Transfer of an undertaking

The transfer of an undertaking refers to the transfer of a discrete economic entity to another party, for example, the sale of a business to a new owner. 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 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 the 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, the transferee (i.e. new) employer may be tempted to persuade the transferor (i.e. former) employer 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 Court of Justice of the European Union (CJEU) has held that the directive’s provisions may still apply to such dismissals before the transfer date, though this will be judged by national courts on the particular merits of each case. The definition of the ‘undertaking’ has also been the subject of controversy before the CJEU. For example, the possibility that a transfer of employees is in itself equivalent to the transfer of an undertaking was acknowledged in a leading case ( Jozef Maria Antonius Spijkers v Gebroeders Benedik Abattoir CV and Alfred Benedik en Zonen BV , Case 24/85, [1986]). The intention to take CJEU decisions into account was added in the amendment to the directive in 1998 (Article 1(1)).

In 2007, further regulations came into effect specifically relating to public passenger transport services by rail and by road and repealing previous regulations. Most notably, this new regulation allows Member States to safeguard the conditions of transfer of other rights of their employees other than those covered by Directive 2001/23. If necessary, therefore, Member States can take into account the social standards established in the legislation, regulations or national administrative provisions, or collective agreements or agreements concluded between the social partners.

See also: Acquired Rights Directive; consultation in the enterprise; information in the enterprise; outsourcing; restructuring

Please note: the European industrial relations dictionary is updated annually. If errors are brought to our attention, we will try to correct them.