CELEX: 51975PC0429
Language: en
Date: 1975-07-25
Title: Amended Proposal for a COUNCIL DIRECTIVE on harmonization of the legislation of Member States on the safeguarding of employees' right and advantages in the case of mergers, takeovers and amalgamations (Amendment presented by the Commission to the Council pursuant to Article 143, second paragraph of the EEC-Treaty)

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DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (75) 429
Vol. 1975/0165
 ---pagebreak--- Disclaimer
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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
                                   COM(75)429 final
                                   Brussels , 25 , July 1975
                        Amended Proposai for a
                           COUNCIL DIRECTIVE
            om harmonization of the legislation of Member
            States on the safeguarding of employees ' right
            and advantages in the case of mergers , take­
            overs and amalgamations
            ( Amendment presented by the Commission to the
            Council pursuant to Article 143 , second
            paragraph of the EEC-Treaty )
  COM(75 ) 429 final
 ---pagebreak---                                                      V/631/1 /7^-E
                            EXPLANATORY MEMORANDUM
A. INTRODUCTION
   1 . Developments in the economy are producing a rapid increase in
concentrations between undertakings both at national and Community
level . The extent of these developments is borne out by the following
statistics : between 1962 and 1970 , the annual total of amalgamations
in the six original Member States rose from 173 to 612 , i.e. an in­
crease of three and a half times in nine years . From 1966 to 1970 alone
the rate of increase doubled by comparison with the period 1962 to
1966 . In some Member States , the increase in the number of amalgamation
has reached the point where 50 % of total industrial turnover is ac­
counted for by one hundred of the largest industrial undertakings .
   2 . This grouping process is the result of company mergers , transfers
of undertakings and of undertakings gaining control of other underta- *
kings .                                                       -  ' •
   3 » These developments have made it necessary to create appropriate
legal framework at Community level . A number of legal instruments have
been drafted for this purpose , including the Proposal for a Third
Directive on mergers between companies , the preliminary draft Conven­
tion on international mergers between companies , the Proposal for a
Council Regulation on the control of amalgamations of companies and
the Proposal for a Statute for European companies .
        The purpose of these legal instruments is to regulate the pro­
blems thrown up by this grouping process in the fields of company
and competition law .
 ---pagebreak---  dj . • ** • 1    .»•
                                   :                . 2 -         '     v/63W7^-E
             h-. It remains clear , however , that changes in the structure of under­
             takings caused by this grouping process often have far-reaching effects
             on the welfare of employees in the undertakings affected . The laws of
             the Member States , to the extant that they regulate such operations ,
             do not always take sufficient account of the interests of employees .
             This is particularly true where such changes are carried out in ac­
             cordance with civil law rules governing transfers which give employees
             no legal rights vis-a-vis thenew employer as regards maintenance of
             the employment relationship .
                     These problems and the need to resolve them at Community level have
             already been recognized . The legal instruments referred to above thus
/
              contain provisions safeguarding the interests of employees more effec
              tively when changes occur in the structure of undertaking . The fact should
             not be overlooked , however ^ that $hese legal instruments , in view of
              their scope and the particular nature of their social provisions , re­
             present only a partial solution tp the problems which employees face when
               changes in the structure of undertakings occur .
               6 . In its Resolution of 21 January 197^ concerning a social action
              programme , the Council voiced the political will to adopt the measures
              necessary to bring about an improvement in living and working conditions
               and to harmonize them as the programme progressed , including the pro­
               tection of employees' interests , particularly as regards the retention
               of their rights and advantages in the case . of amalgamations , business
               concentrations and rationalization operations .
                      It should be noted in this connection that the government experts
               from the six original Member States responsible for drawing up a Preli­
               minary draft Convention on international mergers between companies drew
               attention in 1972 in a joint declaration on behalf of their governments
               to the need to protect employees by means of a special comprehensive
               legal instrument when any kind of business concentration occurred .
