Consequences of Employee’s Transfer Refusal in Transfer of Undertaking

The employment contract of an employee who had refused to transfer to the new employer due to the adverse consequences of the transfer of the undertaking was terminated by operation of law. Yet, the employee was entitled to compensation for the missing notice period and to the transitional allowance.

The owner of a wellness and cosmetics production company sold his enterprise to a company in Germany. The transfer of undertaking took place on 1 January 2022. As a result of the transfer, the employees' workplace was moved to Germany. For the employee this implied that the distance between his place of residence and the workplace would be 480 kilometres (one way) and that the one way travel time would be between five and a half and six hours. Prior to the transfer of undertaking, this employee informed the employer that the change of workplace to Germany entailed too many disadvantages for him and that, for that reason, it was impossible for him to join him in the transfer. The employee then submitted a request to the Sub-district Court to dissolve the employment contract, in which request he stated that there had been a significant change in the employment conditions to the detriment of the employee and that, therefore, he could not be expected to continue the employment contract with the new German employer.
From case law of the Supreme Court the Sub-district Court deduced that an employee may decide not to continue his employment contract with the transferee of a company. To this end, the employee should make a clear and unambiguous statement. According to the Sub-district Court, this is what the employee had done. According to the Sub-district Court, the consequence of this statement was that, under the jurisprudence of the Supreme Court and by operation of law, the employment contract would terminate on the date of the transfer of the undertaking. Since, however, the transfer of undertaking had already taken place, the Sub-district Court judge stated that it was impossible for him to dissolve the employment contract any longer. The employee's claim for continued payment of wages was also rejected for the same reason.
If, however there is a significant change in the terms of employment to the detriment of the employee, the employment contract shall be deemed to have been terminated on the initiative of the employer under the law, even if the employment contract was terminated by or at the request of the employee. According to the Sub-district Court, the long travel distance was more than could reasonably be expected from the employee. Therefore, according to the Sub-district Court, there had been a significant change in the terms of employment. A judgment of the Court of Justice of the European Union, according to which the employer should bear the consequences associated with termination of an employment contract by the employer, lead the Sub-district Court to the conclusion that the employer also owed compensation for termination of the employment contract without observing the notice period. This decision of the European Court is relevant, since the Dutch legal provision is based on a European Directive. The Sub-district Court, used the date of the employee’s application for dissolution of the employment contract as the start of the notice period. The employer also had to pay the transitional allowance, the amount of which should be calculated on the basis of the date the employment contract would have terminated if the notice period had been observed.
The employee had also claimed fair compensation, alleging that the employer had behaved seriously culpably. But the Sub-district Court did not grant this claim because, according to the Sub-district Court, there had been no seriously culpable conduct. Not informing the employees about the transfer of the undertaking at a time when the decision to transfer has not yet been made, was indeed contrary to the law, but not seriously culpable. According to the Sub-district Court, the employer was free to ask the employee to sign a non-competition clause during the negotiations on concluding a termination agreement, even if the employee in his turn was entitled to refuse the request. The absence of a social plan was not seriously culpable either, according to the Sub-district Court.

The judgment of the Supreme Court that the Sub-district Court used to deduce that an employment contract between an employee and an employer who transfers the undertaking ends by operation of law if the employee is not willing to transfer to the transferee of the undertaking, dates back to 1988 and is not universally endorsed.
Instead, there are arguments to have the employment contract dissolved by the Court.
What is certain is, that the employee has no right to stay behind with the transferor of the undertaking. The law also provides that the employee is entitled to the transitional allowance if he terminates the employment contract himself due to a significant change of the employment conditions to the detriment of the employee, as a result of the transfer of undertaking.