Netherlands: Transfer Of Employment Contracts: Heineken Loses Eight-Year Legal Battle

An eight-year legal battle between trade union FNV, caterer Albron and Heineken has finally been resolved by the Supreme Court. The consequences of this judgment could be considerable: when acquiring a company through a transfer of assets, special attention must be paid to employees who are permanently assigned to the target (the de facto employer), but who are employed by another group entity (the official employer). Such employees – and more specifically, their employment conditions – may transfer with the target by operation of law, even if the employees do not have an employment agreement with the target. This may lead to unexpected liabilities for the acquirer.

Facts

Heineken's employees were employed by a personnel company, Heineken Nederland Beheer. Heineken Nederland Beheer subsequently assigned staff permanently to various operating companies within the Heineken Group, including to Heineken Nederland BV, where a number of employees provided catering services. On March 1 2005 Heineken Nederland BV decided to outsource its catering activities to Albron, which provides catering services in company restaurants. Heineken Nederland Beheer's employees within the catering arm were employed by Albron and offered new employment contracts, which contained less favourable employment conditions (including a salary reduction of between 40% and 50%).

Some employees, together with trade union FNV, objected to this course of events. They claimed that the transfer constituted a transfer of undertaking under the EU Acquired Rights Directive (2001/23/EC), meaning that they were entitled to the same employment conditions as they had enjoyed with Heineken Nederland BV. However, Heineken Nederland BV claimed that the outsourced unit (catering activities) was not the same as the official employer (Heineken Nederland Beheer) and that, therefore, the directive did not apply.

On October 22 2010 the European Court of Justice (ECJ) ruled in favour of the employees, stating that it was unnecessary for employees to have employment contracts with the target (Heineken Nederland Beheer) to fall under the Acquired Rights Directive. The rules on transfers of undertakings also apply to employees who have been permanently assigned to the target, but who are formally employed by a different undertaking within the transferor's group.

Decision

After the Amsterdam Court of Appeal confirmed the ECJ's decision, Heineken and Albron appealed in cassation, claiming that a change of law was necessary in order to follow the ECJ's decision. The Supreme Court dismissed these arguments, confirmed the ECJ's decision and finally brought this eight-year long legal battle to a close.

Comment

Employers purchasing assets or taking on outsourced services from a group business whose staff is employed by another group company must be clear about which staff are assigned to the transferring undertaking, and whether they are assigned permanently, in order to avoid the risk of acquiring unexpected liabilities under the Acquired Rights Directive.

As the ECJ's decision has retrospective effect, there is a risk that this decision will affect past deals conducted by way of a transfer of assets. The ruling does not seem to apply (directly) to share deals, but if used as a way out, could still be risky. Finally, secondments outside the transferor's group could fall under the ECJ's ruling. In short, this is a case to take into account when assessing the risk of a takeover.

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