EU Directive 77/187/EEC (Transfer of Undertakings (Protection of Employment) Regulations (TUPE) transfer) has been codified in Articles 7:662 and following of the Civil Code in the Netherlands. Under Dutch law, in case of a TUPE transfer, the acquirer is statutorily required to continue the terms and conditions of individual employment contracts after the transfer. This means, among other things, that employees remain entitled to their position, salary, holiday allowance and company car. If it is impossible to continue certain terms and conditions (eg, a company stock option plan or provision of company-specific products), the acquirer must offer similar terms and conditions.
In a June 30 2014 decision the Utrecht Cantonal Court considered whether an employee can be offered a different position following a TUPE transfer.
An employee was in the service of a public transport company (X) since 1999. The employee had most recently held the position of manager of human resources, policy and control, in which she managed six employees. After a tender, the concession for providing public transfer services was granted to another party (Y). The transfer of the concession constituted a TUPE transfer. As such, the employee was transferred automatically by operation of law from X to Y, while retaining the right to the employment terms and conditions to which she was entitled based on her employment contract with X. A position in principle also constitutes an employment condition.
The position of manager of human resources, policy and control did not exist in Y's organisation. In consultation with the employee, it was investigated whether she could be placed in a suitable position within an affiliated Y company; however, this was not a permanent position. After a certain period (during which the employee was seconded to the railway industry pension fund), the employee was offered a contract relating to a human resource position within Y's organisation. The employee rejected the role. According to Y, the employee wrongly rejected the offer. Y submitted a request to the Utrecht Cantonal Court to dissolve the employment contract.
During the dissolution proceedings the employee stated that the position offered to her could not be considered suitable, since it entailed no management activities. Further, she invoked the ban on termination due to a TUPE transfer – which prohibits an employer from terminating an employment contract in connection with a TUPE undertaking – and stated that Y had no economical, technical or organisational reasons for either the termination or change of position.
The court ruled that TUPE legislation does not require an acquirer to offer a transferred employee exactly the same position following a TUPE transfer. Within reasonable bounds, the acquirer may implement changes to a role, if these are deemed necessary from an organisational perspective. The fact that the employee could be employed by Y only if her position were adjusted was sufficient reason to offer her a change of position. The court considered that the position offered by Y concerned a contract relating to a human resources position and corresponded to the activities that the employee had performed at X. Although there were differences in the two positions – the employee assigned great value to the managerial aspects of her previous position, which were not included in the position offered by Y – the court ruled that the proposal could not be deemed unreasonable. The fact that the offered position – the employee argued – did not include managerial activities did not result in Y's offer being unreasonable.
The court ruled that the employee's rejection of the human resource position was unjustifiable. Y attempted to keep the employee employed after the TUPE transfer by offering her a position where she could retain her existing employment conditions, including a company car. In view of this, the court granted Y's request to dissolve the employment contract. The court ruled that the ban on termination in connection with a TUPE transfer did not apply in the underlying matter.
The court granted severance whereby the adjustment factor was set at 0.5 (€88,675 gross), while the employee requested severance of €300,000 gross.
In case of dissolution proceedings, the starting principle is that severance is offered on the basis of the cantonal court formula (A (weighed years of service) x B (gross remuneration, including all fixed salary components) x C (adjustment factor)), whereby the adjustment factor is set at 1. This is considered a neutral dissolution in which neither party is substantially to blame for the termination (eg, sound restructuring). The adjustment factor will be lower than 1 if the employee is substantially to blame for the termination and higher than 1 if the employer is substantially to blame.
By granting severance based on an adjustment factor of 0.5, the court clearly initiated that the employee was substantially to blame for the termination by rejecting the human resources position. Nevertheless, the court took into account that Y was unable to clarify the exact content of the position and the fact that the termination related to the TUPE transfer. It therefore found no reason to dissolve the employment contract without granting any severance payment.
For further information on this topic please contact Danielle Pinedo at Baker & McKenzie, Amsterdam NV by telephone (+31 20 551 7555), fax (+31 20 626 7949) or email (firstname.lastname@example.org). The Baker & McKenzie website can be accessed at www.bakermckenzie.com.
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