Council Directive 98/50/EC of 29 June 1998 amending Directive 77/187/EEC on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses
Date: 1998-06-29
Institutions: Council of the European Union
Subjects: approximation of laws, labour law, transfer of businesses, worker consultation, worker information

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Official Journal of the European Communities

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COUNCIL DIRECTIVE 98/50/EC

of 29 June 1998

amending Directive 77/187/EEC on the approximation of the laws of the
Member States relating to the safeguarding of employees’ rights in the event of
transfers of undertakings, businesses or parts of businesses

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community, and in particular Article 100 thereof,

Having regard to the proposal from the Commission (1),

Having regard to the opinion of
liament (2),

the European Par-

Having regard to the opinion of the Economic and Social
Committee (3),

Having regard to the opinion of the Committee of the
Regions (4),

that:

‘The completion of

(1) Whereas the Community Charter of the fundamental
social rights of workers adopted on 9 December 1989
(‘Social Charter’) states, in points 7, 17 and 18 in
the internal
particular
market must lead to an improvement in the living
and working conditions of workers in the European
Community. The improvement must cover, where
the development of certain aspects of
necessary,
for
employment
collective redundancies and those regarding bank-
ruptcies. Information, consultation and participation
for workers must be developed along appropriate
lines, taking account of the practices in force in the
various Member States. Such information, consulta-
tion and participation must be implemented in due
time, particularly in connection with restructuring
operations in undertakings or in cases of mergers
having an impact on the employment of workers’;

such as procedures

regulations

(2) Whereas Directive 77/187/EEC (5) promotes

the
harmonisation of the relevant national laws ensuring
the rights of employees and
the safeguarding of
requiring transferors and transferees to inform and
consult employees’ representatives in good time;

(3) Whereas the purpose of this Directive is to amend
Directive 77/187/EEC in the light of the impact of
the internal market, the legislative tendencies of the
Member States with regard to the rescue of under-

(1) OJ C 274, 1. 10. 1994, p. 10.
(2) OJ C 33, 3. 2. 1997, p. 81.
(3) OJ C 133, 31. 5. 1995, p. 13.
(4) OJ C 100, 2. 4. 1996, p. 25.
(5) OJ L 61, 5. 3. 1977, p. 26.

takings in economic difficulties, the case-law of the
Court of Justice of
the European Communities.
Council Directive 75/129/EEC of 17 February 1975
on the approximation of the laws of the Member
States relating to collective redundancies (6) and the
legislation already in force in most Member States;

(4) Whereas considerations of legal security and trans-
parency require that the legal concept of transfer be
clarified in the light of the case-law of the Court of
Justice; whereas such clarification does not alter the
scope of Directive 77/187/EEC as interpreted by the
Court of Justice;

(5) Whereas those considerations also require an express
provision, in the light of the case-law of the Court of
Justice, that Directive 77/187/EEC should apply to
out
private
economic activities, whether or not they operate for
gain;

undertakings

and public

carrying

(6) Whereas it is necessary to clarify the concept of
‘employee’ in the light of the case-law of the Court
of Justice;

(7) Whereas, with a view to ensuring the survival of
insolvent undertakings, Member States should be
expressly allowed not to apply Articles 3 and 4 of
Directive 77/187/EEC to transfers effected in the
framework of liquidation proceedings, and certain
derogations from that Directive’s general provisions
should be permitted in the case of transfers effected
in the context of insolvency proceedings;

(8) Whereas such derogations should also be allowed for
one Member State which has special procedures to
promote the survival of companies declared to be in
a state of economic crisis;

(9) Whereas the circumstances in which the function
and status of employee representatives are to be
preserved should be clarified;

(10) Whereas,

in order to ensure equal

for
similar situations, it is necessary to ensure that the
laid
information and consultation requirements

treatment

(6) OJ L 48, 22. 2. 1975, p. 29. Directive as amended by Directive

92/56/EEC (OJ L 245, 26. 8. 1992, p. 3).

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down in Directive 77/187/EEC are complied with
irrespective of whether the decision leading to the
transfer is taken by the employer or by an under-
taking controlling the employer;

trative authorities, or the transfer of administra-
tive functions between public administrative
authorities, is not a transfer within the meaning
of this Directive.

