Transfer of Undertakings Directive: The History of a European Union Social Policy Directive

Ghosheh, N. S., Jr., Gill, Colin, International Journal of Employment Studies

This article considers some the issues relating to the creation, implementation and definition of Council Directive 7711871EEC (the Acquired Rights of Workers in case of Transfers of Undertakings)--usually known as the Transfer of Undertakings Directive.

It is argued that the drafting of the Directive was subject to many imperfections as a legislative tool when it came into effect. It was a product of its time and the seeds of future problems that were to emerge in later years in its implementation had already been sown. A comparison is made of how industrial relations actors in Ireland, Germany and Spain have defined the Directive and how this has influenced the implementation of the Directive in those three member states. The paper explores four broad topics that the Directive was meant to address which include: what is a transfer of undertaking, business, or part of a business?; information and consultation; dismissal of workers and compensation; and sanctions for violating the Directive.

The article concludes that the 1977 Directive and its updated 1998 version have enhanced the employment protection rights of workers to some degree, but particularly in Ireland. In Spain and Germany, employees were already well protected in transfer cases. Finally, the future application of the 1998 version of the Directive is discussed.

INTRODUCTION

In 1977, EC Directive 77/187/EEC came into effect in the Member States of the European Economic Community (EEC). The Directive was one of the few directives created as a result of the European Community's First Social Action Programme of 1974 which was meant to further address social policy issues within the European Community Member States. Directive 77/187/EEC which has been commonly known as the Transfer of Undertakings Directive, was meant to safeguard the rights of workers in the event of a transfer of undertakings, businesses, or parts of business. While this Directive has provided many workers with some protection, it has been problematic for industrial relations and institutional actors at both European Community level and at Member State level.

DIRECTIVES: METHOD OF EUROPEAN COMMUNITY POLICY IMPLEMENTATION IN MEMBER STATES

Since its inception, the European Community (EC) has maintained various means for creating rules for implementation within the Member States in order to achieve its policy objectives. One of the legal tools at the disposal of the institutions of the EC is directives. Directives were defined by the Treaty of Rome in Article 189 which stated that they must be binding as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authorities the choice and form of methods. Directives were not initially assumed to be directly applicable and were thus not able to produce direct effects (Steiner, 1993) (1). Since the early 1970s the European Court of Justice (ECJ), in its legal decisions, has defined the applicability of directives to confer rights on individuals against a Member State but do not impose such rights on other individuals (2).

Directives are, however, subject to certain notable imperfections as a legislative tool. First, as directives often involve extensive negotiations between institutional actors and, in this case, industrial relations actors and their representatives, the final product is not often what is initially anticipated. Secondly, while they allow for flexibility in the method of adaptation of EC policy, and hence are a favoured tool of the EC Commission, it can result in different interpretations by institutions and actors in the Member States. The consequence of this can be differing interpretations and application of the directive in different Member States.

The Transfer of Undertakings Directive (77/187/EEC) was the product of such negotiations and the result did not completely achieve what had been initially anticipated. There are notable reasons for this, which have in turn contributed to the long-term difficulties in its application. Some of these reasons will now be explored.

TRANSFER OF UNDERTAKINGS DIRECTIVE: ISSUES AFFECTING ITS CREATION

The most notable feature of the Transfer of Undertakings Directive was that it was a product of its time (3). Several factors contribute to this assessment which will be assessed in turn.

To begin with, in the early 1970s there was a developing political will among the heads of governments of the Member States to further develop social policy. Prior to 1970, the creation of social policy initiatives by the EC Commission had been stifled to some degree by the political will of the Council of Ministers who refused to allow the Commission beyond either the Treaty of Rome's ambit or its own defined parameters. When the Commission attempted in 1966 to do so, the political fallout was so great as to threaten the existence of the EC (4). A significant turn was taken by the heads of the Member States at the Paris Summit of 1972. At this point the Council made two decisions which were vital to social policy development, especially as it regarded the creation of the Transfer of Undertakings Directive. The Council first instructed the Commission to develop a social policy programme that should also provide for increased participation of the social partners in the Community decision-making process. Of greater significance, however, was that as a manifestation of political will, the ministers authorised the future use by the Commission of Articles 100 and 235 of the Treaty of Rome. This had the effect of creating social policy directives without which the directives which were to come from the First Social Action Programme of 1974 would have been a dead letter, including the Transfer of Undertakings Directive.

Another reason that the Directive was a product of its time was that it was at this point that the industrial relations actors at EC level began to organise and assert themselves in social policy discourse, particularly the trade unions in the Member States and at EC level. The employers association, UNICE, came into being in March 1958 while the European Trade Union Confederation (ETUC) was set up in 1973. Thus from 1958 until the early 1970s employers in the Member States had a seemingly co-ordinated representative at EC level. During this same period, however, the trade unions from the same Member States were represented by a patchwork of trade unions that often had differing domestic agendas and political positions as well as a shared distrust of the EC as a whole (5). With the creation of the ETUC in the early 1970s there began to develop some, if limited engagement by industrial relations actors at the supranational level. Thus, for example, when the guidelines to establish the 1974 Social Action Programme (SAP) were debated, the ETUC, perhaps as a demonstration of strength, made a veiled threat. This threat was that since they represented a sizeable population of voters, if questions of (social) policy before the Council of Ministers were not seriously addressed, it would be viewed by the trade union movement as unsatisfactory (6).

The final reason that the Transfer of Undertakings Directive was a product of its time was that the political will so evident at the Paris Summit of 1972 had evaporated by the time the First SAP had officially been created in 1974. With international and domestic problems taking primacy of place in the period just after the 1972 Paris Summit, national governments in the Member States elected leaders who had little interest in the issues being debated in the 1974 SAP, including the Transfer of Undertakings Directive. With the interest in the SAP 1974 all but gone, it was a wonder that any of the directives mentioned within it came to fruition. Though there was optimism as to the quantity and manner as to how the issues were to be addressed by a Transfer of Undertakings Directive, the final product was not quite the product initially envisioned, which in turn has affected its interpretation and implementation.

ISSUES PERTAINING TO THE CREATION OF THE TRANSFER OF UNDERTAKINGS DIRECTIVE

The Directive was not created in a vacuum but how then was it modelled? Some have implied that the Directive relates to the French Code du Travail of 1928 (Bernard, 1996) (7). While the French government had a history of asserting its social policy demands in negotiations which were then included in both the Treaty of Paris and the Treaty of Rome, in this case they were more likely to be a supporter rather than an initiator of the Directive. The most likely advocate of the Directive was the Federal Republic of Germany. Three reasons can be offered to support this theory.

The first is that German legal doctrine was one of the first to deal with the complex theory of acquired rights for employees which had been part of German legal theory since the beginning of this century (Aliprantis, 1985; Herz, 1954). The second was that German legislation was created in 1972, the year of the Paris Summit. Although comprehensive protection of workers rights covering the continuation of the employment relationship in a transfer was governed by law in France, Italy, and Luxembourg, as well as in West Germany, the Directive that was proposed in 1973 appeared to reflect quite heavily the German legislation (8). The final reason had to do with the politics of the Federal Republic of Germany at the time of the 1972 Paris Summit. At that time, Chancellor Willy …

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Publication information: Article title: Transfer of Undertakings Directive: The History of a European Union Social Policy Directive. Contributors: Ghosheh, N. S., Jr. - Author, Gill, Colin - Author. Journal title: International Journal of Employment Studies. Volume: 10. Issue: 1 Publication date: April 2002. Page number: 45+. © 2008 GROWES Research Group. COPYRIGHT 2002 Gale Group.

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