Cross Border Commercial Transactions
Lecture 1: The employment effects of cross- border mergers, takeovers and
reorganisations
I. What happens in the event if the business where you are currently
working in is taken over by the other company and does this really has
any effects on your legal position as an employee?
For instance, you are working in a Dutch company and this company is taken over
by the Belgian company. Belgian company decides to relocate the manufacturing
to Belgium. What happens to the Dutch employees? Are they required to continue
their employment in Belgium?
Substantive rules which play a part in this regard:
- At a European level, we have a European social arena. That means that
there are a lot of legislative acts that exists throughout the EU that deals
with a workers’ rights.
- › Directive 77/187/EEC the Acquired Rights Directive 1977. One of
the first directive of these European Social Arena/Agreement. It
established the rights of the employees in the event of the cross-border
take over. It regulates the approximation of laws of European member
states relating to the safeguarding of employees’ rights in the event of
transfers of undertakings, businesses or parts of undertakings or
businesses, as amended or re-enacted from time to time; it ensures that
you as an employee is transferred automatically from the old employer to
a new employer. Therefore, you are protected against dismissal. a lot
of issues in this directive were not clear. Therefore, it is the most litigated
directive that exists.
, - › Directive 98/50/EC as a result of litigation, a lot of case law arises.
Therefore, they decided to codify this cases in a new, 1998, directive.
- › Directive 2001/23/EC in 2001 they consolidated the two previous
acquired right directives if we are talking about the Acquired Rights
Directive at present we are talking about 2001 Directive.
Directive 2001/23/EC 3 functions:
1) Facilitates the transfer of employment relationship automatic transfer;
2) Protect the employee against dismissal you cannot be dismissed just by
reason of the transfer;
3) Information and consultationprior to the transfer taking place you as an
employee has to be informed and the employment representative body has to
be consulted. As an employee, you shall be aware of your legal position
because both transferee and transferor have to inform employee about the
legal position during the transfer.
4) This directive gives rights to the employee representative
Transfer of the employment relationship
› Article 3(1) automatic transfer of the rights and obligations of the
employment relationship
› ‘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 can be seen already that the actual contract of employment is not
needed. Even in the absence of the written contract of employment, but there
is an actual employment relations in a sense that the employee is performing
work for remuneration based on the specific direction of the employer this is
an employment relationship.
As a result of this employment relationship, all these rights and
obligations will transfer to the transferee at the moment of the transfer.
, the exact moment of that transfer is not always clear.
Concept of transfer
Art. 1(1)(a) Transfer of:
- a business;
- an undertaking;
- part of a business;
- part of an undertaking;
- from one person to another;
- as a result of a legal transfer of merger.
it can be seen that transfer includes also transfer of the part of the business,
outsourcing of one department;
› Article 1(1)(b):
› ‘there is a transfer within the meaning of this Directive where there is a transfer
of an economic entity which retains its identity, meaning an organised grouping of
resources which has the objective of pursuing an economic activity, whether or not
that activity is central or ancillary.’
it means that there must at least be an economic entity, it must be able to make
money;
if the business does not retain its identity, then there is no transfer of
undertaking. So, the employees DO NOT automatically transfer to a new employer
and you do not have to apply any of the right and obligations given in the directive.
when does the business retains it identity? ECJ Spijkers Case
ECJ Spijkers Case 24/85
› “The decisive criterion for establishing whether there is a transfer of undertaking
for the purposes of the directive is whether the business in question retains its
identity”
in this case, the ECJ set out a list of criteria that playing part in determining
whether a business actually retains its identity. In doing so there must be a
transfer of a ‘going concern’:
(a) the type of undertaking or business,
, (b) the transfer of tangible assets,
(c) the value of intangible assets,
(d) the transfer of the majority of the employees,
(e) the transfer of customers
(f) the degree of similarity between the activities carried on before and after the
transfer and
(g) the period, if any, for which the activities were suspended
we cannot look at this factors in isolation. Overall assessment based on the facts
of the case should be made!
(d)Majority of employees Susan case when it comes to this particular
case, we have a case a Spijkers case to establish whether there is a retention
of identity. And if there is a retention of identity there will be a transfer of
undertaking. As a result, the employees will transfer automatically to a new
employer. It is a bit strange that the question of whether the employee is
actually transferred to a new employer is to some extend depends on the
actual transfer of the majority of the employees.
So, basically if asking the question whether the employee will transfer to a
new employer it should be established whether there is a transfer of
undertaking then need to see whether there is a retention of identity one
of the factors in establishing whether there is a retention of identity is the
question whether the majority of the employees actually transferred to a new
employer. strange!
BUT! If we look on this from a different prospective, it may make sense.
For instance: if we have a very labour intensive business which mostly
deals with cleaning/catering. In this sense one may say well I want to take
over your business, I want to take over most your employees because I
actually do need them to quickly continue the business. As such I will take
over the large part of the employees, because it Is actually your business. I
can buy supplies, but it is the employees who make the business. Therefore,
I would like to take large part of them but not the trouble makers. If that
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