(11) Whereas

it

is appropriate to clarify that, when
Member States adopt measures to ensure that the
transferee is informed of all the rights and obliga-
tions to be transferred, failure to provide that infor-
mation is not to affect the transfer of the rights and
obligations concerned;

(12) Whereas it is necessary to clarify the circumstances
in which employees must be informed where there
are no employee representatives;

(13) Whereas the Social Charter recognises the impor-
tance of the fight against all forms of discrimination,
especially based on sex, colour, race, opinion and
creed,

HAS ADOPTED THIS DIRECTIVE:

Article 1

Directive 77/187/EEC is hereby amended as follows:

1. the title shall be replaced by the following:

‘Council Directive 77/187/EEC of 14 February 1977
on the approximation of the laws of the Member States
relating to the safeguarding of employees’ rights in the
event of transfers of undertakings, businesses or parts
of undertakings or businesses’;

2. Articles 1 to 7 shall be replaced by the following:

‘SECTION I

Scope and definitions

Article 1

1.

(a) This Directive shall apply to any transfer of an
undertaking, business, or part of an undertaking
or business to another employer as a result of a
legal transfer or merger.

this Article,

(b) Subject to subparagraph (a) and the following
there is a transfer
provisions of
within the meaning of
this Directive where
there is a transfer of an economic entity which
retains its identity, meaning an organised group-
ing of resources which has the objective of
pursuing an economic activity, whether or not
that activity is central or ancillary.

(c) This Directive shall apply to public and private
undertakings engaged in economic activities
whether or not they are operating for gain. An
administrative reorganisation of public adminis-

2.
This Directive shall apply where and insofar as
the undertaking, business or part of the undertaking or
business to be transferred is situated within the ter-
ritorial scope of the Treaty.

This Directive shall not apply to sea-going

3.
vessels.

Article 2

1.

(a)

(b)

(c)

(d)

For the purposes of this Directive:

‘transferor’ shall mean any natural or legal person
who, by reason of a transfer within the meaning of
Article 1(1), ceases to be the employer in respect of
the undertaking, business or part of the under-
taking or business;

‘transferee’ shall mean any natural or legal person
who, by reason of a transfer within the meaning of
Article 1(1), becomes the employer in respect of
the undertaking, business or part of the under-
taking or business;

shall mean the

‘representatives of employees’ and related expres-
sions
the
employees provided for by the laws or practices of
the Member States;

representatives of

‘employee’ shall mean any person who,
Member State
concerned,
employee under national employment law.

is protected as

in the
an

2.
This Directive shall be without prejudice to
national law as regards the definition of contract of
employment or employment relationship.

However, Member States shall not exclude from the
scope of this Directive contracts of employment or
employment relationships solely because:

(a) of the number of working hours performed or to be

performed,

(b) they are employment relationships governed by a
fixed-duration contract of employment within the
meaning of Article 1(1) of Council Directive
91/383/EEC of 25 June 1991 supplementing the
measures to encourage improvements in the safety
and health at work of workers with a fixed-duration
employment relationship or a temporary employ-
ment relationship (*), or

(c) they

are

temporary

employment

relationships
within the meaning of Article 1(2) of Directive
91/383/EEC, and the undertaking, business or part
of the undertaking or business transferred is, or is
part of, the temporary employment business which
is the employer.

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SECTION II

Article 4

Safeguarding of employees’ rights

Article 3

1.
The transferor’s rights and obligations arising
from a contract of employment or from an employ-
ment relationship existing on the date of a transfer
shall, by reason of such transfer, be transferred to the
transferee.

Member States may provide that, after the date of
transfer,
the transferor and the transferee shall be
jointly and severally liable in respect of obligations
which arose before the date of transfer from a contract
of
relationship
existing on the date of the transfer.

an employment

employment or

2. Member States may adopt appropriate measures
to ensure that the transferor notifies the transferee of
all the rights and obligations which will be transferred
to the transferee under this Article, so far as those
rights and obligations are or ought
to have been
known to the transferor at the time of the transfer. A
failure by the transferor to notify the transferee of any
such right or obligation shall not affect the transfer of
that
any
right or obligation and the rights of
employees against the transferee and/or transferor in
respect of that right or obligation.

the

transferee

Following the

3.
shall
transfer,
continue to observe the terms and conditions agreed in
any collective agreement on the same terms applicable
to the transferor under that agreement, until the date
of termination or expiry of the collective agreement or
the entry into force or application of another collective
agreement.

the undertaking or business shall not

The transfer of the undertaking, business or part
1.
in itself
of
constitute grounds for dismissal by the transferor or
the transferee. This provision shall not stand in the
way of dismissals that may take place for economic,
technical or organisational reasons entailing changes in
the workforce.

