Transfer of an undertaking
The transfer of an undertaking refers to the transfer of a discrete economic entity to another party. The interests of employees in such a transfer is regulated by Council Directive 77/187 of 14 February 1977 on the ‘approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of businesses’ (as amended by Directive 98/50/EC of 29 June 1998; consolidated in Directive 2001/23 of 12 March 2001), which applies to the ‘transfer of an undertaking, business or part of a business’. In the event of transfer of an undertaking, the terms and conditions of employment in contracts and collective agreements are safeguarded; but employment itself is not always guaranteed.
To avoid liability for dismissals, transferee employers may be tempted to persuade transferor employers to dismiss the workforce before the transfer, so as to be able to claim that the employees were not employed at the time of the transfer. The European Court of Justice has held that the directive’s provisions may still catch such dismissals before the transfer date, though the decision is for national courts to judge on the particular merits of the case. The definition of the ‘undertaking’ has also been the subject of controversy before the ECJ. For example, the possibility that a transfer of employees is of itself equivalent to the transfer of an undertaking was acknowledged in a leading case (Jozef Maria Antonius Spijkers v. Gebroeders Benedik Abbatoir CV & Alfred Benedik en Zonen BV, Case 24/85, [1986]). An attempt to take ECJ decisions into account was made in the amendment to the directive in 1998 (Article 1(1)).
See also: Acquired Rights Directive; consultation in the enterprise; information in the enterprise; outsourcing; restructuring.