European Labour Law Lecture 09B

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 1

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 2

When is there a transfer in the sense of the Directive? 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 Transfer of the undertaking 3

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 intermediary (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 4

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 Transfer of the undertaking 5

The Directive does apply to both private and public enterprises, whether or not operating for gain. 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 6

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. 428/199. 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 Directive. Normally temp. agency workers are left out of the transfer of the user-company, but in specific cases this may be different (Albron case) Transfer of the undertaking 7

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 8

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 reasons. To assess this all circumstances of the dismissal must be taken into account Transfer of the undertaking 9

The protection of the existing conditions of employment 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) Transfer of the undertaking 10

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 11

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 12

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 Transfer of the undertaking 13

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 Transfer of the undertaking 14

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 15

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 Transfer of the undertaking 16

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 Transfer of the undertaking 17

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 automatically. 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 18

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 sanctions Transfer of the undertaking 19