news

Transfer of undertaking

30 October 2018

In a recent case, the subdistrict court decided that the liquidation proceedings were initiated with a view to the relaunch of the insolvent undertaking and were not (solely) aimed at liquidation of the assets. In this way, the protection rules for employees in the event of transfers of undertakings continue to be effective. The subdistrict court decides that there was a transfer of undertaking. The termination of the employment contracts by the receiver, however, predates the transfer of undertaking. It is possible that that termination was carried out in violation of the provisions of Section 670(8) of Book 7 of the (former) Dutch Civil Code, but the employees have not (timely) invoked the voidability of the termination. The conclusion is that the employees have been transferred along to the new undertaking for the period of the notice of termination and have a claim relating to pay for that period.

Facts

The undertaking PVG has been put into liquidation and the receiver has terminated the employment contracts. Subsequently, a relaunch was carried out. On behalf of a group of employees, the Dutch Trade Union Confederation FNV claims that the Directive 2001/23/EG applies to the relaunch of the undertaking PVG and that the employees therefore, pursuant to the transfer of undertaking by operation of law, have entered the employment of the undertaking that has been relaunched without loss of employment conditions. As a result, the Dutch Trade Union Confederation FNV furthermore claims payment of the outstanding wages.

Judgment of the subdistrict court

Smallsteps ruling criteria

The subdistrict court compares the situation with the criteria following from the Smallsteps ruling of the European Court of Justice. In the Smallsteps ruling, the European Court of Justice held that the right to exempt the protective provisions from application in the case of transfer of undertaking only applies if the following cumulative requirements are met:

the transferor must be involved in liquidation proceedings or similar proceedings;
these proceedings must have been initiated with a view to the liquidation of the assets of the transferor; and
these proceedings must be supervised by a competent public authority.

The subdistrict court decides that the liquidation proceedings were initiated with a view to the relaunch of the insolvent undertaking and were not (solely) aimed at liquidation of the assets. As a result, the second criterion is not met. In this way, the protection rules of the Directive 2001/23/EG for employees in the event of transfers of undertakings continue to be effective.

The subdistrict court held, among other things, that the director of the parent company of PGV had already indicated in the liquidation report that he himself wishes to attempt a relaunch of the undertaking. In order to achieve this, three subsidiary companies have submitted an offer. According to the subdistrict court, this strongly suggests that, within the group, there was no intention to liquidate the assets of PGV. In addition, the subdistrict court is surprised that the subsidiary companies apparently had the financial resources for a relaunch, while on the other hand they have not chosen to provide the necessary financial boost in order to preserve PGV.

Transfer of undertaking

The subdistrict court subsequently focuses on the question whether there is a transfer of undertaking and concludes that this is indeed the case, given that the identity has been preserved and the customer base and trade name have been transferred along.

Consequences of the termination by the receiver

If it was established that the transfer of undertaking predated the liquidation order, the receiver would not have been entitled to dismiss the employees, since the employees have entered the employment of the new employer. The termination of the employment contracts by the receiver, however, predates the transfer of undertaking. The termination therefore has legal effect, even though the termination was carried out with a view to - and possibly in violation with the prohibition of termination applicable in the event of - the transfer of undertaking. It would then have been up to the Dutch Trade Union Confederation FNV to invoke the voidability thereof within two months after the termination had taken place. This has not happened. The subdistrict court decides that the employees have been transferred along to the new undertaking for the period of the notice of termination and have a claim relating to pay for that period.

Court of Limburg 26 September 2018, ECLI:NL:RBLIM:2018:9137

This notice was written by Ms Nadia Adnani, LLM, an attorney at law with Palthe Oberman Advocaten in Amsterdam, the Netherlands (www.paltheoberman.nl). This news report has been published in the newsletters of Sdu OpMaat Arbeidsrecht and Rechtsorde. 



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