Retaining rights and obligations
A ‘transfer of undertaking’ applies when a business is transferred to a third party by means of a contract — for example, a sale, hire or lease contract — and the business retains its identity after the transfer. This means that the transferee continues running the business or resumes running it after a brief period of interruption.
In the transfer of undertaking, all the verbal and written agreements in the employees’ employment contracts pass by law to the transferee. That applies not just to the terms and conditions in the employment contract but also to the terms and conditions in the collective labour agreement, whether mandatory or otherwise.
In practice, a transfer of undertaking gives rise to numerous questions, for example:
- Do I need to take account of the ‘transfer of undertaking’ rules if I acquire a business in another country, or if my business is transferred to a foreign party?
- Does the transfer of undertaking apply if only part of the business is transferred?
- Is the identity retained after the disposal of the business to the transferee?
- Is it a transfer of undertaking if just the shares held by the legal entity that runs the company are transferred?
- Are freelancers, payroll employees and temporary staff also included in the transfer?
- What is the position of employees who are off sick when there is a transfer of undertaking?
- Are non-compete clauses included in the transfer? What about seniority and years of service that count towards the calculation of severance pay in the event of a dismissal at a later date?
- What happens if a different collective labour agreement applies to the transferee compared with the transferor? Does one of those collective labour agreements take precedence and if so, when does that end?
- What happens if the transferor is not subject to a collective labour agreement while the transferee is, or vice versa?
- Should the transferor and/or the transferee inform the employees working for the business about their legal position, the applicable legal provisions and the associated choices they need to make?
- Does the transferor and/or transferee need to consult the works council, employee representative body or clients’ participation council regarding a planned transfer of undertaking?
- Can an employee refuse to be transferred?
- Is it possible to dismiss employees shortly before or after the transfer of undertaking?
- Is it possible to use contracts to negate the consequences of a transfer of undertaking, or to harmonise the employment terms and conditions after the transfer?
Our lawyers in the Employment and Corporate Law teams have considerable expertise and experience in this specialist area, both in the Netherlands and internationally. We would be happy to help you consider and implement the options.
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