 ---pagebreak---                                    - 3 -              V/63l /1 /7^-E
   7«  That is the object of this proposed Directive , which the Com­
mission has undertaken to submit to the Council#
       The aim of the proposed Directive is to protect employees from
losing acquired and future rights in the event of transfers of under­
takings or amalgamations by introducing provisions affording protection
and safeguards#
       This aim is to be achieved by the following means :
   transfer of the employment relationship from the transferor to the
   transferee in the event of a change of ownership ;
-  protection of employees against dismissal on the sole ground      of
   transfer of an undertaking or an amalgamation ;
   provision of information , consultation and negotiations with em­
   ployee representatives regarding the interests of the employees
   affected .
   8 , The proposed Directive seeks , in accordance with Article 117
of the EEC Treaty , to promote improved working conditions and an im­
proved standard of living for workers so as to make possible their
harmonization while the improvement is being maintained through ap­
proximation of provisions laid down by the law , regulation or admi­
nistrative action of the Member States .
 ---pagebreak---                                  - if -               V/b3Vï /7k-&
B , COMMENTARY ON THE INDIVIDUAL PROVISIONS
Article 1
        This Article lays down the scope of the proposed Directive#
        It covers the transfer of undertakings or parts of undertakings
to another owner through mergers between or conversion of companies ,
and other legal transfers .
        The proposed Directive does not at this point introduce its own
conceptual definitions , leaving this task to the laws , regulations and
administrative provisions of the Member States and future Community law .
By the latter is meant the Proposal for a Third Directive on mergers
between companies and the preliminary draft Convention on international
mergers between companies .
        All legal transfers are covered , i.e. not only transfers of
property but letting , leasing and the granting of beneficial interests .
In addition , not only are transfers of whole undertakings covered , but
also cases where individual establishments are transferred from one
undertaking to another .
        With regard to the concept of a company , the proposed Directive
refers to the second paragraph of Article 58 of the EEC Treaty and
thus covers all companies or firms governed by civil or commercial
law , including cooperative societies , and other legal persons governed by
public or private law , except for those not operating for gain .
        Although all forms of legal transfer of undertaking3 are charac­
terized by a change of ownership and thus of employer concentrations
between undertakings generally take place in such a way that the un­
dertakings remain autonomous legal entities and the identity of the
 ---pagebreak--- /·    " -Ί·,    -                                                                 ' *
   ·'      .V*    !
                                            - 5- .               V/631 /1 /7^-E
      employer remains the same . All that happens is that one undertaking
      gains control of others .
                  Although with such amalgamations the identity of the owner or
      employer remains the same the controlling undertaking can , by virtue
      of its rights of control exert considerable influence on the form of
      the employment relationships in the dependent . undertaking , with pos­
      sible adverse effects on employees' working conditions . Employees are
      thus in need of protection similar to that needed in the case of trans­
      fers of undertakings . Since , however , the legal identity of the employer
      remains unchanged all legal consequences stemming from, a change of em­
      ployer are ruled out . Paragraph 2 thus provides £hat only those provi­
      sions of the proposed Directive which secure claims under company .
      pension schemes ( Article 5 ), which deal with the protection of employees .
      against unjustified dismissal " and where there is a fundamental change
      in their working conditions ( Article 6 ), which govern transfers of
      employees ( Article 7 ) and which provide 'a procedure for consulting
      employees ( Article 9) are to apply by analogy .
                  With regard to the concept of control , the proposed Directive
      does not give its own definition , and refers to Article 2 of the Pro­
      posal for a Council Regulation on the control of amalgamations of
      companies .             ^
               ( With regard to the territorial scope of the proposed Directive ,
      it appears necessary to protect the rights of employees not only in
      cases where the transfer or amalgamation involves establishments or
      undertakings situated within the territory of a Member State or of
       several Member States , but also to include transactions involving
       establishments or undertakings situated in the territory of one or
       several Member States and in the territory of one or several non-
       member states .            -
 ---pagebreak---                                  - 6 -                У/631 /1 /7^-Е
Since for legal reasons it is impossible to thrust this proposed Com­
munity legislation on non-member states , paragraph 3 provides that
the Directive shall apply in the latter case only insofar as establish­
ments or undertakings situated within the territory of the SEC are
affected by it .
Article 2
       The definition of the concepts of " transferor " and " transferee "
in paragraph 1 is of legal significance in relation to changes of
ownership , and is intended to simplify the language used in the pro­
posed Directive .
