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Transfer of an Undertaking
A transfer of an undertaking occurs where an undertaking or an autonomous part thereof is transferred to a new owner, with the employees automatically transferring while retaining their rights and obligations.
The transfer of an undertaking is an employment law concept that applies where an economic activity is transferred and retains its identity. This is provided for in Article 7:662 of the Dutch Civil Code and derives from European Directive 2001/23/EC.
It is relevant in that it protects employees against dismissal or adverse changes to their terms and conditions of employment in the event of business acquisitions, mergers or outsourcing. The transferee assumes the existing rights and obligations under the employment contracts.
In practice, this arises regularly in acquisitions of businesses or parts of businesses, where the new employer is required to continue the employment of the existing workforce on the same terms and in the same roles.
“As a result of the transfer of the undertaking, the employees of the acquired store automatically transferred to the new owner, retaining their salary and accrued rights.”
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