Member States may provide that the first subparagraph
shall not apply to certain specific categories of
employees who are not covered by the laws or practice
of the Member States in respect of protection against
dismissal.

If the contract of employment or the employ-
2.
ment relationship is terminated because the transfer
involves a substantial change in working conditions to
the detriment of the employee, the employer shall be
regarded as having been responsible for termination of
the contract of employment or of the employment
relationship.

Article 4a

1.
Unless Member States provide otherwise, Articles
3 and 4 shall not apply to any transfer of an under-
taking, business or part of an undertaking or business
is the subject of bankruptcy
where the transferor
proceedings or any analogous insolvency proceedings
which have been instituted with a view to the liquida-
tion of the assets of the transferor and are under the
supervision
authority
competent
(which may be an insolvency practitioner authorised by
a competent public authority).

public

of

a

Member States may limit the period for observing such
terms and conditions with the proviso that it shall not
be less than one year.

4.

(a) Unless Member States provide otherwise, para-
graphs 1 and 3 shall not apply in relation to
employees’ rights to old-age, invalidity or sur-
vivors’ benefits under supplementary company
or inter-company pension schemes outside the
statutory social security schemes in Member
States.

(b) Even where they do not provide in accordance
with subparagraph (a) that paragraphs 1 and 3
apply in relation to such rights, Member States
shall adopt the measures necessary to protect
the interests of employees and of persons
no longer employed in the transferor’s business
at the time of the transfer in respect of rights
conferring on them immediate or prospective
entitlement to old age benefits, including sur-
vivors’ benefits, under supplementary schemes
referred to in subparagraph (a).

2. Where Articles 3 and 4 apply to a transfer during
insolvency proceedings which have been opened in
relation to a transferor (whether or not
those pro-
ceedings have been instituted with a view to the li-
quidation of the assets of the transferor) and provided
that such proceedings are under the supervision of a
competent public authority (which may be an insol-
vency practitioner determined by national
law) a
Member State may provide that:

(a) notwithstanding Article 3(1), the transferor’s debts
arising from any contracts of employment or
employment relationships and payable before the
transfer or before the opening of the insolvency
proceedings shall not be transferred to the trans-
feree, provided that such proceedings give rise,
under the law of that Member State, to protection
at least equivalent to that provided for in situations
covered by Council Directive 80/987/EEC of
20 October 1980 on the approximation of the laws
of the Member States relating to the protection of
employees in the event of the insolvency of their
employer (**);

and, or alternatively, that

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(b) the transferee,

transferor, or person or persons
exercising the transferor’s functions, on the one
hand, and the representatives of the employees on
the other hand may agree alterations, insofar as
current law or practice permits, to the employees’
terms and conditions of employment designed to
safeguard employment opportunities by ensuring
the survival of the undertaking, business or part of
the undertaking or business.

3.
A Member State may apply paragraph 2(b) to any
transfers where the transferor is in a situation of
serious economic crisis, as defined by national law,
provided that the situation is declared by a competent
public authority and open to judicial supervision, on
condition that such provisions already exist in national
law by 17 July 1998.

The Commission shall present a report on the effects
of this provision before 17 July 2003 and shall submit
any appropriate proposals to the Council.

4. Member States shall take appropriate measures
with a view to preventing misuse of insolvency pro-
ceedings in such a way as to deprive employees of the
rights provided for in this Directive.

Article 5

1.
If the undertaking, business or part of an under-
taking or business preserves its autonomy, the status
and function of the representatives or of the represen-
tation of the employees affected by the transfer shall
be preserved on the same terms and subject to the
same conditions as existed before the date of
the
transfer by virtue of
law, regulation, administrative
provision or agreement, provided that the conditions
necessary for the constitution of the employees’ repre-
sentation are fulfilled.

The first subparagraph shall not apply if, under the
laws, regulations, administrative provisions or practice
in the Member States, or by agreement with the repre-
sentatives of the employees, the conditions necessary
for the reappointment of the representatives of the
employees or for the reconstitution of the representa-
tion of the employees are fulfilled.

Where the transferor is the subject of bankruptcy
proceedings or any analogous insolvency proceedings
which have been instituted with a view to the liquida-
tion of the assets of the transferor and are under the
supervision of a competent public authority (which
may be an insolvency practitioner authorised by a
competent public authority), Member States may take
the necessary measures to ensure that the transferred
employees are properly represented until the new elec-
tion or
the
employees.

designation of

representatives

of

If the undertaking, business or part of an undertaking
or business does not preserve its autonomy,
the
Member States shall take the necessary measures to
ensure that the employees transferred who were repre-
sented before the transfer continue to be properly
represented during the period necessary for the recon-
stitution or reappointment of
the representation of
employees in accordance with national law or practice.

