the sense of the
Directive depends very much of the situation in a
specific enterprise. If core personnel has been
taken over it is much more easy to conclude that
there has been a transfer than if only some less
important persons have been taken over.
In a company where employees are far less
important than machinery more weight must be
attached to the fate of the machinery.
    9.3. Transfer of the undertaking 6

The Directive does apply to both private and
public enterprises, whether or not operating for
The Directive does not apply to
- Sea-going vessels (art. 1(3)
- Administrative reorganisations of public
administrative authorities (art. 1(1)(c)
- to transfers from a bankrupt company, unless a
MS provide other wise. MS that have not provided
otherwise must take measures to prevent abuses.
(art. 5(4)
   9.3. Transfer of the undertaking 7

Other exceptions are not allowed and for example
Italy has been condemned in 2009 for having
excluded workers by way of its crisis-act nr.
The concept of ‘employee’ is according to national
law, but MS may not along this way exclude part-
time workers, fixed-term contract workers and
temp. agency workers from the application of the
Normally temp. agency workers are left out of the
transfer of the user-company, but in specific
cases this may be different (Albron case).
    9.3. Transfer of the undertaking 8

What is the content of the Directive?

A. Protection of the job
B. Protection of existing conditions of employment
    9.3. Transfer of the undertaking 9

The protection of the job a prima vista seems strong.
If there is a transfer in the sense of the Directive the
transferee must take over all the workers of the transferor.
Neither the transferor (before the transfer) nor the transferee
(after the transfer) may dismiss a worker on the grounds of
the transfer.
If this has happened the worker is considered to be still in
the service of the transferor c.q. the transferee (Bork case)
However, both the transferor and the transferee may
dismiss a worker for economic, technical or organisational
To assess this all circumstances of the dismissal must be
taken into account.
    9.3. Transfer of the undertaking 10

The protection of the existing conditions of
In a transfer in the sense of the Directive all rights
and obligations are automatically transferred. This
also includes rights and obligations resulting from
a collective agreement. Special rules apply to the
continuation of the rights and obligations in
occupational pension schemes (art. 3(4).
Case law has established that this maintenance of
exiting rights and obligations only concerns rights
and obligations applicable at the date of the
transfer. Not to later modifications in for instance
the collective agreement (Werhof-case).
    9.3. Transfer of the undertaking 11

The important question has been raised: how long
this continuation? This depends of the character
of the rights and obligations.
If it are rights and obligations solely deriving from
the individual contracts of employment the
transferee may change them according to the
national rules on modification of the contract of
employment (mostly only by mutual consent,
sometimes also unilateral)
If it are rights and obligations deriving from
collective agreements, then they may be changed
either after the date of termination of that
collective agreement or after the coming into fore
of a new collective agreement
    9.3. Transfer of the undertaking 12

Information and consultation of workers’
representatives in case of planned transfers must
be delivered by both transferor and transferee
- beforehand
- in good time
and contain
- reasons
- indication of the number of workers involved
- social consequences for the workers
    9.3. Transfer of the undertaking 13

Consultation with a view to reaching an
agreement (art. 7(2)
The agreement should be about
- mitigating disadvantageous consequences for
the workers.
- the fate of workers’ representation bodies after
the transfer.

Workers’ representatives according to the law and
practices of MS may be
- trade unions, or/and
- works’ councils.
    9.3. Transfer of the undertaking 14

Most import problem with the Directive in cases of
(multinational) concerns: at what moment to
initiate the process of information and consultation
of the workers’ representatives???

Formal decision making process, triggering the
application of the Directive’s obligations by the
directors at establishment level, is most of the
times preceded by material decision making at the
level of the concern-top.
    9.3. Transfer of the undertaking 15

What if the worker does not agree with a transfer?
For instance
- out of a fear that the transferee is not as solvent
as his actual employer.
       The directive provides that MS may provide
       that after the date of the transfer the
       transferor and the transferee shall be jointly
       liable in respect of obligations out of the
       contracts of employment before the
       transfer – a weak consolation!
    9.3. Transfer of the undertaking 16

Or out of unwillingness to have to relocate or to
switch to a less attractive job.
       He may himself take his dismissal which
       will not endanger his right to
       unemployment benefits or even can entitle
       him to redundancy payments as the
       Directive provides that if the contract is
       terminated because the transfer involves a
       substantial change in peius in the working
       conditions the employer shall be regarded
       as responsible for the termination.
   9.3. Transfer of the undertaking 17

However in the Juuri-case the Court has said that
this provision does not mean the a MS must
ensure that the worker obtains the same
redundancy pay as is usual in cases of unlawful
dismissal. Only normal consequences connected
to the rupture of a contract of employment must
be guaranteed.
    9.3. Transfer of the undertaking 18

Case law has established that the worker cannot
be forced to enter into the service of the
transferee (Michelson case).
But what if he refuses? Dutch legal opinion says:
the contract with the transferor is terminated
I disagree. If the transferor has not completely
stopped the employee should be entitled in
principle to stay in his service and been given a
appropriate other job. Only if such is impossible
the transferor should be justified to terminate the
contract with the employee on the normal rules of
an economic dismissal.
What does Italian law say?
   9.3. Transfer of the undertaking 19

Last year the Commission made a so-called
fitness check of the Directive on Transfer of
Undertakings. It was established that there are
still problems with the scope and definition of
‘transfer of undertaking’ , the liability of the
transferor, transfer as ground for dismissal, the
recourse to bankruptcy to avoid the application of
the Directive, the difficult harmonisation of
collective agreements after a transfer, non respect
fo the information and consultation provisions,
reemployment after the transfer and the lack of

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