Since economic trends are bringing in their wake, at both national and Community level, changes in the structure of undertakings, there is a need to provide for the protection of employees in the event of a change of employer, and in particular to ensure that their rights are safeguarded.
Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses.
1. The Directive applies to the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger, in so far as the undertaking, business or part of the business to be transferred is situated within the territorial scope of the EEC Treaty. The Directive does not apply to sea-going vessels.
2. Definitions of the terms "transferor", "transferee" and "employees' representatives".
3. The rights and obligations arising from a contract of employment or from an employment relationship existing at the time of the transfer are transferred to the new employer. Member States may provide that, in addition to the transferee, the transferor continues to be liable in respect of obligations arising from the contract of employment. The terms and conditions agreed in the collective agreement continue to apply until the date of termination or expiry of the agreement or the entry into force of another agreement. The period during which the terms and conditions remain applicable may be limited in time, with the proviso that it shall not be less than one year. Maintenance of rights does not apply to old-age, invalidity or survivors' benefits under supplementary pension schemes outside the statutory schemes. Member States are required to adopt the necessary measures to protect the rights of employees and of persons no longer employed in the transferor's business.
4. The transfer does not constitute grounds for dismissal, which may only take place for economic, technical or organisational reasons or when Member States make exceptions in respect of certain specific categories of employees. In all other cases the employer is regarded as having been responsible for termination of the employment.
5. The status and function of employees' representatives are preserved unless, under the provisions or practice of a Member State, the conditions necessary for re-appointment of employees' representatives are fulfilled. If the term of office of the representatives expires on the occasion of the transfer, the representatives continue to enjoy the protection provided by the laws, regulations, administrative provisions or practice of the Member State.
6. The former employer and the new employer are required to inform the representatives of their respective employees in good time of the reasons for the transfer, the legal, economic and social implications, and the measures envisaged in relation to the employees. This information must be given for the employees transferred before their transfer is carried out, and in any event for all employees before they are directly affected as regards their conditions of work and employment. When the former employer or the new employer envisage measures in relation to their employees, they must consult the employees' representatives in good time with a view to seeking agreement. Member States whose provisions provide for recourse to an arbitration board may limit the obligations concerning information and consultation where the transfer gives rise to serious disadvantages for a considerable number of the employees. Member States may provide that where there is no employees' representative the employees concerned must be informed in advance when a transfer is about to take place.
14 February 1979
Official Journal L 61, 05.03.1977
On 8 September 1994 the Commission adopted a proposal for a Directive amending Directive 77/187/EEC on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses [COM (94) 300 final, Official Journal No C 274, 1.10.1994].
This proposal was originally intended to replace Directive 77/187/EEC, but, at the request of Parliament, it was transformed into a proposal for an amending Directive [COM(97) 60 final - Official Journal C 124, 21.04.1997].
The objective is to revise Directive 77/187/EEC in the light of the impact of the single market, legislative trends in the Member States with regard to the rescue of undertakings in economic difficulties, the case law of the Court of Justice, the adopted revision of the Directive on collective redundancies and the legislation already in force in most Member States.
As regards the scope of the Directive, the proposal:
The proposal makes it compulsory for the transferor and transferee to be jointly and severally liable in respect of obligations arising from a contract of employment which ended before the date of transfer.
The Member States may provide that the transferor's debts are not transferred to the transferee in the case of transfers affected in the context of insolvency proceedings, but they must prohibit the use of fraudulent insolvency proceedings intended to deprive employees of their rights.
Member States may allow the employer and the employees' representatives to change the terms and conditions of employment and carry out dismissals for economic reasons through an agreement concluded as a means of ensuring the survival of the undertaking.
Finally, Member States must make provision for penalties in the event of failure to comply with the provisions of the Directive.
On 4 March 1997 the Commission adopted a Memorandum on acquired rights of workers in cases of transfers of undertakings (guidelines on the application of Council Directive 77/187/EEC based on the case law of the Court of Justice of the European Communities [COM(97) 85 final, not published in the Official Journal].
The Memorandum starts by defining the scope of the Directive:
The transferor's rights and obligations arising from a contract of employment existing on the date of transfer are, by reason of such a transfer, transferred to the transferee.
The transferee must continue to observe the terms and conditions agreed by the transferor in any collective agreement:
If the contract of employment is terminated because the transfer involves a substantial change in working conditions, the employer is regarded as being responsible for termination.
An employee cannot waive the rights conferred upon him by the Directive, and these rights cannot be taken away, even with his consent.
The transferor's obligations arising from non-statutory schemes are not transferred (i.e. old-age, invalidity or survivor's benefits under supplementary company or inter-company pension schemes).
The Directive is limited to prohibiting dismissals where the only reason is the transfer.
The transferor and transferee are required to inform the representatives of their respective employees affected by a transfer of the reasons for the transfer, the legal, economic and social implications of the transfer for the employees, and the measures envisaged in relation to the employees. Consultation is obligatory only when the transferor or transferee envisages measures affecting his employees.
The Transfers Directive has formed the basis for a large number of cases brought before the Court of Justice. 25 judgments have been handed down, and several cases are pending. In its judgments, the Court has in particular clarified the concept of transfer, ruled that a contractual link is not necessary between the transferor and transferee for the Directive to apply, excluded from the scope of the Directive liquidation proceedings but not suspension of payment proceedings, clarified the meaning of the term "employee", and ruled that employees and their representatives cannot waive the rights conferred on them by the Directive as implemented by national legislation.
This summary is online: http://www.europa.eu.int
Globalization and Workers' Rights