Netherlands

    1.1 In what circumstances does the employee transfer law apply?

    The employee transfer law applies upon the transfer of an economic entity, i.e. an organised grouping of resources with the objective of pursuing an economic activity. A group of employees performing a joint activity may constitute an economic entity even if no significant assets transfer.

    For the law to apply, the identity of the transferring undertaking must be preserved. This is determined based on:

    • the nature of the undertaking;
    • the value of transferred tangible and intangible assets;
    • whether customers transfer;
    • whether the activities performed are similar before and after the transfer;
    • whether the essential part of the group of employees transfer.
    • whether the identity of the transferred business is preserved.
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    Author: Bronsgeest Deur Advocaten

    Date: January 2017

    1.2 Does the employee transfer law apply to (a) a sale of a business or (b) outsourcing?

    (a) Sale of a business

    A transfer can take place by agreement for sale, lease, rental, gift, merger or division. Transfers of insolvent undertakings are excluded from the rules. So are share transfers, because share transfers do not affect the identity of the employer.

    In labour-intensive sectors, such as cleaning companies, the employees form a distinctive part of the identity of the company and will transfer by operation of law in cases involving the transfer of cleaning activities. In capital-intensive sectors, for which equipment is more distinctive the rules will not apply if the equipment is not transferred.

    (b) Outsourcing

    Outsourcing is considered a transfer if it concerns a permanent or long term outsourcing and the identity of the outsourced activities is preserved. For example, where a bank employs a group of cleaners, but wants to outsource the cleaning activities to a cleaning company, the cleaners will transfer to the cleaning company. Similarly, if cleaners employed by cleaning company A clean company B on a project basis and after a while the latter outsources the cleaning project to cleaning company C, then the cleaners employed by company A working on the project with company B will transfer to company C.

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    Author: Bronsgeest Deur Advocaten

    Date: January 2017

    1.3 In outline, what are the implications of the employee transfer law?

    The implications of the employee transfer law are as follows:

    • all employees assigned to the transferring entity will transfer by operation of law to the transferee;
    • all rights and obligations in relation to those employees transfer including non-competition clauses and, under certain circumstances, existing pension schemes remain in force upon transfer;
    • the transferor and the transferee are jointly liable for one year after the transfer as regards the rights of employees which arose before the transfer;
    • the transferred employees are protected against dismissal (in that the transfer cannot be a valid reason for dismissal);
    • the transferee cannot claim a new probationary period for the transferred employees;
    • all financial rights linked to the accrued years of service also transfer, for example, as concerns the notice period and calculation of the Dutch statutory ‘transition payment’ if the transferee terminates the employment relationship.
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    Author: Bronsgeest Deur Advocaten

    Date: January 2017

    2.1 Who transfers?

    The employee transfer law applies to all employees and therefore all rights and obligations based on employment agreements between the transferor and employees automatically transfer by operation of law to the transferee.

    The law does not apply to temporary workers, civil servants and former employees as there is no employment relationship with the transferor.

    If part of a company is transferred, only employees who ‘belong to’ the relevant department will transfer. As some employees work in more than one department, it may not be obvious whether they transfer. The actual status (rather than formal status) is decisive: someone who, for example, has been suspended without the chance to return or who has been withdrawn from a project will not transfer (although they formally remain part of the department). However, sick employees will transfer irrespective of their absence.

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    Author: Bronsgeest Deur Advocaten

    Date: January 2017

    2.2 Can employees object to transferring?

    Employees are entitled to object but if they do so, they will not transfer to the new employer and their employment contract will end by operation of law at the time of the transfer. The employee will then neither have an employment contract with the transferor, nor with the transferee. In such cases, the employee is not entitled to a statutory transition payment, as the employment contract will end by operation of law on the initiative of the employee.

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    Author: Bronsgeest Deur Advocaten

    Date: January 2017

    2.3 What happens to terms of employment contracts?

    The rights and obligations (both written and oral) to which employees are entitled by virtue of their employment agreement with the transferor will transfer by operation of law to the transferee.

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    Author: Bronsgeest Deur Advocaten

    Date: January 2017

    2.4 What about other employee benefits?

    All rights and obligations, whether essential or minor, transfer to the transferee. However, an exception could be ‘enterprise-bound’ employment conditions, such as discounts on company products. Sometimes the transferee cannot reasonably be obliged to comply with certain conditions of employment after transfer, for example, profit shares or share option schemes. In such cases, the transferee must compensate employees where that can reasonably be expected in the circumstances.

    Length of service within the transferor counts as continuous employment for the notice period and for calculating the transition payment on termination. However, with regard to making selections for redundancy, the general view is that length of service with the transferor does not count.