       Paragraph 2 makes it clear that " employee representatives " means
employee representatives as designated by the law of the Member States .
The proposed Directive thus does not interfere with the machinery and
structural arrangements of employee representation at national level .
Article 3
       This Article which provides for automatic transfer of the em­
ployment relationship to the transferee , is the core of the proposed
Directive . It is designed to prevent the transferee from refusing to
retain employees by virtue of civil law provisions governing transfers ,
and from even agreeing with the transferor that transfer of employment
relationships shall be excluded . The transferor would in such a case
have no alternative but to dismiss employees excluded from the transfer
which would be contrary to the objective of protecting employees .
       According to prevailing legal opinion under all national sys­
tems of law commercial practice forms part of an employment relationship
to the extent that it gives rise to rights and obligations on the part
of the contracting parties .
 ---pagebreak---                                      - 7-               V/631/1 /7^E
The - fact that these rights and obligations are also transferred is .
made clear in paragraph 1 .      . .
          Transfer to the transferee of rights and obligations arising
out of collective agreements calls for different arrangements to meet
the varying cases . Where the transferor has been party to a collective
agreement it appears logical that the transferee should automatically
assume the transferor's rights and obligations arising out of such an
agreement , as stipulated in paragraph 2 , until the parties have conv
eluded a fresh collective agreement or agreements .
          The legal position is different in the case of collective agree­
ments concluded between trade associations to which the transferor ^ but
not: the transferee , is party ajid which have not been declared generally
binding . It would in this case be contrary to the principle of freedom
of association as protected under the constitutional law of the Member
 States to make the transferee party to a collective agreement against
his will . In order , however , to prevent employee from losing collectively
 agreed teres of employment should the transferee be unwilling to become
 party to the collective agreement j a solution has been sought in para­
 graph 3 which does not impose the collective agreement upon the trans­
 feree but requires him to continue to respect terms of employment al–
 ready secured under a collective agreement until the parties have conclu
 ded a fresh collective agreement or agresments , although for a period
 not exceeding one year . Where the parties fail to conclude a fresh agree
 ment within this period and the transferee is bound by another col­
 lective agreement , the latter applies .
           The provisions in paragraphs 2 and 3 on continuation of the
 validity of collective agreements correspond to a large extent to the
 views expressed by the Economic and Social Committee on this point .
 ---pagebreak---                                                    \
                                   -8 -                 V/63l /l /7^-E
Article k
        This Article provides that an employee 's length of service with
the transferor is one of the factors protected under the employment
relationship . In this way , the employee is guaranteed continuity of
the period of employment , irrespective of whether or not provisions
laid down by law , or contained in collective agreements or an indivi­
dual contract of employment applicable to the employment relationship
which is the subject of the transfer call for particular legal conse­
quences according to the length of service in the establishment or
undertaking .    '                                                ,
Article 5
        Employees' 'acquired and future rights   arising out of company
or inter-company welfare schemes , whether for pensions or relief in
the event of sickness or other circumstances s represent for employees
an important part of the employment relationship . However , it is clear
that the requirements , forms and nature of such obligations differ so
greatly and the ways in which they are organized are so varied , that
it is not possible to lay down specific Community rules in this pro­
posed Directive . Nor are these necessary to attainment of the objec­
tives of the Directive . For this reason , the proposed Directive con­
fines itself to requiring Member States £0 ensure that employees do
not lose rights , and leaves to them the choice of ways and means .
Article 6
        Protection of the employment relationship which is the purpose
of this proposed Directive could be circumvented if the transferor or
transferee were to dismiss employees by reason of the transfer . This
is already prohibited by law in some Member States .
 ---pagebreak---                                        • 9 -: '           v/esi /i /^-E
  In others , however , employers are free to dismiss employees in such
  circumstances . The uniform provision had therefore to be included
  that dismissals on the occasion of a transfer of an undertaking are
  permitted only for pressing business reasons .
            Economie common sense dictated the latter qualification .
  It is intended to enable an entrepreneur to carry cut organizational
  changes , adaptation of production , rationalization measures etc . on the
  occasion of the transfer of an undertaking . This can be of importance ,
  for example , where a transfer is carried out to restore health to
  economically weak undertakings . In such circumstances , the employees in the
  undertakings concerned may be affected both quantitatively and qualita­
  tively aud dismissals may even prove unavoidable .
