The transfer of a business occurs if an economic unit that retains its identity – in other words, an entirety of organised resources intended to carry out a commercial activity, whether or not that activity is part of the enterprise’s core business – is transferred. Playing a role in this respect are the following circumstances, known as the ‘Spijkers criteria’:
- the nature of the enterprise or branch concerned;
- whether or not tangible fixed assets are transferred;
- the value of the intangible assets;
- whether or not the new business will be taking on virtually all of the staff of the old business;
- whether the client base is being transferred;
- the degree to which the activities before and after the transfer correspond to one another; and
- the duration of any interruption.
The list of relevant circumstances above is not exhaustive, and the circumstances listed are not assigned any particular priority. The key question is whether the commercial operation of a going concern is transferred. Another factor that may play a role in this is whether the enterprise is labour-intensive or capital-intensive.
Applying the transfer of business rules
In practice, it is generally thought that strict regulations only apply if a business that is considered an entire enterprise is sold to a third party. The rules also apply, however, if part of a business is transferred, provided that an organised entirety of activities is transferred. Case law shows just how quickly such a situation can be deemed to exist: the catering activities of a company canteen (despite the fact that the company’s core business consists of entirely different activities), the cleaning activities within a certain building (in which case law held that even a single cleaner/employee who cleaned the entire building constituted “part of a business”), but also, for example, a company’s customer service department, provided that the entirety constitutes an entity.
The rules, which are mandatory, follow directly from European Directives that all of the Member States (including the Netherlands) have implemented in their national legislation. European Court of Justice (ECJ) case law shows that the rules are applied very stringently, even if national courts seem to be somewhat more flexible in their judgments.
The transferor (the former employer) is often considered to be the disposer and the transferee (the new employer) the acquirer.
Obligations upon transferring a business
If a business (or part of a business) is being transferred as meant in the statutory scheme, the following will apply (among other things):
- All employees who are employed by the disposer (and who work for that business or part of a business) enter the acquirer’s employ by operation of law – in other words, automatically.
- The disposer and the acquirer may not dismiss these employees due to the transfer (protection from dismissal). Such dismissals may, however, be effected before or after the transfer by the disposer or the acquirer, respectively, if there are other valid reasons for the dismissals (economic or organisational reasons). In other words, the dismissals will have to be justifiable outside the context of the transfer.
- All rights and obligations pursuant to an employment contract are also automatically transferred to the acquirer. All employment benefits (regardless of whether these are based on a collective bargaining agreement) will thus be retained. Only after the transfer will the acquirer and the individual employees be free to negotiate about an alternative employment benefits package. Making such changes is not always a simple matter, however. The desire to harmonise employment benefits is generally not sufficient reason to change the employment benefits agreed with the acquired employees.
- An important exception to this is the pension scheme. Under Dutch regulations, the acquirer may opt to apply its own pension scheme to the employees it will acquire, provided that it undertakes the same pension commitment it has made to incumbent employees. In this respect, it does not matter whether the acquirer’s pension scheme is inferior to the former pension scheme (making this an important exception to the aforementioned general rule that all rights and obligations are transferred to the acquirer). If the acquirer does not declare its own pension scheme applicable in good time prior to the transfer, or if the acquirer has no pension scheme of its own in place when the transfer is effected, then the former pension scheme will continue to apply to the employees transferred to the acquirer. The acquirer might also find itself faced with pension contribution arrears for the period in which the disposer was responsible for these.
- European and Dutch case law indicate that the disposer (and the acquirer) are subject to far-reaching obligation to inform individual employees. For example, the employees must be provided with clear and complete information about the choices to be made and their legal positions.
A proposed resolution to transfer a business will often be subject to the right of both the acquirer’s and the disposer’s works councils to issue a formal opinion.
Advice on transferring businesses and harmonising employment benefits
We have a great deal of experience with business transfers and would be glad to advise you on whether or not your specific situation will constitute the transfer of a business and how you can best approach the situation with all of your stakeholders (your works council, trade unions, employees). Please do not hesitate to contact us at +31202351150 or via the contact form.