Transfer of undertaking: Criteria

Publication date: 28 October 2015
Planning a merger, acquisition or division of (part of) a business in the Netherlands or any other EU country? Be aware of the EU law which sets out the strong position of employees in case of a transfer of undertaking (Directive 2001/23/EC). Russell Advocaten will inform you on this legislation and the consequences thereof by a series of newsletters. This time: Criteria for a transfer of undertaking.

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Undertaking should retain its identity after transfer

In case of a transfer of undertaking all rights and duties arising from the employment contract(s) with the transferor existing at the time of the transfer will be transferred to the transferee by law (thus, without any further proceedings). Therefore, it is important to be aware of the criteria for a transfer of undertaking. A transfer of undertaking exists when an undertaking retains its identity by a transfer arising from a contract, merger or division. There is a significant amount of (European) case law on when a transfer should be considered a transfer of undertaking. This case law shows that it is not necessary for the transferor (the party that ceases to be the employer) and the transferee (the party that becomes the new employer) to have aimed at a transfer. Even a direct contractual relation between the transferor and the transferee is not required for the existence of a transfer of undertaking. The transfer of a single activity may also qualify as a transfer of undertaking (for instance, only a cleaning division of a company is being transferred).

To determine whether the undertaking has retained its identity several matters  must be taken into account, including:

  • The type of the transferred undertaking
  • Whether tangible assets have been transferred and the value of these assets
  • Whether the majority of the employees have been transferred
  • Whether customers have been transferred
  • The extent to which the activities carried out before the transfer are similar to the activities carried out after the transfer
  • The duration of the suspension of the activity (if any).

More information

Would you like to receive more information about the EU law on transfer of undertaking and the consequences thereof? Or do you have any other questions on employment law? Please contact:
Jan Dop, LL.M. (jan.dop@russell.nl).

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