            The proposed Directive deliberately refrains from giving a
  list of business reasons . These oan vary so greatly according to the
  circumstances of each case that to draw up such a list appears im­
  possible , and any attempt to do so in this Directive would only be
  confusing . It is thus left to the individual Member States to define
  the concept of "pressing business reasons ", either through legislation
  or by leaving it to be determined in the courts or in collective agree-
                                                                %
  ments .
            It accords , however , with the objectives of the proposed Di­
, rective that reliance on pressing business reasons to carry out dis­
  missals is possible only if all possible solutions within the under­
  taking ; such as transfers to another acceptable job , measure for re­
  adjustment and retraining have first been exhausted . It is evident that
  the procedure for informing and consulting employee representatives
  provided       in Article 9 of the proposed Directive serves as an agpfopria-
  te framework for those concerned to reach agreement on how the problems
  arising in this context are to be resolved .
 ---pagebreak---                                     - 10 -              У/б31/1/7^-Е
           Moreover , in the event of collective redundancies , the Coun­
cil Directive ( 1 ) of 17 February 1975 on the approximation of the laws
of the Member States relating to collective redundancies applies , which
provides for consultation of employee representatives , a duty prior
notification of collective redundancies , and intervention by public
authorities i
           Where an employee no longer wishes to continue the employment
relationship with the transferee because the transfer of the under­
taking has resulted in a fundamental and detrimental change in his
working conditions , it would appear justified , as paragraph 2 provi­
des , to treat the employee as though termination of his employment
has been due to the action of the employer .
           The proposed Directive does not stipulate any legal conse­
quences based on Community law that should follow dismissals of the
kind referred to in paragraphs 1 and 2 , but provides in paragraph 3 that
the legal consequences of such dismissals should be governed by the
laws of the Member States .
Article 7
           This provision governs cases where employees are transferred
to other establishments as a result of the transfer of the undertaking ,
by making provisions of Article 6 applicable by analogy . This means
that transfers of employees are possible only for pressing business
reasons and that an employee may terminate the employment relation­
ship as provided in Article 6(2 ) where such transfer would result
in a fundamental and detrimental change in his working conditions .
           These provisions cannot apply of course where the employee
is bound under his contract of employment to accept a transfer , but
only insofar as this could reasonably be expected in the circumstances
prevailing when the contract of employment was concluded , even following
transfer of the undertaking .
 ( 1 ) OJ No L ko . 22 February 1975
 ---pagebreak---  JW* JP
                                     - 11 -             V/63 1 /1 /74-E
Article 8
         This provision guarantees that the legal status and function of
employee representatives ( as defined in Article 2(2 ) are not affected
by transfers of undertakings . Where an undertaking is transferred as
a complete entity , employee representatives in office at that time
continue to exercise their functions even after completion of the
transfer . This is not , however , feasible where only a part of an un­
dertaking is detached from one undertaking and incorporated into ano­
ther undertaking , the employee representatives in the new undertaking
becoming responsible for it at that point .
         Provisions in some Member States stipulate that new elections
of employee representatives must be held in the event of changes in
the composition of the work force# Such circumstances can arise , for
example , where a single overall works council has to be formed for the
new company when companies merge , each of whom previously had such a
works council . Paragraph 2 takes account of this special legal situation .
Article 9
         The substantive provisions on the protection of employees' ac­
quired rights need to be supplemented by procedural provisions which
ensure that employee representatives are informed of and consulted
upon the consequences of the transfer of an undertaking . Such provisions
are contained in the Proposal for a Third Directive on mergers bet­
ween companies in respect of mergers between limited companies within
the same Member State .
         In order to prevent overlapping between the two directives ,
paragraph 5 excludes application of this provision to mergers between
companies to which the Third Directive applies .
 ---pagebreak---                                   - 12-                V/631 /1 /7^-E
Secondly , m order to avoid xn practice Jrhe application of a multitude
of differently structured and oriented procedural provisions , emphasis
has been placed on the form of these provisions being largely identical
in both proposed Directives as far as this was possible having regard
to the special features of the transactions to be regulated .
