Is it an Employer’s Obligation to Pay the WGA-Benefits of Acquired Employees

When answering the question of whether there had been a full transfer of the undertaking or of part of it, the UWV had insufficiently substantiated that the acquirer of a company had the obligation to pay the WGA-benefits of the employees and former employees the transferor of the undertaking originally had to pay as a self-insurer, by only relying on the question of whether the entire wage bill or part thereof had been transferred.
On April 1, 2018, a foundation that conducted research into nuclear energy and sustainable energy transferred its research activities regarding sustainable energy to another party. The foundation was a self-insurer for payment of WGA-benefits. On October 3, 2014, an employee fell ill. Therefore, the foundation had to pay the WGA-benefit that was later granted to the employee itself. In 2021, the UWV decided that the third party, being the acquirer, should bear the risk of payment 89.78% of this employee's WGA-benefit.
This third party (hereinafter “the acquirer”) did not agree, however.
According to the acquirer, there had been a transfer of part of the foundation's undertaking and in such case the law stipulates that the self-insured employer who transfers the undertaking shall continue to pay the WGA-benefit. According to this party, also the percentage of 89.78% had insufficiently been motivated.
When the UWV declared the acquirer's objection unfounded, the Court had to rule on the case.
First of all, the Court referred to a ruling of the Central Appeals Tribunal in 2019, which was reaffirmed by the Central Appeals Tribunal in 2023. According to this ruling, it should first be assessed whether there has been a transfer of undertaking in the sense of employment law. This means that there has to be an economic entity that retains its identity in the event of a transfer resulting from an agreement or resulting from a merger or scission.
The UWV and the acquirer agreed that this was the case.
Then it should be assessed whether there is a transfer in whole or in part of the undertaking. This is an assessment which, according to the Central Appeals Tribunal, should be made in the sense of social insurance law and for which the determining factor is whether the transferring undertaking has transferred all its economic activities or whether still economic activities remain under the transferring undertaking. This should be assessed from the perspective of the transferring employer.
For this purpose, the UWV used data from the tax authorities regarding the percentage of the wage bill the acquirer had taken over from the foundation. In the opinion of the UWV, the payroll tax number is decisive for the question of whether there is an employer in the sense of social insurance law. After the takeover of the sustainable energy research activities, the foundation had transferred its nuclear energy research activities into a general partnership.
From the foundation's annual accounts the UWV concluded that no longer staff had been employed by the foundation after April 1, 2018. The percentage of 89.78% could be explained by the fact that all 400 employees of the sustainable energy research activities had been transferred to the acquirer on April 1, 2018, after which date 65 employees had returned to the foundation as of October 1, 2018 , to then be transferred to the general partnership.
The acquirer, on the other hand, argued that the UWV should not have based itself on data from the tax authorities regarding payroll tax numbers exclusively, but should have conducted its own investigation into the question of whether economic activities had remained under the foundation after the transfer. After the takeover of the sustainable energy research activities, the nuclear energy research activities remained under the foundation. According to the acquirer, for the question of whether there had been a transfer of an entire undertaking or of part of an undertaking it is not important what the foundation has subsequently done with these research activities. The acquirer said it had no insight into it either. In the sense of social insurance law, the foundation and the general partnership should also be seen as one employer, according to the acquirer.
The Court ruled that the UWV should indeed not have based its decision on the tax authorities' investigation into the payroll tax numbers only, but that it should have taken the entire factual situation of the foundation into account in its assessment. The UWV should have investigated whether the foundation still had economic activities after the transfer of the sustainable energy research activities. The Court therefore annulled the UWV decision on the objection. Since the Court lacked sufficient information to settle the case itself, the Court instructed the UWV to come to a new decision on the objection, with due observance of the Court's ruling.

In order to encourage employers to reintegrate disabled employees into the labour market as effectively as possible, the costs of disability benefits of employees and former employees, the Sickness Benefit and the WGA- benefit, are allocated to employers. For this allocation a hybrid scheme applies, in which employers can choose whether or not to be a self-insurer. As self-insurers, they have to pay the benefits themselves. For the non-self-insurers among medium large and large employers, the differentiated Work Resumption Fund premium they have pay to the tax authorities is increased due to payment of a benefit to an employee or former employee.
