On October 21, 2010 the European Court of Justice held that employees need not have an employment contract with the transferor in order for transfer of undertakings legislation to apply to them.
Facts and circumstances
Within Heineken the staff who are working within the group are hired via one staff corporation that acts as a central employer. The employees of this staff corporation are then posted to one of the operating companies within the larger Group.
The key question was for the court was whether the European Directive concerning transfer of an enterprise had to be interpreted in such way that these posted workers would be subject to automatic transfer to the transferee in a transfer of undertakings situation under provisions of the Acquired Rights Directive.
According to the Dutch legal provisions regarding transfer of an enterprise it is required that the employee must have contract of employment within the meaning of section 7:610 of the Dutch Civil Code with the employer who transfers the enterprise.
The Court decided that the European Directive refers both to contracts of employment and to employment relationships. In other words, according to the Court, it is not strictly necessary to have a contractual relationship (in this case referring to a contract of employment) between the transferor and the employee. From the European Directive it can also be concluded that employees must be protected in the event of a change of 'entrepreneur' and according to the Court the term 'entrepreneur' can also be applied to the non-contractual worker.
The Court has ruled that the Directive is applicable in case of a permanent posting. Furthermore it must refer to a posting to one specific company, it seems – and not to a number of different companies. This makes sense, as there could not be a permanent posting otherwise. Apart from this, the Court ruled that the Directive not only applies to employees who are posted from a staff corporation within the group, but to all staff who are posted permanently within a group of companies.
It is interesting that the Court did not find it necessary to limit the retrospective effect of its decision. The acquiring enterprise had specifically asked for such. The Court pointed out that such a limitation is only possible in case of good faith among the interested parties and if there is a risk of serious economic repercussions. The Court took the view that the acquiring enterprise has been unable to prove that such serious economic repercussions would indeed take place. Therefore, in principle, posted workers who were working in a transferred enterprise before this court decision can claim that they too were transferred and claim protection of the relevant transfer of undertakings legislation in any member state of the EU.
Application by Dutch court
The question remains how the Dutch court will interpret the ECJ decision. Dutch legislation explicitly requires that there must be a contract of employment between the transferring party and the employee. Dutch courts are not allowed to apply the law contrary to the provisions of domestic legislation, although in the past lower courts have done so.
It is likely that the Netherlands and, possibly, other EU member states will have to adjust their legislation to follow this court interpretation of the governing Acquired Rights Directive. Businesses would do well to consider which individuals are employed by their enterprise in as posted workers at the time of any transfer, because these workers may qualify for employment protection under the national provisions of the Acquired Rights Directive.