In a transfer of undertaking, employees automatically transfer by operation of law to the transferee employer, retaining their terms of employment. An important starting point applies here: the employment contract may not be terminated because of the transfer (Section 7:670(8) of the Dutch Civil Code). That prohibition on dismissal has a clear protective purpose, but it is not absolute. In practice, the question therefore regularly arises as to what extent a transferee, after an acquisition, nevertheless has room to adjust its workforce.
What was this case about?
The employee had been employed by a Jumbo franchise supermarket since 1994 and, from 2022 onwards, held a unique, informally described administrative P&O/HR role for eight hours a week. After the sale of the business, she transferred by operation of law to the acquiring legal entity, which had centralised its HR administration. The acquiring business concluded that the employee’s role did not fit within the organisational chart and was redundant for business-economic reasons. Attempts to redeploy her in an alternative role proved unsuccessful. After the UWV (Employee Insurance Agency) had rejected a request for dismissal, the employer asked the subdistrict court to dissolve the employment contract. The request was granted both at first instance and on appeal. The employee maintained the position that the prohibition on dismissal in the event of a transfer of undertaking applied, but the Supreme Court ruled that this prohibition did not apply here, so that the dissolution decision was upheld.
ETO reasons do not provide a blank cheque, but do offer room
In its ruling, the Supreme Court makes clear that termination of the employment contract is indeed possible where there are so-called economic, technical or organisational reasons (ETO reasons). An important nuance applies here: the dismissal must not be motivated by the transfer itself, but must rest on an independent reason. It follows from European Directive 2001/23/EC that a balance can be struck between protecting employees and enabling the transferee to make the adjustments necessary to safeguard the continuity of the business. In this case, the acquiring business had sufficiently demonstrated that the HR-officer role structurally did not fit within the existing organisation. The dismissal was therefore based on an independent organisational reason. The acquiring business had, moreover, sufficiently investigated whether the employee could be redeployed elsewhere within the organisation. After sufficient efforts, this also proved not possible in this particular case.
Conclusion
ETO reasons do not provide a blank cheque to simply circumvent the prohibition on dismissal, but under certain circumstances they can offer room to bring about termination of the employment contract. The key question always remains: what is the actual reason for the dismissal? Does it lie in the transfer itself, or in an independent economic, technical or organisational necessity? Precisely because this distinction is nuanced and fact-specific in practice, it calls for careful preparation, substantiation and documentation.
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