Selling your business? Ten practical tips for transferring staff who do not want to transfer

You are selling a part of your business to an interested party. It is important to this buyer that the staff of this part of the business are transferred as well. After all, they have the knowledge and expertise. The value of the business is largely determined by the employees who work there.

But can you force these employees to transfer to a buyer? Or can these employees refuse? Or can they force you to keep them in your employ?

The answer is that you cannot force employees, but neither can employees demand that you keep them in your employ.

It is therefore important to involve the employees in the process. This will make employees less inclined to resist. And with enthusiastic employees, your business unit will be worth more when it is sold!

Negative consequences of the transfer

The law protects employees against the negative consequences of the transfer of undertaking, but employees cannot be protected against all negative consequences.

There are numerous elements that employees must accept, such as a different boss, a different working environment, a different location, longer travel times, and adverse consequences for promotion opportunities. It is therefore common for employees to not wish to transfer and thus want to escape the Business Transfer Act.

The question is, however, whether an employee can oppose the protection afforded by the Act and thus block the transfer. The employment contract is automatically transferred to the purchaser, so in principle the employee becomes employed by the purchaser.

Termination of the employment contract by the employee

Naturally, an employee can terminate the transferred employment contract with the new employer. If the employee has very good reasons for doing so, they can also ask the court to terminate the employment contract on the grounds of compelling reasons. In that case, the risk of termination lies with the employer.

In addition, the employee may terminate his contract before the transfer with the employer’s consent, for example at the time of the transfer. In this way, the employee does not become employed by the transferee, as his contract is terminated at the time of the transfer.

It is also possible to have this termination take place just after the transfer. The transferee takes over all the rights and obligations of the transferor, including any agreement to terminate the employment contract by mutual consent after the transfer.

The position of employees who do not want to work for the transferee

Various attempts have been made by employees who wanted to retain their old employment contract and did not wish to transfer to a buyer. These attempts have been unsuccessful, as the sale automatically terminates the relationship with the old employer. The employee’s wishes are therefore irrelevant, in the sense that he cannot demand continued employment with the old employer.

Waiving the right to transfer to the buyer

If an employee does not wish to transfer, he loses his job. It is therefore important to assess the employee’s behaviour carefully. The buyer may not infer from a single statement by the employee that he prefers to remain in the service of the former employer that the employee does not wish to transfer.

Ten practical tips for entrepreneurs regarding the transfer of staff after the sale of the company where the staff are unwilling to cooperate

• As a general rule, the employees transfer to the buyer along with the company or part thereof. Communicate this general rule clearly to the employees.
• Discuss with the employees that their employment contracts will remain unchanged and must be respected by the buyer.
• Ensure that it is clear before the sale which employees will oppose a transfer.
• Have the employees confirm their choice to transfer to the new owner in writing.
• Be very cautious about assuming that employees do not want to transfer and will therefore become unemployed. Employees must state unequivocally that they do not wish to exercise their right to transfer to the buyer.
• Inform employees of the (legal) consequences of such a refusal. Employees will become unemployed as a result of their refusal.
• Have employees who continue to refuse sign a termination agreement before the transfer.
• Involve the works council or employee representatives in the process.
• Also involve the buyer of the company in this process so that there are no surprises for the buyer later on.
• Include in the purchase agreement that the buyer guarantees to respect the rights of the transferred employees.

Fruytier Lawyers in Business is a commercial law firm in Amsterdam that specialises 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 its consequences under employment law, and about other aspects of the acquisition process, such as due diligence, please feel free to contact us without obligation.