In the event of a company takeover, employees retain their existing employment contract and all associated rights. Dutch employment law offers extensive protection through the automatic transfer of employment relationships and specific protection against dismissal during M&A-transactions. Employees cannot simply be dismissed because of the takeover itself.
What happens to my employment contract in the event of a takeover?
Your employment contract will automatically transfer to the new owner without you having to give your consent. This transfer of undertaking is regulated in Articles 7:662-666 of the Civil Code and applies when an economic entity changes ownership through transfer, merger or demerger while retaining its identity.
The legal basis for this lies in the so-called Spijkers criteria. These determine whether there has been a transfer of undertaking by looking at factors such as the nature of the undertaking, transfer of assets, intellectual property, transfer of staff and customer base. In the case of services, the transfer of staff weighs heavily in this assessment.
All existing terms of employment and rights remain fully intact. This means that your salary, working hours, job description, accrued holiday entitlement, years of service and seniority are automatically transferred to the new employer. Secondary terms of employment such as pension accrual also remain unchanged.
Can I be dismissed immediately after a takeover?
Resignation due to the takeover itself is strictly prohibited and void. Dutch employment law offers specific protection against dismissals directly related to the transfer of ownership. This protection applies from the moment the takeover is announced until after the transaction has been completed.
Only dismissals for economic, technical or organisational reasons (ETO reasons) that are completely unrelated to the takeover are permitted. The burden of proof that the dismissal is not related to the takeover lies with the employer. This means that the new owner must demonstrate that the dismissal is based on other business considerations.
In the event of collective dismissal of 20 or more employees within three months, additional protective measures apply. The employer must then notify the UWV one month in advance and conduct mandatory consultations with trade unions. Failure to comply with these procedures renders the dismissals voidable.
Will my terms of employment remain the same after the takeover?
All terms and conditions of employment are guaranteed to remain the same during the transition period. This includes not only your salary and working hours, but also holiday entitlement, pension rights, bonus schemes and other fringe benefits. Any applicable The collective labour agreement remains valid for one year. after the takeover.
Your accrued rights, such as seniority, holiday entitlement and pension accrual, will be transferred in full to the new employer. Years of service will continue to count for all employment law purposes, including notice periods and severance payments. This means that you will not be disadvantaged by the change of ownership.
After the first year, terms and conditions of employment may be changed, but this must be done in accordance with the normal procedures for changing terms and conditions of employment. The new employer cannot unilaterally impose worse conditions without your consent or valid business reasons.
What is the difference between a takeover and a merger for employees?
For employees, both types of transaction make little legal difference, because in both cases the transfer of undertaking applies. In a takeover, one party purchases the shares or assets, while in a merger, two companies merge into one new entity. In both scenarios, employment contracts and rights remain fully protected.
The practical difference lies mainly in the organisational consequences. In the case of a takeover the company structure often remains largely intact, while a merger usually involves further reorganisation. This may lead to changes in job roles or redeployments, but always within the protective framework of employment law.
The same information obligations towards employees and works councils apply to both types of transactions. Protection against dismissal and the transfer of employment conditions are also identical, regardless of whether the transaction is legally classified as a takeover or a merger.
How far in advance must I be informed about a takeover?
There is no legal obligation to inform individual employees of a takeover within a specific period of time in advance. However, the works council statutory advisory rights which require timely consultation before binding commitments are entered into. This consultation must take place at a time when the advice can still have a significant influence.
In practice, employees are often informed after signing a Letter of Intent (LOI), but before the final purchase agreement. This timing is crucial, as communicating too early can cause unrest, while communicating too late leads to a loss of trust. Employers must strike a balance between confidentiality and transparency.
In companies with 50 or more employees, the works council must be consulted before final agreements are made. In smaller companies, the emphasis is on direct communication with staff, with the timing being tailored to the transaction phase and business considerations.
What role does the works council play in a takeover?
The works council has a statutory right to be consulted in the event of company takeovers pursuant to Section 25 of the Works Councils Act (WOR). This right to be consulted applies in the event of a transfer of control, the establishment or termination of long-term partnerships and significant organisational changes. The works council must be able to give its opinion before final decisions are taken.
Ignoring this right to be consulted may result in the decision being overturned by the Enterprise Chamber. This makes timely and careful consultation essential for a successful transaction. The works council must be informed at a time when their advice can still have a significant influence on the decision-making process.
For individual employees, this means that the works council acts as a collective representative. The council can impose conditions on the takeover, request information about the consequences for employment and working conditions, and, if necessary, take legal action to protect employee interests. This provides an extra layer of protection on top of the individual guarantees under employment law.
In complex transactions, professional guidance from specialist advisers is essential for both employers and employee representatives. We guide companies through the entire process and ensure proper compliance with all legal obligations. For advice on your specific situation, please contact us. contact with us.
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