Wednesday, June 15, 2011

The Netherlands: News from the Transfer of Undertaking Front - the Albron Case

By Els de Wind and Cara Pronk

On 22 October 2010 the European Court of Justice (ECJ) ruling was issued in the by then famous Dutch “Heineken/Albron case”[1]. In this brief note we will set out the essentials of this case and its practical implications. We will first explain the background of the typical European concept of "transfer of undertaking.

Transfer of undertaking

The rules on transfer of undertaking (also referred to as "TUPE" rules) cover any transfer of a business that results in a change of ownership of the undertaking or a specific part of it. The rules do not apply to share transfers. The rules stem from the European Directive 2001/23/EU (also referred to as the “Acquired Rights Directive”) and have been implemented in national legislation of the EU Member States. Under Dutch law the rules can be found in articles 7:662 and further of the Dutch Civil Code. In order to decide if a certain business transfer falls under the scope of TUPE, one generally looks at if (i) the business (or a specific part of it) is transferred following an agreement, a merger or a legal separation (which is mostly the case); (ii) if the business which is transferred forms an "economic entity" (which is more often the case if all the assets of a company are being transferred but is usually difficult to establish if a specific part of a business is being transferred); and (iii) which economic entity retains its identity after the transfer.

If a business transfer is considered to be a transfer of undertaking, employees working in the transferred business will automatically transfer to the employment of the acquiring company as per the date of transfer of the business. The employees will remain entitled after the transfer to the contractual employment benefits which they enjoyed with the previous employer (the transferring legal entity). It should be noted that special rules have been defined in Dutch statute with respect to the transfer of pension entitlements. Also, special rules apply to the transfer of collective employment benefits (mostly stemming from an applicable sector or company collective labour agreement).

Although it has been clear for a while that the TUPE rules do apply to “intra-group” business transfers, until the Albron judgement only employees who were employed with the transferring legal entity would transfer. Whether or not an employee was "employed" with the transferring entity had to be interpreted according to the law applicable to the employment relationship. It was uncertain if employees, who would be factually working in the transferring business but were employed with another legal entity, could transfer on the basis of the Directive (and the applicable national TUPE rules).

Albron Catering v. FNV case

Heineken Nederland B.V. outsourced its catering activities to Albron, one of the largest professional catering businesses in The Netherlands. The outsourcing qualified as a TUPE transfer. The employees were not employed with the transferring company Heineken Nederland B.V., but with another legal entity within the Heineken group, a specifically set-up personnel company Heineken Nederland Beheer B.V. Albron therefore took the position that the employees working in the business being outsourced did not transfer to its employment, but remained employed with Heineken Nederland Beheer. Albron offered these employees an employment contract with less favourable employment benefits than they enjoyed with Heineken. One of the employees involved, Mr Roest, claimed that the outsourcing constituted a transfer of undertaking under the meaning of the Acquired Rights Directive (and the Dutch TUPE rules) and therefore Albron had to award him the employee benefits he previously enjoyed with Heineken. The labour court at first instance ruled in favour of Mr Roest. Albron appealed the case to the Amsterdam court of appeal. The appeal court asked the ECJ if the employees involved had indeed transferred to Albron as a result of transfer of undertaking, even now they were not employed with the transferring company Heineken Nederland.

THE ECJ ruling

The ECJ considered that a contractual link with the transferring entity is not always required for employees to benefit from the Directive's protection. Heineken Nederland, the business in which Mr Roest and the others were working could be regarded as the "non-contractual employer" and Heineken Nederland Beheer as the "contractual employer". The company to which the employees were assigned to work on a permanent basis should be considered the transferring entity in the meaning of the TUPE rules, even though Mr Roest and the others were not employed with this company but with another company belonging to the Heineken group. The ultimate ruling held that Mr Roest could indeed fall under the protection of the Directive and transfer to Albron following a TUPE between Heineken Nederland and Albron. Albron should award Mr Roest the employee benefits which he had enjoyed with Heineken Beheer B.V.

Legal commentaries on the Albron case

It should be noted that the exact consequences of the ECJ ruling for the parties involved are not yet clear because the ECJ refers cases back to the local court, in this case the Amsterdam court of appeal, in order to render a new judgement taking into account the ECJ ruling. The Albron ECJ ruling seems to imply that as long as employees are “permanently assigned” to work in another company, they would transfer if this other company transferred all of its business or the part of the business they work in. In exactly which situations this would apply is widely debated in Dutch literature. Most writers agree that this will only apply in case of “intra group” assignments and in the situation where within the group all personnel are employed with a “personnel company” and the employees are permanently assigned to work in other group companies. However, some argue that the scope of the ruling is wider and a transfer of undertaking might include for instance an expat employed with the U.S. parent company but permanently working in the transferring business.

Practical note

We await the judgment of the Amsterdam court of appeal. So far there has not been relevant case law following the ECJ judgment. One should therefore be conscious of the fact that if a transfer of undertaking occurs in a situation where there are employees who are factually working in the transferring business but who are not employed with the transferring legal entity, the Directive and the applicable local TUPE rules can still apply.

Els de Wind is a partner and Cara Pronk is an associate with Van Doorne N.V. in Amsterdam

[1] European Court of Justice, case C-242/09, 21 October 2011, Albron Catering BV v. FNV Bondgenoten and John Roest