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09. Transfer of Undertakings

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09. Transfer of Undertakings

Employees’ Rights in Case of a Transfer of Undertaking

The transfer of an undertaking, business or part of a business to a new owner by way of agreement is subject to Sec. 613a of the Civil Code. By reference in the Transformation Act, Sec. 613a BGB also applies in the case of mergers, splits and asset transfers. Sec. 613a adopts the amended EU “acquired rights” or “transfer of undertakings” directive (EU Directive 2001/23/EC). An undertaking, a business or a part of a business is defined for this purpose by the European Court of Justice and the German Federal Labour Court as an economic entity, which retains its identity irrespective of the transfer.

Pursuant to Sec. 613a, all of the transferor’s employees automatically transfer to the transferee, with the terms and conditions of their employment contracts and their seniority remaining intact. Prior to the transfer, each affected employee must be informed in writing about the transfer, its reasons, the background, the social and legal consequences and any further measures planned by the transferee.

The employee is entitled to object to the transfer of employment within one month from receiving a correct and complete information letter, without giving reasons for their objection. If the information letter is not in line with legal requirements, the right to object may only forfeit years after the transfer. In case of an objection, the employment will continue with the transferor. If the transferor is no longer in the position to offer a job to the employee, a dismissal for operational reasons may be socially justified.

Requirements for Predecessor and Successor Parties

The transferee is bound by all rights and obligations resulting from the employment contracts in existence at the time of the transfer and is also liable for pension commitments made by the transferor to the employees affected. However, the transferee is not obliged to treat the employees transferred and its other employees equally. A dismissal is invalid if the dismissal is based on the transfer.

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