Protecting employment rights when business ownership is transferred

KEY POINTS

Scope

The Directive applies to all types of employment relationships regardless of:

• the number of working hours, performed or to be performed
• the type of employment contract (undetermined, fixed-duration, or temporary).

It applies to all companies, public or private, which are engaged in economic activities whether or not they are operating for profit.

Transfer of ownership

• the transfer of ownership may be the result of a legal transfer or merger,
• the person or company receiving the transfer becomes the employer of the company transferred to them.

Transfer of employment relationships

• The transfer of a company is not a ground for dismissal. Dismissal may only take place for economic, technical or organisational reasons.
• Employees maintain their rights and obligations, as set out in an existing employment contract or relationship, when ownership is transferred.
• The terms and conditions for employees of a collective agreement with the transferred company are maintained for its duration. However, this period may be limited by national governments but not to less than one year.
• Employees' rights and obligations under the complementary social protection schemes are not transferred. However, national governments may take measures to protect the rights to retirement benefits acquired under these schemes.
• Employees do not keep their rights and obligations when the transfer is undertaken as part of insolvency or bankruptcy proceedings. National governments may take action to prevent the misuse of insolvency proceedings to deprive employees of their rights.

Employee representatives

• Employee representatives must continue to carry out their role during a transfer until their reappointment is possible. Employees must continue to be represented, including in the case of bankruptcy or insolvency proceedings.
• Representatives must be consulted before measures concerning employees are adopted.
• Both the former and new employer must inform employees or their representatives in good time, of:
  • the date or proposed date of the transfer
  • the reasons for the transfer
  • the legal, economic and social implications of the transfer for the employees
  • any measures envisaged in relation to the employees.
• If an arbitration board exists in the EU country concerned, these information and consultation requirements may be restricted to cases where the transfer disadvantages a considerable number of employees.