Transfer of undertakings and safeguarding of employees’ rights : effects of a dynamic clause with regard to the transferee

In a recent case of 27 April 2017, the European Court of Justice (“ECJ”) answered the question whether, once a business has transferred, the transferee must observe the clause concluded between the transferor and the worker pursuant to which their employment relationship is governed not only by the collective agreement in force on the date of the transfer, but also by subsequent agreements, supplementing, amending or replacing it.

This type of clause, referring to any future changes of an agreement, is often described as being “dynamic”, as opposed to “static” clauses, covering only the version of the agreement in force at the time of the transfer.

Facts and positions of the parties

A part of a German hospital which was originally owned by a local authority was transferred in 1997 to a private company called “KLS”. The employment contracts concluded between the workers and KLS contained a dynamic referral clause providing that their employment relationship would be governed by a specific collective agreement, but also by any future convention supplementing, amending or replacing this specific collective agreement.

In 2008, a new transfer arose between KLS and another company, called “Asklepios”.

Workers sought to rely on the dynamic clause. However, according to Asklepios, Directive 2001/23 precludes the dynamic application of collective agreements, meaning that in the case of a business transfer, those agreements should be applied as they originally stood (static application). Asklepios referred to the Werhof case, in which the ECJ has held that the objective of European legislation is to safeguard employees’ rights in force on the day of the transfer, but not to protect hypothetical advantages flowing from future changes to collective agreements (ECJ, judgment of 9 March 2006, Werhof, C-499/04).

ECJ’s ruling

ECJ answered with a reference to the same Werhof case, in which it also stated the parties are free to enter into obligations with each other. According to the Court, if the transferor and the workers have freely consented to a dynamic clause and if it is in force on the day of the transfer, that obligation to apply future changes of an agreement is transferred to the transferee.

However, ECJ also held that a fair balance between the interests of the employees and those of the employer must be sought, meaning that the employer must be able to make the adjustments and changes in its employees’ working conditions necessary to carry on its operations.

Source : ECJ, judgment of 27 April 2017, Asklepios, C-680/15 and C-681/15.