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    Author: Bronsgeest Deur Advocaten

    Date: January 2017

    2.5 What happens to pension rights?

    Where possible, existing pension schemes should remain in force upon transfer. If the transferor provided a pension scheme and the transferee does not, the latter is obliged to continue the transferor’s scheme for the transferred employees. This applies irrespective of the type of pension scheme (e.g. defined contribution or defined benefit).

    If the transferor did not have a pension scheme and the transferee does, the transferee’s pension scheme automatically applies to the transferred employees.

    If the transferor and the transferee both have a pension scheme, the transferee can choose to apply the scheme that it has in place for its own staff to the transferred employees, even if that scheme is less favourable than the one provided by the transferor. Nevertheless, mandatory, industry-wide pension schemes must be maintained for employees within their scope, to the exclusion of an employer’s individual scheme. Collective labour agreements may also contain specific arrangements.

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    Author: Bronsgeest Deur Advocaten

    Date: January 2017

    2.6 What liabilities transfer?

    The transferor and transferee remain jointly liable for a period of one year in relation to any rights of employees which arose before the transfer. Therefore, an employee may make a claim to either the transferor or the transferee where the basis for the claim already existed prior to the transfer taking place provided it is filed within one year of the transfer. If the claim is made after one year, it must be addressed to the transferee.

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    Author: Bronsgeest Deur Advocaten

    Date: January 2017

    2.7 Do collective agreements transfer?

    All rights and obligations based on collective labour agreements (CLAs) transfer by operation of law. Transferred employees will therefore remain subject to the relevant CLA until it expires. However if, after the transfer, the transferee enters into a new CLA, or its existing CLA is declared ‘generally binding’ by the Minister of Social Affairs, that agreement will apply to the transferred employees. Because CLAs generally continue to remain in force after their expiry date, there is a possibility that certain employment conditions based on the ‘old’ transferred CLA and those of the new CLA of the transferee, will apply at the same time, in which case the transferred employee can ‘cherry-pick’ whichever is more favourable.

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    Author: Bronsgeest Deur Advocaten

    Date: January 2017

    2.8 How does the transferee obtain information on transferring employees?

    The employee transfer law does not require the transferor to provide any particular information to the transferee.

    It is the responsibility of the transferee to gather all relevant information about the transferor and its employees. Often this will be done as part of a due diligence process. Before the intended transfer the transferee will request all relevant (financial) data about the transferee and its employees, based on which the transferee will assess how many employees will transfer and what the financial consequences will be. What kind of data may be shown to the transferee during the due diligence is regulated by privacy law.

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    Author: Bronsgeest Deur Advocaten

    Date: January 2017

    3.1 Can employers make changes to employment contracts?

    After a transfer, the transferee may have different groups of employees with different employment conditions. If so, the transferee may try to agree on a harmonised package with the transferred employees, which will apply to all employees. The old employment conditions will be the starting point for negotiations.

    It is important to note that, as understandable as the transferee’s wish to harmonise employment conditions may be, there are no legal grounds for the transferee to force the transferred employees to accept a new set of employment conditions after the transfer. It is therefore a matter of comparing the total package of compensation and benefits of the transferred employees, to those of the existing employees. If the compensation and benefits package of the existing employees is more favourable than that of the transferor, the transferred employees will generally be willing to accept. This must then be confirmed in writing.

    Note that economic, technical or organisational (ETO) reasons are often not accepted as valid grounds for changing employment contracts, as those reasons are often related to the transfer. The employer may only unilaterally change the employment contracts if it can prove it has a greater interest in changing the employment contracts than the employees have in maintaining them.

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    Author: Bronsgeest Deur Advocaten

    Date: January 2017

    3.2 When can employers safely dismiss employees before or after a transfer?

    The transferor cannot dismiss employees solely by reason of the transfer: such a dismissal would be void. Consequently, if the transferor carries out dismissals on these grounds prior to the transfer, ‘dismissed’ employees will still automatically transfer to the transferee.

    The EU Directive on transfer of undertaking creates exemptions to the prohibition on dismissals. The transferee can carry out dismissals if there are economic, technical or organisational (ETO) reasons. However, the transferee must respect the principle of reflection (the ‘last-in-first-out’- principle which is applied per job category and divided into age categories) at all times.

    Whether ETO reasons are permitted depends on the circumstances. For example, if a surplus of personnel has arisen after the transfer and the transferee finds itself in economically difficult times, for example, this may be permitted.

    Practice shows that the longer the transferee waits to dismiss, the more likely this is to be permissible, as it will be less directly related to the transfer.