        The first aim is to require both transferor and transferee to
inform their respective employee representatives in detail of the
reasons for the transfer of the undertaking , it effects on employees
and measures concerning them , and if necesssary to discuss these with
the employee representatives . Such information must in principle be
provided in the form of a written report two months before completion
 of the transfer of the undertaking . To render this provision more
flexible and to enable it to be applied to all transactions covered by'
the proposed Directive , provision was made that , by way of exception ,
both the two month period and the requirement of writing may be dis­
pensed with . In every case , however , information must be given in
due time , "due time " being determined according to the circumstances
of each individual case . Provision should also be made for cases in
which the employees 1 representatives consider that the proposed trans­
action will be detrimental to the interests of employees . Employee
representatives should in such oases have the right to call for nego­
tiations with a view to reaching agreement on measures to be adopted
for the benefit of employees . Lastly , provision must be made for cir­
cumstances in which the negotiations requested by employee represen­
tatives fail to produce agreement . Each party should in this case have
the right to refer the matter to arbitration . The arbitration board
gives a binding decision on the measures to be adopted for the benefit
of employees .
         Rules governing the setting up of arbitration boards cannot- be left en­
tirely to the national legislatures . It must at least be guaranteed
that the board is composed of persons who are really conversant with
the problems to be solved . Half the members must accordingly be appoin­
ted by the employer ancl half by the employee representatives . The
chairman is appointed by mutual consent of the parties .
 ---pagebreak---                                  - 13                 V/631/1 /7't-E
The competent court intervenes only where agreement cannot be reached
on this point 4
       Paragraph    provides that the obligation to negotiate pursuant
to Paragraph 1   and the negotiation afcdoarbitration procedure pursuant
to Paragraph 3 can neither prevent nor postpone completion of the pro­
posed transfer .
Articles 10 to 13
       These Articles contain the necessary implementing provisions .
 ---pagebreak---                                                       V/63v1 /?^-E
                          Anended Proposai for a
                             COUNCIL DIRECTIVE'
                    on harmonization of the legislatxon of
                    Member States on the safeguarding of
                    employees 'rights and   advantages in the
                    case of mergers , takeovers and amalgama­
                    tions
THE COUNCIL OF THE EUROPEAN COMMUNITIES ,
Having regard to the Treaty establishing the European Economic Com­
munity , and in particular Article 100 thereof ;
Having regard to the Proposal from the Commission ;
Aftsr consulting the European Parliament }
After consulting   the Economic and Social Committee 5
Whereas the establishment of a single market for all products and the
free movement of persons and means of production in the Community has
not only resulted in an enlarged market for European undertakings and
keener competition in the markerts of the Member States , but the eco­
nomic union thus created has compelled undertakings to alter their
structures , methods and size , in particular through mergers and amal­
gamations , in order to adjust to the new demands of the oommon market .
 ---pagebreak--- whereas under Article 2 of the Treaty the Community has as its task ,
by establishing a common market and progressively approximating the
economic policies of Member States , to promote throughout the Commu­
nity a harmonious development of economic activities ; whereas under
the same Article its task is , further , to promote an accelerated raisin
of the standard of living , whereas moreover , the Member States agreed
in Article 117 upon the need to promote improved working conditions
and an improved standard of living for workers , so as to make possible
their harmonization while the improvement is being maintained , in par­
ticular through approximation of provisions laid down by law , regula­
tion or administrative action in the Member States 4
Whereas the Council not onlyreaffi£n>es this objective in its Resolution
of 21 January 197^ concerning a social action programme ( 1 ) but also 1
voiced the political will to adopt the measures necessary to achieve
it .
Whereas changes in the structure of undertakings do not always assist
the attainment of these objectives , but on the contrary tend to ad­
versely affect employees 1 living and working conditions , in particular
with regard to safeguarding their rights and advantages ; whereas the
same problems arise irrespective of the way in which the structure of
the undertaking is altered * •                            .         .
Whereas action musttherefore be taken at Community level to protect
employees in the event of changes in the structure of undertakings so
as to ensure as far as possible security of employment , the maintenance
of working conditions , the preservation of right<5 secured under indi­
vidual contracts of employment or collective agreements , and 'the reten­
 tion of generally recognized practices and special arrangements in for­
 ce in undertakings .
