Buyer beware: the implications of a CLA in case of a transfer of undertaking
We frequently receive questions about employment conditions in the context of a transfer of undertaking. For example, what happens to collective labour agreement (CLA) provisions? Can these be amended, and may an employee rely on future versions of a CLA if a so-called dynamic incorporation clause is included?
On 12 July 2024, the Dutch Supreme Court delivered a significant ruling providing clarity on this matter. In this blog, we explain the content of the ruling and its practical implications.
Transfer of Undertaking
In the event of a transfer of undertaking, employees’ rights and obligations are automatically transferred from the former employer (the transferor) to the new employer (the transferee). The law prohibits changes to the employment conditions of transferred employees during or due to the transfer. But does this also apply when those employment conditions stem from a future CLA declared applicable through a dynamically formulated incorporation clause?
Dynamic Incorporation Clause
An incorporation clause is a provision in an employment contract through which a CLA becomes part of the employment contract. If the clause is dynamically formulated, it also applies to future versions of the CLA. According to the European case-law, a dynamic incorporation clause transfers with the employee in the case of a transfer of undertaking, if the national law provides for the possibility for the transferee to make adjustments of the employment conditions existing after the transfer both consensually and unilaterally. Until the Dutch Supreme Court’s ruling on 12 July 2024, it was unclear whether Dutch law offered sufficient and effective means to amend the employment conditions after the transfer. This question has now been answered.
The Supreme Court’s Ruling
The case leading to the 12 July 2024 ruling involved employees who transferred to ID Logistics (IDL). Their employment contracts contained a dynamic incorporation clause referring to the CLA for Professional Goods Transport. IDL was not a party to this CLA and offered the transferred employees new contracts without the incorporation clause. The employees signed the new contracts. After negotiations on harmonising employment conditions failed, the trade union FNV and the employees initiated legal proceedings, claiming the CLA wage increases based on the dynamic incorporation clause. Both the subdistrict court and the Court of Appeal rejected the claims. According to the Court of Appeal, the agreement between IDL and the transferred employees was valid. However, the Supreme Court ruled in favour of the FNV and the employees, confirming the European and lower national case-law.
The Supreme Court’s key considerations are as follows:
- A dynamic incorporation clause remains in effect after a transfer of undertaking.
- Dutch law provides sufficient possibilities to amend employment conditions after a transfer, through Article 7:613 of the Dutch Civil Code (unilateral amendment clause) and Article 7:611 (principles of good employment and employee conduct).
- Employment conditions may not be altered during or due to the transfer, even with the employee’s consent.
Implications for Employers
For employers involved in a transfer of undertaking, the following points are essential:
- If the employment contract includes a dynamic incorporation clause, the acquiring employer must take future CLA provisions into account.
- Employment conditions cannot be amended if the change is related to the transfer itself, even if the employee agrees to the change.
Need Advice?
Transfer of undertaking and modification of employment conditions are complex matters. It is advisable for employers to seek timely legal advice to avoid unpleasant surprises. Do you have any questions or need advice regarding a specific situation? Please feel free to contact us at: info@vanbladeladvocaten.nl
