Transfer of undertaking
Definition of transfer of undertaking
economic entity =
article 1 (b) ARD 🡪 an organised grouping of resources which has the objective of pursuing an economic activity.
stable,
enabling the exercise of an economic activity pursuing a specific objective,
but may not be reduced to an activity.
be autonomous: the unit should be sufficiently independent. i.e
🡪 powers, granted to those in charge of the group of workers concerned, 🡪 to organise, relatively freely and independently, the work within that group and, more particularly,
🡪 to give instructions and allocate tasks to subordinates within the group, without direct intervention from other organisational structures of the employer Scattolon, paragraph 51).
necessary that that group possess a certain freedom to organise and carry out its tasks…
employer can impose precise obligations on that group of workers and thus has an extensive influence on its activities, (it can still be autonomous) but🡪 group needs to possess freedom to carry out its tasks!!!
2. that entity should transfer to a new employer.
Spijkers case, that the entity should have retained its identity: the business should be disposed of as a going concern, the operation is actually resumed by the new employer. The Spijkers criteria should be assessed.
3. lastly, the transaction should be based on “contractual relations”, which is broadly interpreted.
Assess whether there are contractual relations! The entity also seems to have retained its identity: the same work is continued with more or less the same employees and the same assets.
((((HACK!The unit, however, cannot be qualified as an economic entity, as there is insufficient autonomy. The three employees all have the same hierarchical level and perform more or less the same tasks within each unit. There only supervisor, Mandy, is not part of the entity. The conclusion should therefore be drawn that there is no transfer of undertaking, as the unit cannot be regarded to be an entity. )))))
Q2 Does XXXX belong to the unit that transferred?
Pursuant to article 3 (1) of the Directive, the employment agreements of the employees transfer from the transferor to the transferee.
Qtions to answer 🡪
Does Mandy ‘belong’ to the unit that transferred?
ECJ (C-186/83, Botzen), 🡪 an employment relationship is characterized by the link existing between the employee and the part of the undertaking to which he is assigned to carry out his duties.
In order to decide whether the rights and obligations under an employment relationship are transferred within the meaning of the Directive, it is sufficient to establish to which part of the undertaking the employee was assigned. In the case at hand the three employees are assigned to the unit, whilst Mandy is not. In consequence, she does not transfer from Rotterdam Verzekert B.V. to Insource B.V.
Q3 Protection exceptions
Goodall takes the view that such a termination is not permissible, because he enjoys dismissal protection due to the transfer, even though he is realistic enough to see that indeed there is no suitable position for him in the organisation of Kolka B.V.
Article 3 (1) ARD indeed brings about that as a general rule all individual employment conditions transfer.
Directive brings about exceptions that may cause the employment conditions to deteriorate.
exceptions may trigger the applicability of Article 4 (2) of the Directive. The transferee may
(i) apply its own collective agreement pursuant to Article 3 (3) of the Directive in stead of the collective agreement in force during the employment at the transferor, which may lead to deterioration of the employment conditions. Furthermore, unless Member States provide otherwise,
(ii) pension rights do not transfer on the basis of Article 3 (4) of the Directive, which may also deteriorate the employment conditions.
Finally, (iii) the transfer may result in, for instance, changes in working location of the employee (involving more travelling time) due to the location of the business of the transferee. This may lead to deterioration of the employment conditions.
Who enjoys dismissal protection
Mr. Goodal is right, indeed he enjoys dismissal protection based on article 4 (1) of the Directive.
However, this dismissal protection does not stand in the way of dismissals that may take place for economic, technical or organisational reasons entailing changes in the workforce (article 4.1 of the Directive). In case at hand, there is an organisational reason for the termination of the employment agreement. After all, there already is a managing director, whilst MrGoodal cannot be employed somewhere else in the organisation of Kolka B.V. Therefore Kolka B.V. may terminate the employment agreement.
True or false?
In order to establish whether or not the business that may transfer retains its identity, it is necessary to consider whether that business was disposed of as a going concern. True: This was ruled in the case Spijkers.
Where there are no representatives of employees in a business through no fault
of their own, the employees that are to be transferred are entitled to receive
information about that transfer themselves. True: See article 7.6 of
the Directive on transfer of undertaking
The term “employee” in the Directive on transfer of undertaking is given an autonomous and uniform interpretation throughout the European Union. False: Pursuant to article 2 (d) an employee shall mean any person who, in the Member State concerned, is protected as an employee under national (instead of EU) employment law.
An employee is only entitled to waive and restrict his rights conferred on him by the Directive on transfer of undertaking, if this is done in writing with his freelygiven consent, while he obtains new benefits in compensation for thedisadvantages resulting from the amendment to his contract of employment sothat, taking the matter as a whole, he is not placed in a worse position than before. False: see par. 15 of Daddy’s Dance Hall.
An entity (business) cannot retain its identity, if it loses its organisational autonomy upon transfer. (2 points) False: see ECJ Klarenberg/Ferrotron
Labour or capital intensive?
Why it is relevant to distinguish between labour intensive and capital intensive (also referred to as asset reliant) companies in case of assessing whether a transfer of undertaking occurred? Labour intensive undertaking the “undertaking” and the transfer is approached differently when compared to the capital-intensive undertaking.
Labour intensive undertaking
(i) a group of workers engaged in a joint activity on a permanent basis may constitute an undertaking (“economic entity”).
That undertaking transfers (it maintains its identity)
(ii) where the new employer does not merely pursue the activity in question performed by the transferor, but also takes over a major part, in terms of their numbers and skills, of the employees specially assigned by his predecessor to that task. Süzen.
