This blog post addresses a judgment delivered by the North Holland District Court on 12 April 2018 (available via ECLI:NL:RBNHO:2018:3068) . The case concerned the question of whether an employee who worked in a supermarket taken over by Albert Heijn was entitled to her old, higher salary. Albert Heijn guaranteed that salary to her after its takeover, but made a personal allowance out of the part of her salary that exceeded its own negotiated salaries (known in Dutch as ‘eigen cao-loon’). The employee had no issue with this as such were it not for the fact that Albert Heijn subsequently failed to apply all the negotiated salary increases to the employee’s salary. The personal allowance was only partially increased with the negotiated increment (which would gradually reduce to zero after several years). The employee claimed that Albert Heijn violated the rules governing transfer of undertakings – you keep what you had after a takeover – because Albert Heijn changed the composition of her salary. Albert Heijn argued that the employee got to keep her salary; she had not lost anything, so there had been no violation of the rules governing the transfer of undertakings.
The issue shows a procedure often seen in practice: after a takeover has taken place, the employment conditions package that the transferee has to offer is weighed against the transferor’s existing package first. In the supermarket sector this procedure is commonly referred to as ‘comparison shopping’. The differences between the packages are then gradually buffed out as much as possible. This occurs in several variants, such as the retention of the old package, which is then frozen (if it’s worth more than the package offered by the transferee), or it is supplemented with a allowance (if it’s worth less). Often, however, the transferee will want to apply its own terms of employment directly to the transferred personnel, irrespective of whether this is subject to the granting of a personal allowance that can ultimately be reduced to zero. This is what Albert Heijn did.
This blog post addresses a judgment delivered by the North Holland District Court on 12 April 2018 (available via ECLI:NL:RBNHO:2018:3068) . The case concerned the question of whether an employee who worked in a supermarket taken over by Albert Heijn was entitled to her old, higher salary. Albert Heijn guaranteed that salary to her after its takeover, but made a personal allowance out of the part of her salary that exceeded its own negotiated salaries (known in Dutch as ‘eigen cao-loon’). The employee had no issue with this as such were it not for the fact that Albert Heijn subsequently failed to apply all the negotiated salary increases to the employee’s salary. The personal allowance was only partially increased with the negotiated increment (which would gradually reduce to zero after several years). The employee claimed that Albert Heijn violated the rules governing transfer of undertakings – you keep what you had after a takeover – because Albert Heijn changed the composition of her salary. Albert Heijn argued that the employee got to keep her salary; she had not lost anything, so there had been no violation of the rules governing the transfer of undertakings.
The issue shows a procedure often seen in practice: after a takeover has taken place, the employment conditions package that the transferee has to offer is weighed against the transferor’s existing package first. In the supermarket sector this procedure is commonly referred to as ‘comparison shopping’. The differences between the packages are then gradually buffed out as much as possible. This occurs in several variants, such as the retention of the old package, which is then frozen (if it’s worth more than the package offered by the transferee), or it is supplemented with a allowance (if it’s worth less). Often, however, the transferee will want to apply its own terms of employment directly to the transferred personnel, irrespective of whether this is subject to the granting of a personal allowance that can ultimately be reduced to zero. This is what Albert Heijn did.
The negotiation of pluses and minuses regarding a new employee conditions package even without there being a transfer of undertaking already brings some risk with it. After all, the Supreme Court may not allow one employment condition to cancel out another in a collective agreement, whereby whether the employees, on balance, loses out is of little importance. See, among other things, the Supreme Court Judgment of 14 January 2000, JAR 2000/43 (Beans/Quicken) and the Supreme Court Judgment of 24 April 2009, JAR 2009/130 (Teunissen/Welter). That one employment condition should cancel another out violates Article 12 of the Dutch Collective Agreements Act, which states that any stipulation that deviates from the collective agreement is null and void. In the event of a transfer of undertaking, as in this case, the possibilities appear even more limited. Even if the employer and/or employee representatives agree to an amendment, the consequence of this amendment, if it takes place ‘because of the transfer’, is nullity, at least: that is how the Dutch court often explains it. The district court refers (in legal ground 5.19) to the relevant case law of the Court of Justice of the European Union.