2.
If the term of office of the representatives of the
employees affected by the transfer expires as a result of
the transfer, the representatives shall continue to enjoy
the protection provided by the laws, regulations, ad-
the Member
ministrative provisions or practice of
States.

SECTION III

Information and consultation

Article 6

The transferor and transferee shall be required to
1.
inform the
respective
employees affected by the transfer of the following:

representatives

their

of

— the date or proposed date of the transfer,

— the reasons for the transfer,

— the legal, economic and social implications of the

transfer for the employees,

— any measures
employees.

envisaged in relation to

the

The transferor must give such information to the
representatives of his employees in good time before
the transfer is carried out.

The transferee must give such information to the
representatives of his employees in good time, and in
any event before his employees are directly affected by
the transfer as regards their conditions of work and
employment.

2. Where the transferor or the transferee envisages
measures in relation to his employees, he shall consult
the representatives of his employees in good time on
such measures with a view to reaching an agreement.

3. Member States whose laws, regulations or ad-
ministrative provisions provide that representatives of
the employees may have recourse to an arbitration
board to obtain a decision on the measures to be taken
in relation to employees may limit the obligations laid
down in paragraphs 1 and 2 to cases where the transfer
carried out gives rise to a change in the business likely
to entail
for a considerable
number of the employees.

serious disadvantages

The information and consultations shall cover at least
the measures envisaged in relation to the employees.

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The information must be provided and consultations
taken place in good time before the change in the
business as referred to in the first subparagraph is
effected.

4.
The obligations laid down in this Article shall
apply irrespective of whether the decision resulting in
the transfer is taken by the employer or an under-
taking controlling the employer.

In considering alleged breaches of the information and
consultation requirements laid down by this Directive,
the argument that such a breach occurred because the
information was not provided by an undertaking
controlling the employer shall not be accepted as an
excuse.

5. Member States may limit
the obligations laid
down in paragraphs 1, 2 and 3 to undertakings or busi-
nesses which, in terms of the number of employees,
meet the conditions for the election or nomination of
a collegiate body representing the employees.

6. Member States shall provide that, where there are
no representatives of the employees in an undertaking
or business
the
employees concerned must be informed in advance of:

through no fault of

their own,

— the date or proposed date of the transfer,
— the reason for the transfer,
— the legal, economic and social implications of the

transfer for the employees,

envisaged in relation to the

— any measures
employees.

SECTION IV

Final provisions

Article 7

This Directive shall not affect the right of Member
States to apply or introduce laws, regulations or ad-
ministrative provisions which are more favourable to
employees or to promote or permit collective agree-
ments or agreements between social partners more
favourable to employees.

with the obligations arising from this Directive to
pursue their claims by judicial process after possible
recourse to other competent authorities.

Article 7b

The Commission shall submit
to the Council an
analysis of the effects of the provisions of this Direc-
tive before 17 July 2006. It shall propose any amend-
ment which may seem necessary.

(*) OJ L 206, 29. 7. 1991, p. 19.
(**) OJ L 283, 20. 10. 1980, p. 23. Directive as
amended by Directive 87/164/EEC (OJ L 66, 11. 3.
1987, p. 11).’

Article 2

1. Member States shall bring into force the laws, regu-
lations and administrative provisions necessary to comply
with this Directive by 17 July 2001 at the latest or shall
ensure that, by that date, at the latest, the employers’ and
employees’ representatives have introduced the required
provisions by means of agreement, Member States being
obliged to take the necessary steps enabling them at all
times to guarantee the results imposed by this Directive.

2. When Member States adopt the measures referred to
in paragraph 1, they shall contain a reference to this
Directive or shall be accompanied by such reference on
the occasion on their official publication. The methods of
making such reference shall be laid down by Member
States.

Member States shall inform the Commission immediately
of the measures they take to implement this Directive.

Article 3

This Directive shall enter into force on the day of its
publication in the Official Journal of the European
Communities.

Article 4

This Directive is addressed to the Member States.

Article 7a

Done at Luxembourg, 29 June 1998.

Member States shall introduce into their national legal
systems such measures as are necessary to enable all
employees and representatives of employees who
consider themselves wronged by failure to comply

For the Council

The President

R. COOK