    Compensation for dismissal will in principle be based on the statutory transition payment. In the case of seriously culpable behaviour by the employer, the sub-district court can award additional reasonable compensation to the employee.

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    Author: Bronsgeest Deur Advocaten

    Date: January 2017

    4.1 Who must employers consult?

    Companies employing more than 50 people must set up a works council and employers must consult with the works council before any proposed transfer. If the company employs over 50 people, the Dutch SER Merger Code (which has no force of law) says that the parties should also consult with the relevant trade unions.

    If there is no works council, the transferor must consult the staff association (‘personeelsvertegenwoordiging’), which typically exists where there are 10 to 50 employees; or if none, with the staff assembly (‘personeelsvergadering’).

    If there is no representative body, the transferor must inform the employees who are to be transferred, individually.

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    Author: Bronsgeest Deur Advocaten

    Date: January 2017

    4.2	What information must they provide?

    Information regarding a proposed transfer must include:

    • the plan to transfer the undertaking;
    • the proposed date of the transfer;
    • the reasons for the transfer;
    • the probable legal, financial and social consequences of the transfer for employees; and
    • any planned measures with regard to the employees.

    If the SER Merger Code applies, trade unions are also entitled to information about the reasons for the transfer, the planned measures and the expected social, economic and legal consequences.

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    Author: Bronsgeest Deur Advocaten

    Date: January 2017

    4.3	What does consultation involve?

    The works council (if one exists) must be given the opportunity to advise in a timely manner on each proposal concerning, for example, significant changes in the organisation, changes in the allocation of internal powers, or transfer of control of (part of) the enterprise. Any decision triggering a transfer of the business will fall within this general definition.

    If the works council’s view of the proposals is negative but the transferor intends to continue nonetheless, it must inform the works council of this decision, explaining why it is not following the negative advice. It must then abide by a statutory waiting period before proceeding.

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    Author: Bronsgeest Deur Advocaten

    Date: January 2017

    4.4	How long does consultation last?

    No specific time schedule is provided, and the consultation period essentially depends on the urgency of the matter. If the advice of the works council is positive, the decision can be effected immediately, but if the advice is negative, a waiting period of one month applies.

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    Author: Bronsgeest Deur Advocaten

    Date: January 2017

    4.5	What happens if an employer fails properly to inform or consult?

    If the employer does not follow the works council’s advice, it must suspend implementation of its proposal for one month after notifying the works council of the final decision. Meanwhile, the works council may appeal to the Netherlands Enterprise Court at the Amsterdam Court of Appeal.

    The Enterprise Court may order the employer to withdraw its decision and/or reverse any consequences. Failure to comply is an administrative breach, for which it may be fined.

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    Author: Bronsgeest Deur Advocaten

    Date: January 2017

    5.1	Identify up to three issues in this country of which employers should be aware?

    The first and most important issue to take into account in relation to transfers in the Netherlands is the right of the works council to advise on the transfer. If the employer does not follow the proper procedure, the works council has the right to lodge an appeal with the Enterprise Court. This will delay or may even prevent the transfer.

    The second point is that if the transferor and transferee both have a pension scheme, the transferee can choose to apply its existing the pension scheme, even if that is less favourable than that of the transferor.

    The third point is that there is a possibility of cherry-picking in cases of conflicting collective bargaining agreements after a transfer.

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    Author: Bronsgeest Deur Advocaten

    Date: January 2017

    5.2	Would the employee transfer law apply on a cross-border transfer into or out of this country?

    There have been a number of transfers out of the Netherlands in which the sub-district courts in the Netherlands have ruled that Dutch transfer rules applied. However, it is difficult to say in general terms whether Dutch law would apply either where a transfer is into the Netherlands or to another country, as it would depend on individual circumstances.

    It is important to establish whether the identity of the transferring undertaking is being preserved. Undertakings quite often transfer to foreign companies without the company activities being transferred and if they do transfer, very often, the identity of the transferring undertaking will not remain intact. This depends on, for example, the distance between the old and new location, whether the transferred activities will be slotted into a similar organisational structure and the cultural, economical and social differences between the countries.

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    Author: Bronsgeest Deur Advocaten

    Date: January 2017

    6.1	What are the main national laws protecting employees upon transfers of businesses?

    The provisions under Dutch law that protect employees upon transfer are contained in Sections 7:662-666 of the Dutch Civil Code, Article 14a of the Collective Agreements Act (Wet op de collective arbeidsovereenkomst) and Article 2a of the Act on orders declaring a collective agreement binding (‘Wet AVV’). These provisions are based on EU Directive 2001/23. 

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    Author: Bronsgeest Deur Advocaten

    Date: January 2017

     

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