The ruling is well-documented and touches on various aspects. I cannot deal with them all here. An interesting question raised in this case, is whether Albert Heijn is allowed to change the employment conditions for economic, technical, or organisational reasons (ETO reasons). The idea is familiar: dismissal on ETO grounds is explicitly possible – see Article 4(2) of Directive 2001/23 – so why shouldn’t amendment be possible? He who has a greater power, ought not to be denied lesser one. Or not? The district court rightly wonders whether the law offers room for this view. I am inclined to answer the question in the negative, and not just because amendment on the basis of ETO reasons is not explicitly regulated. In my opinion, the termination of a contract cannot be regarded as ‘the more’, as evidenced by the strict requirements in contract law for amendment (see, for example, the case law on Article. 6:248 of the Dutch Civil Code), where termination is sometimes relatively simple. Pacta servanda sunt (agreements must be honoured), but it is not so that agreements must remain unchanged until the end of time. Then there is the opinion of the Court of Justice of the European Union, namely that the transferee may make changes within the same limits as those that applied to the transferor, as determined by the district court. And then the national amendments options provided in Article 7:611 (good employer and employeeship) and Article 613 of the Dutch Civil Code (written amendment clause) come into play, were it not for the fact that the European Court of Justice always adds the phrase that the amendment must never lie in the transfer itself (see the reference to the Martin/SBU case under 5.24) to its case law.
And here lies the problem. It will almost always be the transferee’s job to harmonise employment conditions, for the sole reason that, after the transfer, equal rules should apply to all. However, the Court of Justice forbade that reason in the case between Martin/SBU as a ground for amendment. Other arguments, such as ‘the crisis compels us to adjust’ or ‘salaries are not in line with sector/market conditions’, can, if they are not overly contrived, often be traced back to the desire to achieve harmonisation. A phasing-out scheme, however careful, shares the same fate: it would not have existed if the transferee did not want to harmonise – gradually. Albert Heijn was also unable to put forward any arguments in this case, other than a desire for harmonisation, that could justify the change.
Should nothing be allowed then? The last few years have seen more flexibility in this respect. The Court of Justice (CJEU) has, in certain circumstances, made it possible for the transferee to amend employment conditions after the transfer. In 2009, for example, the Court ruled that the social partners themselves could decide whether or not a collective agreement was to be transferred (CJEU Ruling of 27 November 2008, JAR 2009/20 (Mirja Juuri/Fazer Amica Oy). In the Parkwood case (CJEU Ruling of 18 July 2013, JAR 2013/216), the CJEU, referring to the Werhof case (CJEU 9 March 2006, JAR 2006/83), held that,
“the transferee must be able to make the adjustments and changes required in order to continue its activities” (legal ground 25). Although that statement pertains to the scope of an incorporation clause, the CJEU’s comments are, in my view, of a very general nature. Legal ground 27 is also interesting:
“To the extent that a public sector undertaking transfers to the private sector, it must be assumed that the transferee will not be able to continue its activities without making significant adjustments and changes, as differences in employment conditions inevitably exist between the two sectors.”
It is not a major step to apply this ground beyond a transfer from the public to the private sector, although this would not have benefited Albert Heijn much in this case as the transfer took place in the same sector. Nevertheless, this legal ground offers interesting possibilities.
A second aspect of the ruling that deserves further consideration is the fact that Albert Heijn applied its own (sector) collective labour agreement immediately after the transfer, excluding the applicable Collective Labour Agreement for the Food Industry in place at the transferor. Strictly speaking, Dutch law does not allow for this exclusion, see Article 14a of the Collective Agreements Act and Article 2a of the Collective Agreements (Declaration of Universally Binding and Non-Binding Status) Act. The directive does provide for this: the transferee may directly apply his own collective agreement, which terminates the transferor’s binding status to the collective agreement that has been concluded. See, for example, CJEU Ruling of 6 September 2011, C-108/10, JAR 2011/262 (Ivana Scattolon/Ministerio dell’Instruzione, dell’Università e della Ricerca). It seems to me that a simple legal intervention can prevent much conflicting collective agreement distress.
Finally, I am not sure whether this ruling will be upheld on appeal. That the employee did not receive the same (future) salary increases as the personnel already employed by Albert Heijn is, in fact, not prohibited anywhere. This difference did not ensue from the ‘transfer of undertaking’, but from the collective agreement in place at Albert Heijn, all of which took place after the transfer. Albert Heijn did not take anything away from the employee, but she forfeited a benefit that other employees received (but, then again, they also had a lower salary). I do understand that the court sees a risk if a transferee changes the composition of the salary as salary is often linked to pension contributions, etc., but the reasons given by the court now raise some questions.