Company takeover
What terms and conditions of employment do you offer after a takeover?
When your company makes a takeover, the staff often automatically transfer with it. But under what terms and conditions of employment do these transferred employees become your employees? Are you obliged to offer all the old terms and conditions of employment? In general, the answer is yes. But how much freedom do you have as the acquiring party to adjust the terms and conditions of employment?
Retention of terms and conditions of employment in the event of a takeover
The basic principle of the law is that, after the transfer of the company, the employee is entitled to the same terms and conditions of employment as those enjoyed by his former employer. The law explicitly regulates the transfer of all the employee’s rights and obligations.
This means that, in principle, you must offer the transferred employees the same salary and terms of employment that they enjoyed with their former employer. This applies even if you use different salary scales or a different number of holiday days for your existing employees.
Company-specific terms and conditions of employment are also transferred to the new owner
But what about company-specific terms and conditions of employment? These include staff discounts on products and services (e.g. mortgages or airline tickets) or share options. Company-specific terms and conditions of employment are therefore characterised by the fact that they were offered by the seller but not by the buyer.
The question that arises when company-specific employment conditions are transferred is whether the buyer must offer exactly the same employment conditions. Must this also be the case if it will lead to considerable costs? Or may the buyer compensate for the company-specific employment conditions? For example, by offering discounts on the products manufactured by the buyer, or financial compensation for the loss of certain privileges? In principle, this is not possible, according to a ruling by the European Court of Justice.
Acquisition partner bound by all terms and conditions of employment
The European Court of Justice has reiterated the principle that an employee cannot waive rights derived from the law when a business is transferred. Not even if the employee has given their explicit consent. In this case, it was not considered important that the employee was given different terms and conditions of employment, which meant that, overall, they were not worse off.
The buyer is therefore not permitted to exchange terms and conditions of employment. The idea behind this is to protect the employee against pressure and abuse of power by the buyer.
Terms and conditions of employment may be changed after the transfer
Where an employee cannot waive his rights when transferring to a new employer, the parties are free to agree on other terms of employment after the transfer. The normal rules of employment law apply in this case. This also offers a solution: after the transfer, discuss with the employees how terms of employment can be adjusted and compensated in other ways. Incidentally, an employee cannot simply be obliged to cooperate.
If strict application of the rule that terms and conditions of employment must be taken over really does encounter major practical and financial objections, realistic compensation must be accepted by the employee. This exception only applies if maintaining the terms and conditions of employment would lead to disproportionate objections on the part of the purchaser and would be contrary to what can reasonably be expected of the purchaser.
If an employee refuses the compensation offered in such a situation, they run the risk of acting contrary to good employment practices. Fruytier Lawyers in Business is a commercial law firm in Amsterdam specialising in advising on and assisting with mergers and acquisitions. As your partner, we can use our knowledge and experience to prevent or resolve employee-related issues in a merger or acquisition.
If you would like to know more about the transfer of undertaking and/or the consequences thereof under employment law, please feel free to contact our specialists without obligation.
