In 1977 the Transfer of undertakings directive, 77/187/EEC, was adopted by the Council. According to the preamble, the differences in employee protection among the Member States can have a direct effect on the functioning of the Single Market. The purpose of the Directive is (Article 1) to protect employees’ rights in case of a ‘ transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger’. It aims to achieve partial harmonisation of the Member States’ legislation by extending the protection of workers to cover the case of transfer of undertakings. The aim of the Directive is to ensure, as far as possible, that the employment relation continues unchanged with the transferee and that the workers are not placed in a less favourable position solely as a result of the transfer.

The aim is not, however, to establish a uniform level of protection throughout the Community on the basis of common criteria, thus prohibiting Member States from introducing more employee-favourable provisions than those of the Directive. As a result, the protection of employees’ rights in these situations may differ amongst the Member States. However, the ECJ has delivered many decisions related to the interpretation of the Directive whereby the substantive provisions have often been given an extensive and flexible interpretation.

The Directive gave rise to a long series of different problems of interpretation and a large number of cases were referred to the European Court of Justice. In 1997 the Commission published a Memorandum on acquired rights of workers in cases of transfers of undertakings, intended to serve as guidance on the application of Community law. With Directive 98/50/EC amending the original Transfer of undertakings directive, the Council mainly codified the abundant case law of the Court. These Directives were in turn repealed in October 2001 through the revised Transfer of undertakings directive 2001/23/EC,which was adopted ‘ [i]n the interests of clarity and rationality’ but did not materially change the Directive or the scope of the original Transfer of undertakings directive which had been interpreted through ECJ case law.

The Directive is applicable when the undertaking to be transferred is situated within the ‘territorial scope of the Treaty’. Another prerequisite for the applicability of the Directive is that there is a transfer of employer. The ECJ stated in Allen v. Amalgamated Construction that there can be a Directive-relevant transfer when there is:

a change in the natural or legal person responsible for carrying out the business, who by virtue of this acquires the obligations of an employer vis-à-vis employees of the undertaking, regardless of whether or not ownership is transferred. For instance, if a person acquires the stock of a company but the employer remains the same, the Directive does not become applicable.


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