Wheraas employees must likettfise be protected in the territory of the
 Community where a person or undertaking situated in the territory of a
 third country is involved in the transaction .
 ( 1 ) OJ No C 13 , 12 February 197^
 ---pagebreak---                                     - 3 -                V/631 /1 /7^-E
whereas it xs moreover essential that employees of the undertakings
in question    are informed of and consulted upon the consequences of
the transaction insofar as they are affected., and that provision       is
made for an appropriate negotiating procedure •
Whereas such action can only be taken on the basis of the progressive
harmonization of provisions laid down by law , regulation or adminis­
trative action in the Member States for theproteotion of employees in
the event of changes in the structure of undertakings ,
HAS ADOPTED THIS DIRECTIVE :
                               PAPT I
                        SCOPE AND DEFINITIONS
                              Article 1
1 ) This Directive shall apply to the transfer of undertaking or parts
of undertakings to smother owner through mergers between or conversion
of companies within the meaning of the second paragraph of Article 58
of the Treaty establishing the European Economic Community , or by way
of other legal transfers .
2 ) Artciles 5 , 6 , 7 and 9 of this Directive shall apply by analogy to
concentrations between undertakings within the meaning of Article 2
of Council Regulation No                of ••••••• , where such a concen-
                                                      4.
tration has the same effect upon dependent or controlling undertaking
as would a transfer within the meaning of parp^raph 1 .
 ---pagebreak---     y
                                   - i» -■             V/631 /1 /7^E
3 ) This Directive shall apply where and insofar as the transferring
or dependent undertaking is situated in the territory of the Member
States of the European Economic Community or the transfer or concen­
tration affects an undertaking within that territory involved in such
a transaction .
                              Article 2
1 ) For the purposes of this Directive transferor or transferee means
any natural or legal person that relinquishes or acquires an interest
in an undertaking by reason of a transfer of the kind specified in
Article 1 .
2 ) For the purposes of this Directive employee representatives means
employee representatives as designated by law or practice in the Mem­
ber States-
                               PART II
                         TRANSFER OF EMPLOYMENT RELATIONSHIP
                              Article 5
1 ) The transferor 's rights and obligations arising out of the employment
relationship entered into by him shallj upon the occasion of a transfer
within the meaning of Article 1 , be atomatically transferred to the
transferee and shall include rights and obligations arising out of
commercial practice .
                                           /                            ^
2 ) The transferor 's rights and obligations arising out of collective
agreements entered into by him shall , upon the occasion of a transfer
within the meaning of Article 1 , be automatically transferred \ to the
 transferee and shall continue to exist until the parties have concluded
 a fresh collective agreement or agreements .
 ---pagebreak---                                  - 5 -                V/ 631 / 7/7*f-E
3 ) Conditions of employment agreed under a trade association collective
agreement to which the transferor has been party shall continue ts be
valid following a transfer within the meaning of Article 1 even where
the transferee is not bound by the same trade association collective
agreement as the transferor , until the parties have concluded a fresh
collective agreement or agreements but for a maximum of one year following
the transfer# Where no fresh collective agreement is concluded within
this period and the transferee is party to a trade association collective
agreement , the terms of that agreement shall apply#
b ) The legal consequences of paragraphs 1 to 3 cannot be excluded or
restricted by declarations on the part of the transferor or transferee .
                               Article h
An employee 's length of service with an undertaking based on his em­
ployment relationship with the transferor shall for all relevant pur­
poses be taken fully into account in his relationship with the trans­
feree .
                                 PART III
          CLAIMS ARISING OUT OF COMPANY AND INTER-COMPANY
                          PENSION SCHEMES
                               Article 5
1 ) The Member States shall adopt measures necessary to ensure that
employees 'acquired rights and future rights to payments from company or
inter-company pension schemes are not diminished as the result of a
transfer within the meaning of Article 1 .
2 ) The Member States shall adopt the same measures in respect of em­
ployees so entitled but no longer employed by the undertaking at the
time of a transfer within the meaning of Article 1 »
 ---pagebreak---                                                          V/63V1 / 7^-E
                                 PART IV
                         DISMISSALS AND TRANSFERS
                               Article     6
1 ) A transferor or transferee may dismiss employees on the occasion
of a transfer within the meaning of Article 1 only for pressing business
reasons .
