On 12 July 2024, the Dutch Supreme Court ruled in FNV v ID Logistics Tilburg BV that a dynamic referral clause also transfers in a transfer of undertaking. This is because Dutch employment law provides the transferee sufficiently effective options to make adjustments, both consensually and unilaterally, according to the Supreme Court.

BACKGROUND

A transfer of undertaking is a complex affair. For a start, the employees generally transfer automatically to the new employer, the transferee. All rights and obligations under their employment agreements also pass to the party taking over the business. This applies to both the terms of employment included in the individual employment agreements and the collective terms of employment.

A key aspect of transferring terms of employment is the 'referral clause'. This is a clause in the employment agreement that declares a collective labour agreement (CLA) applicable to the employment relationship. A referral clause can be formulated either 'statically' or 'dynamically'. A static referral clause declares the employment relationship subject to a CLA as it applies on the date that the employment agreement is concluded (for example, "the 2024 Collective Agreement for the Insurance Industry applies"). A dynamic referral clause declares the employment relationship subject to a CLA as it applies from time to time (for example, "the Collective Agreement for the Insurance Industry as it reads or will read, applies"). Under a dynamic referral clause, the terms of employment evolve in tandem with future CLAs concluded after the employment agreement is entered into.
It has long been unclear whether a dynamic referral clause actually remains dynamic after a transfer of undertaking and whether the transferee is allowed to adjust the clause.

The EU Court of Justice (ECJ) ruled on the issue on several occasions. In the 2017 Asklepios judgment, the ECJ held that a dynamic referral clause also transfers in a transfer of undertaking, provided that national law provides for sufficient possibility for the transferee to make adjustments. Whether the Dutch legal system sufficiently provides for this possibility has been a persistent uncertainty.

FNV V ID LOGISTICS TILBURG BV

In the case examined by the Supreme Court, ID Logistics Tilburg BV (IDL) acquired employees whose employment agreements included a dynamic referral clause. However, upon the transfer of undertaking, IDL concluded new employment agreements with the transferring employees. These new employment agreements did not include a dynamic referral clause or indeed any reference to the relevant CLA.

The key question was whether these employees could still derive any rights from negotiated salary increases under the dynamic referral clause of their 'old' employment agreements if a new CLA was concluded after the transfer of undertaking to IDL. 

Based on Asklepios, the 's-Hertogenbosch Court of Appeal held that the dynamic referral clause had transferred to IDL because Dutch law provided for sufficient possibility to unilaterally and consensually amend terms of employment. Nevertheless, the 's-Hertogenbosch Court of Appeal concluded that the employees in question were no longer entitled to the salary increases under the most recent CLA, as IDL had used the opportunity to adjust the terms of employment with the employees' consent at the time of the transfer by concluding new employment agreements with them.  

THE SUPREME COURT'S OPINION

Regarding the abovementioned point, the Supreme Court agreed with the 's-Hertogenbosch Court of Appeal's view that Dutch employment law provides a transferee sufficiently effective options to make adjustments to the employment agreement, both consensually and unilaterally, after a transfer of undertaking. The Supreme Court referred here to the possibility for employers to incorporate a unilateral changes clause into the employment agreement (Article 7:613 of the Dutch Civil Code) and to amend terms of employment in accordance with standards of being a good employer or employee (Article 7:611 of the Dutch Civil Code). Dutch employment law therefore meets the condition for the transfer of a dynamic referral clause, which means that, as a rule, this clause will also transfer.

However, the Supreme Court ruled that the 's-Hertogenbosch Court of Appeal's judgment could not be upheld. IDL should not have amended the terms of employment at the time of, or because of, the transfer of undertaking. This applies both to the conclusion of a new employment agreement and to the amendment or removal of the referral clause. After all, the dynamic referral clause is a right under the employment agreement currently in place. Employees must not relinquish it at the time of, or because of, a transfer of undertaking. The Court of Appeal had overlooked this, according to the Supreme Court.

THE JUDGMENT'S SIGNIFICANCE

The Supreme Court's judgment is relevant for the development of law. The judgment establishes that Dutch employment law provides sufficiently effective adjustment possibilities and that the dynamic referral clause therefore also transfers in a transfer of undertaking. Transferees must consider future CLAs. This cannot be 'solved' by concluding new employment agreements in a transfer of undertaking that do not include this clause. However, valid changes to terms of employment can be agreed after the transfer of undertaking, but only if these changes are unrelated to the transfer of undertaking. The time that has passed since the transfer usually plays an important role in that respect. 

Read the judgement here (in Dutch).