Therefore, the definition of “economic entity” and “transfer” are somewhat different in a labour intensive undertaking.
Capital intensive undertaking, i.e. where the tangible assets contribute significantly to the performance of the activity, the absence of a transfer to a significant extent from the old to the new company of such assets, which are necessary for the proper functioning of the undertaking (entity), must lead to the conclusion that the entity does not retain its identity. (Oy Liikenne. This bears relevance for the definition of “transfer”. )
In summary, in a labour intensive undertaking the “undertaking” and the transfer is
approached differently when compared to the capital-intensive undertaking.
Transfer of undertaking?
must be (i) an undertaking (economic entity), that (ii) transfers (to a new employer) as a (iii) result of a legal transfer of merger (article 1.1 of the Acquired Rights Directive).
The company must be an economic entity as defined in article 1 (b) of the Acquired Rights Directive. There is an organised grouping of resources which has the objective of pursuing an economic activity. That entity must be stable and cannot be reduced to the activity entrusted to it.
That entity must transfer to a new employer, which means that it has to retain its identity. Relevant here is the Spijkers case: if the business was disposed of as a going concern - the operation is actually resumed by the new employer – then the identity is retained. In order to assess this, the so-called Spijkers criteria are relevant.
Finally, the transaction must be based on “contractual relations”.
The factory of XL ltd will no doubt be considered an economic entity. After all, the entire factory is taking into consideration.
The question is whether the company retains its identity. That, again, no doubt is the case. The current matter resembles Spijkers, where the transferee also argued that no transfer of undertaking took place, given the fact no goodwill was paid and the slaughterhouse ceased activities during a few weeks. These arguments were dismissed by the Court, applying a general test. There is an agreement: the purchase agreement.
In sum there is a transfer of undertaking.
Did the employees transfer?
The argument that only employees still employed by the transferor transfer holds, in general, true. Reference is made to article 3.1 of the Acquired Rights Directive: ‘the transferor's rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer shall, by reason of such transfer, be transferred to the transferee.’ The argument that the transfer of undertaking occurs on the date of actually resuming the undertaking is correct as well. However, according to the ECJ in the case Bork, employees of the undertaking whose contract of employment or employment relationship was terminated with effect from a date prior to that of the transfer, contrary to Article 4.1 of the directive, must be regarded as still in the employ of the undertaking on the date of the transfer, with the result, in particular, that the employer' s obligations towards them are automatically transferred from the transferor to the transferee in accordance with Article 3. 1 of the directive.
In order to determine whether the employees were dismissed solely as a result of the transfer, contrary to Article 4.1, it is necessary to take into consideration the objective circumstances in which the dismissal took place and, in particular, in the case Bork, the fact that it took effect on a date close to that of the transfer and that the employees in question were taken on again by the transferee.
The facts are the same here. Therefore, it makes sense that also in this case the termination will be held in violation of article 4.1 of the directive. Therefore, the employees transfer.
Do claims accrued in the past transfer?
Article 3.1 of the directive arranges that the transferor's rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer shall, by reason of such transfer, be transferred to the transferee. It continues to state that Member States may provide that, after the date of transfer, the transferor and the transferee shall be jointly and severally liable in respect of obligations which arose before the date of transfer from a contract of employment or an employment relationship existing on the date of the transfer.
This means that the transferee steps ‘in the shoes’ of the transferor. That also means in rights and obligations that were accrued prior to the date of transfer of undertaking. This answer is also confirmed by article 3.3 of the Directive, in which certain already accrued rights are explicitly excluded from the transfer. This decision has, finally, been taken by the ECJ in Abels.
Transfer of undertaking
In order to establish whether there is a transfer of undertaking, there must be (i) an undertaking (economic entity), that (ii) transfers (to a new employer) as a (iii) result of a legal transfer of merger (article 1.1 of the Acquired Rights Directive).
The company Mahler must be an economic entity as defined in article 1 (b) of the Acquired Rights Directive. There is an organised grouping of resources which has the objective of pursuing an economic activity. That entity must be stable and cannot be reduced to the activity entrusted to it. Mahler will no doubt be considered an economic entity.
That entity must transfer to a new employer, which means that it has to retain its identity. Relevant here is the Spijkers case: if the business was disposed of as a going concern - the operation is actually resumed by the new employer – then the identity is retained. Here, the identity is retained. However, the transaction does not lead to a transfer to a new employer. A share sale is not considered a legal transfer, as there is no new employer. Here there is a share deal.
Therefore: there has not been a transfer of undertaking.
a labour-intensive and a capital intensive undertaking with regard to the concept “transfer of undertaking”.
In order to establish whether there is a transfer of undertaking, there must be (i) an undertaking (economic entity), that (ii) transfers (to a new employer) as a (iii) result of a legal transfer of merger (article 1.1 of the Acquired Rights Directive).
The company Mahler must be an economic entity as defined in article 1 (b) of the Acquired Rights Directive. There is an organised grouping of resources which has the objective of pursuing an economic activity. That entity must be stable and cannot be reduced to the activity entrusted to it. Mahler will no doubt be considered an economic enitity.
That entity must transfer to a new employer, which means that it has to retain its identity. Relevant here is the Spijkers case: if the business was disposed of as a going concern - the operation is actually resumed by the new employer – then the identity is retained. Here, the identity is retained. However, the transaction does not lead to a transfer to a new employer. A share sale is not considered a legal transfer, as there is no new employer. Here there is a share deal.
Therefore: there has not been a transfer of undertaking.
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