Reorganization due to Transfer of Undertakings Possible by Relying on ETO Reason?
A discussion of the judgment of the Subdistrict Court of
Amsterdam, JAR 2009/275
Dismissal Because of
Transfer of Undertaking
If there is a transfer of undertaking, the employees of the
transferor are transferred to the transferee by operation of law.
This follows from European Directive 2001/23/EC (the
"Directive"), which is implemented into
Section 7:662 of the Dutch Civil Code (Burgerlijk Wetboek
("DCC")) et seq.
Subsequently, neither the transferor nor the transferee is allowed
to give notice of termination of the employment agreement of the
employees "because of" the transfer of undertaking, as is
stipulated in Section 7:670 (8) DCC. In principle, a petition to
rescind the employment agreement will not succeed either because of
the consequential effect of the prohibition of termination arising
from Section 7:685 (1) DCC.
Pursuant to Article 4 of the Directive, under circumstances,
despite the prohibition of termination a dismissal may be still
possible, if the reason for the dismissal is based on an economic,
technical or organizational reason (an "ETO Reason"),
which reason implies employment changes. It cannot be determined
too clearly when exactly there will be an ETO
reason. In literature, however, it is argued that the
situation should be assessed as if there were a transfer of
undertaking, therefore if there is an ETO reason independently of
the transfer of undertaking.The Facts
In the present case, Mrs. Hebbes
("Hebbes") entered the employment of
Ereon B.V. ("Ereon") in the position of
Office Manager on 1 December 2008. Next, on 11 June 2009, Ereon was
acquired by Clear2Pay Nederland B.V.
("Clear2Pay"), as a consequence of which
there were two Office Managers in the organization.
Shortly after the take-over Ereon filed a petition to rescind
Hebbes's employment agreement. As a reason for this it was
argued that Ereon was forced to review the business operations and
to take organizational measures, as a result of which Hebbes's
position became redundant. The organization was too small for two
Office Managers. Hebbes's employment was the shortest, and
there was no other suitable position, as a result of which the
employment agreement should be rescinded, according to Ereon, and
there was no reason for compensation, because Hebbes had been
employed one year and was exempted from performing work for some
time.
Hebbes denied that there were serious reasons for rescission and
requested, in case the Subdistrict Court would still proceed to
rescind the employment agreement, a compensation of C=2. Hebbes
argued in support of her arguments that there is a prohibition of
termination pursuant to Section 7:670 (8) DCC, because the
requested rescission is fully connected to the take-over and
therefore in conflict with the prohibition of termination referred
to. In addition, Hebbes denied that there was no suitable position
available.
Judgment of the Subdistrict Court
The Subdistrict Court denied Ereon's petition for rescission
and stated that it has become plausible that the requested
rescission is fully connected to the transfer of undertaking. Next,
the Subdistrict Court ruled that only because of this take-over the
situation of two Office Managers had arisen, for whom there was
insufficient work, while during the hearing Ereon had acknowledged
that without the take-over there would have been sufficient work
for Hebbes. It may be that this is not the case anymore in the new
situation, and that as a result a reorganization is necessary,
according to the Subdistrict Court, but this leads to the
conclusion that this reorganization is directly connected to the
transfer and can therefore not lead to a rescission of the
employment agreement. According to the Subdistrict Court, the other
circumstances brought forward by Ereon did not constitute a serious
reason either.
Comments
In literature this decision has been criticized, whereby it was
indicated that the prohibition of termination would have been
explained too widely. Only if the take-over is the only reason to
proceed to dismiss an employee - for instance to make an
undertaking more sellable in the preparation of a take-over - the
prohibition should apply. According to the critics, in the present
case there would be an ETO reason if the situation is looked at as
it occurred independently of the transfer, because the dismissal
was not requested because of the transfer of undertaking, but
because of the fact that after the transfer there was a redundancy
of personnel.
I myself - probably because I assisted Hebbes and as a result have
more information available than is shown in the decision - am not
convinced by the critics and think that the above-mentioned
reasoning is too bold. The mere fact that there is redundancy
because of the transfer of undertaking is in my opinion too closely
connected with the transfer to be able to speak of an ETO reason
that occurs independently of the transfer. Therefore, in my
opinion, an intended dismissal, just as the Subdistrict Court has
ruled, would actually have to be qualified as a dismissal because
of the transfer and would therefore have to fail on grounds of the
prohibition of termination. Only if there are additional
circumstances in addition to the redundancy - such as a poor
financial position - and if the possibilities for relocation or
re-education have been seriously examined, I can imagine that a
dismissal because of an ETO reason should indeed be granted. In the
present case, however, there is no (sufficient) evidence of such
additional circumstances.