The old or the new employer must inform every employee individually prior to the transfer. It is not sufficient to inform the employee representatives.
Involvement of employee representatives
Although consent of the employee representatives is not required for the transfer, the transferor and the transferee may be required to inform and consult with the employee representatives. There is no obligation to inform or consult the unions, but there are three types of representatives of employees that could be involved: the works council, the economic committee and the spokespersons’ committee. If so, these bodies must be informed and consulted by the employer.
In businesses with more than 20 employees on average, the employer must inform the works council promptly and fully of planned operational changes that could result in significant disadvantages for employees or a considerable proportion of the employees. The employer must also provide any information necessary for the works council to evaluate the forthcoming operational changes and detrimental effects on employees.
Operational changes include:
Generally, the transfer of the whole undertaking does not in itself constitute a change in the employer’s structure or its operations. However, the transfer of a part of a business is, in most cases, deemed to be an operational change even if, at first sight, no further measures affecting the employees are planned or will be carried out.
The works council and the employer must try to agree a ‘reconciliation of interests’ and, if necessary, a social plan. In the reconciliation of interests, the parties will stipulate if, when and how the planned operational changes will be implemented. In the social plan, the parties must agree on how to mitigate financial disadvantages suffered by the employees. If no agreement is reached on either aspect, the parties may request the Governing Board of the Federal Employment Agency to mediate. If no agreement about the social plan is reached, the conciliation board, which is a type of arbitration tribunal, will make a final and binding decision.
Failure to negotiate a reconciliation of interests may result in claims by employees for compensation. If the employer fails to inform and consult with the works council it could incur an administrative fine of up to EUR 10,000. Further, failure to inform and consult may prevent the implementation of the transfer if the works council applies for a preliminary injunction.
Employers with more than 100 employees on average must establish an economic committee. The committee comprises three to seven members who are employees, one of whom must be a member of the works council. The economic committee must discuss economic matters with the employer, with a view to influencing any plans and offering suggestions. In addition, it must forward information and advice to the works council. Its function is to promote cooperation and exchanges of information between the employer and the works council. In the event of a major asset deal and/or transfer of an undertaking, it is generally presumed that the economic committee must be informed.
Therefore, the economic committee must be given the opportunity to discuss the matter with the employer and to inform the works council. The economic committee must be provided with all of the information that the employer used to make its decision. The information must be provided in a comprehensible form and its context and any unknown terms must be explained. However, the employer is not under an obligation to obtain or create information specifically for the purpose of passing it on to the economic committee.
Spokespersons’ committee (‘Sprecherausschuss’)
The works council does not represent managerial employees. Therefore, in businesses with more than ten managerial employees, those employees may elect their own representation, or ‘spokespersons’ committee’. The function of the spokespersons’ committee is to work together with the employer for the benefit of the executives and the business. The employer must also inform the spokespersons’ committee, in parallel with the information to be given to the works council, of any planned changes in operations that could cause serious disadvantages to managerial employees. If the managerial employees suffer any economic disadvantages as a result of changes in operations, the employer must discuss measures to compensate for or reduce this with the spokesperson’s committee. However, the employer is under no obligation to conclude agreements along the lines of a reconciliation of interests or social plan.
Notification to the employment office
Where the transferor or transferee plans collective dismissals (e.g. dismissals within a 30-day period affecting more than five employees in an establishment of 21-59 employees; more than 25 employees or at least 10% of the workforce in an establishment of 60-499 employees; and at least 30 employees in an establishment of 500 or more employees) either before or after the transfer, the competent employment office must be notified. Otherwise, any termination of employment will be void.