The allocation of the burden of the Sickness Benefits and the WGA-benefits of employees and former employees to employers requires a legal regulation of the consequences of the transfer of an undertaking for this allocation. In order to ensure that the financial incentive for reintegration is sufficiently effective for employers, the legislator wants to prevent employers from losing the allocation of the costs by transferring the undertaking in whole or in part to another legal entity.
The choice for the hybrid scheme implies that these rules are complicated. After all, account has to be taken of any situations in which the employer who transfers the undertaking, the transferor, is a self-insurer and of situations in which it is not, combined with situations in which the employer who acquires the undertaking, the acquirer, is a self-insurer and situations in which it is not. In addition, the legislator has chosen to differentiate between the rules for allocation of the benefit costs for Sickness Benefits to the employer and those for the WGA-benefits, as well as to make a distinction between the transfer of an entire undertaking and the transfer of part of it.
The legal regulations in respect of the consequences of the transfer of an undertaking for this allocation imply that, for both the Sickness Benefit and the WGA-benefit, there is a major difference between the transfer of an entire undertaking and the transfer of part of an undertaking, if it concerns the transfer of an undertaking from a self-insured employer.
When transferring an entire undertaking, the acquirer of the undertaking will have to pay the benefits, but when transferring part of an undertaking, the transferor of the undertaking will continue to pay the benefits. That is why, in the above case, the acquirer of the undertaking wanted to establish that there had been a transfer of part of the undertaking.
After some varying case law, the Central Appeals Tribunal determined last year that, in order to determine whether there is a transfer of an entire undertaking or part of an undertaking, it shall be determined whether any economic activities remained under the transferor after the transfer. That is what the UWV should investigate then. But in practice, the UWV takes the position that it is obliged to follow the tax authorities’ data on the question of whether and when there is a transfer of an undertaking, and limits itself to the information it receives from the tax authorities regarding payroll tax numbers and the wage amounts stated under these payroll tax numbers, before and after the transfer. The necessity of coordination between the UWV and the tax authorities is, indeed, obvious, because the hybrid system implies that one time, for determination of the differentiated Work Resumption Fund premium, the consequences of the allocation of benefits to an employer have to be determined by the tax authorities and at another time, for payment of the benefit as a self-insurer, by the UWV.
In order to prevent double allocation or no allocation to an employer, it is obvious that the tax authorities’ and the UWV allocations must be carried out from the same point of view. The fact that primacy for this coordination is given to the tax authorities is a justifiable choice. But this does not mean that the UWV -as is always the case in practice- can limit itself to a reference to the data obtained from the tax authorities without having to properly justify the data itself. And it is clear by now that referring to payroll tax numbers and wage sums is insufficient for the UWV as its substantiation. The Court therefore rightly annulled the UWV decision on the objection, due to the absence of sufficient substantiation.
If the UWV decides not lodge an appeal, -though arguments for successful appeal appear to be missing-, it will, whether or not in coordination with the tax authorities, have to prove the existence or absence of remaining economic activities under the foundation after the transfer of its sustainable energy research activities. The question then will rise whether or not the fact that the remaining nuclear energy research activities were simultaneously transferred to a general partnership should be taken into account.
And if so, will it make a difference if the foundation itself was a partner in this general partnership?
And what is the impact for the allocation of the benefits to the employer if two acquirers simultaneously take over part of the undertaking, which resulted in the transfer of the transferor’s entire undertaking?
It may also become a relevant point of discussion whether the alleged return transfer per October 1, 2018, -which the UWV saw as new transfer of undertaking-, of some of the employees who had been engaged in the sustainable energy research activities. Should it be seen as the transfer from an undertaking or, in that case, at least of part of an undertaking?
If so, the question arises whether it should be seen as a transition from a non-self-insurer, if it is applicable to the acquirer, to the self-insured foundation or, -since the acquirer’s obligations to pay the WGA benefit from the foundation as self-insurer and should therefore be seen as a self-insurer- as the transition from a self-insurer to another self-insurer, i.c. the foundation.
In the first case, the UWV's pro rata calculation is correct, but in the other case the acquirer would even remain obliged to pay the WGA benefit.
Anyway, plenty of reason to look forward to the further pursuit of this case.