Transfer of undertaking
Category: Employment law
What happens to the employees after a merger or a division? Do employees follow the new company? What happens to the employment conditions?
These questions relate to the matter of “transfer of undertaking”.
According to article 7:662 section 2 Dutch Civil Code, a “transfer” means a “transfer arising from a contract, merger or division of an economic entity, which maintains its identity”.
An “economic unit” means a “complex of organized means established for the pursuit of an activity whether or not this constitutes its principal economic activity”.
In case of transfer of undertaking, employees enjoy legal protection under the European Acquired Rights Directive 2001/23/EC, that is implemented in the Dutch Civil Code.
In case of transfer of undertaking, all the rights and obligations arising from the employment agreement move to the (new) employer. The employee generally retains the employment conditions which it had prior to the transfer.
Also, the employee is in principle protected against dismissal due to transfer of undertaking. However, the employer can dismiss the employee due to economic, technical and organizational reasons (ETO-reasons).
In case you have any questions regarding transfer of undertaking or in case you require an assessment if an transfer of undertaking is applicable, please consult: