THE BOTTOM LINE
- Pre-Transfer Changes are High Risk: Any agreement with an employee to alter their terms and conditions made before a business transfer, specifically because of the transfer, is likely to be deemed void. Acquirers cannot make keeping a job conditional on accepting worse pay terms.
- “Acquired Rights” Are Broader Than Salary: Employee rights that transfer during an acquisition include not just the headline salary but also established, consistent practices like annual pay raises, even if not contractually guaranteed.
- Buyer’s Union Agreements Don’t Trump Employee Protection: A new employer cannot use its own collective labor agreement (CAO) as a justification to immediately level down the more favorable terms of transferring employees. The legal protection during a business transfer is paramount.
THE DETAILS
This case serves as a crucial reminder for any company involved in mergers and acquisitions, particularly asset deals where employees are transferred. The dispute involved a driver transferred to a new employer as part of a company acquisition. His salary at the old company was higher than the pay scales in the new employer’s collective labor agreement (CAO). To manage this, the acquiring company had the driver sign a new contract just before the transfer. This contract maintained his salary level through a “personal allowance” but included a clause to phase out this allowance by offsetting it against any future CAO-mandated pay increases, effectively freezing his pay for years.
The legal heart of the matter lies in the European Acquired Rights Directive, implemented in the Netherlands by Article 7:663 of the Civil Code. This legislation is designed to protect employees during a “transfer of undertaking.” The core principle is that all of an employee’s existing rights and obligations automatically transfer from the seller to the buyer. The Arnhem-Leeuwarden Court of Appeal was clear: any change to employment terms made because of the transfer is prohibited. The law’s purpose is to prevent a situation where an acquirer pressures employees into accepting worse conditions as a prerequisite for keeping their jobs post-transaction.
The Court of Appeal ruled that the phase-out agreement was void from the start. It found that the employee had an acquired right not only to his higher base salary but also to the established practice of receiving annual pay raises at his former company. By asking him to sign a contract that effectively eliminated these future raises, the new employer made a change directly linked to the acquisition, which is illegal. The employer’s argument that its own binding CAO necessitated the change was dismissed; the court confirmed that the mandatory legal protection for transferring employees is a matter of public policy and cannot be overruled by a collective agreement. The company was ordered to repay all withheld allowances, plus interest.
SOURCE
Source: Gerechtshof Arnhem-Leeuwarden
