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

By Ghosheh, N. S., Jr.; Gill, Colin | International Journal of Employment Studies, April 2002 | Go to article overview
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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.


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.


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.

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