2) Where an employee severs an employment relationship because a trans­
fer within the meaning of Article 1 has resulted in a fundamental and
detrimental change in his working conditions , the employer shall be
regarded as having been responsible for termination of the employment
relationship .
3 ) The legal requirements and consequences of dismissals prohibited
under the terms of paragraph 1 , and of severance of employment relation­
 ships in the circumstances referred to in paragraph 2, shall be governed
 by the laws , regulations and administrative provisions of the Member
 States . The same shall apply in respect of severance payments and com­
 pensation payable in the event of termination of an employment relation­
 ship .
                              Article 7
 Article 6 shall apply by analogy to transfers of employees from one
 establishment to another on the occasion of a transfer within the
 meaning of Article 1 . It shall , however , not apply where an employee is
 bound by his contract of employment to accept transfer to another es­
 tablishment and where such acceptance could reasonably be expected in
  the circumstances prevailing when the contract was concluded .
 ---pagebreak---                                                        V/631/1/7 i+-E
                                  PAPT V                                  :
                     EMPLOYEE . REPRESENTATION AND
                             CONSULTATION
                                 Article 8
1 ) The legal statue , and function of employee representatives in un­
dertakings transferred within the meaning of Article 1 shall remain
unaffected by such transfer . This shall not apply in the case of trans­
fers of parts of undertakings .
2 ) The first sentence of paragraph 1 shall not apply where , the conditions
for new elections are met under the laws , regulations cr administrative
provisions or according to current practice in the Member States#
                                 Article 9
1 ) The transferor and transferee shall be required to inform their
employee representatives of the reasons for. transfers within the meaning
of Article 1 , of the legal , economic and social consequences for employee
and of all intended measures affecting employees . It is requested by the
employee representatives that the action to be taken should be negotia­
ted by the parties .
2 ) Such information shall in general be given not less than 2 months
before completion of a transfer within the meaning of Article 1 in the
form of a detailed report . In special circumstances and by way of ex­
ception , information given orally and in due time prior to completion
of a transfer within the meaning of Article 1 shall suffice .
3 ) Where the employee representatives consider that the interests of
employees are adversely affected by a transfer within the meaning of
Article 1 , the transferor and transferee shall , at the request of their
employee representatives , negotiate with them with a view to reaching
agreement on measures to be adopted for the benefit of such employees .
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If , on completion of such negotiations or within 2 months of their
commencement , the parties fail to reach agreement each of them shall
be entitled to refer the matter to an arbitration board , which shall
                                     ■ •» •
give a binding decision on such measures within one month . The arbitra­
tion board shall be composed of arbitrators * equal numbers of whom
shall be appointed by each party , and a chairman appointed by mutual
consent of the parties * Where one / party fails to appoint arbitrators
or where no agreement is reached on the appointment of the chairman
appointment shall be made by the court .
k ) Transfers of undertakings shall not be affected by the necessity;
of having a negotiation provided for in paragraph 1 and by the nego­
tiation and arbitration procedure provided for in paragraph 3 *
5 ) This Article shall not apply to mergers between companies within
the meaning of.theThird Council Directive - (EEC ) No        of ;      •
 ,  .                        PART VI                       .
                   ~ ' FINAL PROVISIONS         v ''             /      '
                          Article 10                 •
 This Directive shall not restrict the right of Member States to apply
 or to adopt laws , regulations or administrative provisions more fa­
 vourable to employees .                           •    r     -
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                               Article 11
1 ) Member States shall adopt the laws , regulations ans administrative
provisions necessary to comply with this Directive within twelve months
of its publication ,  and shall forthwith inform the Commission thereof .
2 ) Member States shall communicate to the Commission the texts of laws ,
regulations or administrative provisions which they adopt in the field
covered by this Directive .
                               Article 12
Member States shall within twelve months of the expiry of the twelve
month period specified in Article 11 , forward to the Commission all
relevant information to enable the Commission to draw up a report    for
the Council on the application of this Directive .
                             _ Article 13
This Directive xs addressed to the Member States