Leasing Employees Who Object To Business Transfers

• Published date: 13 May 2022
• Subject Matter: Corporate/Commercial Law, Employment and HR, Corporate and Company Law, Contract of Employment, Employee Benefits & Compensation
• Law Firm: lus Laboris
• Author: Kliemt.HR Lawyers

A ruling from the German Federal Labour Court has confirmed that on the transfer of a business, employees who object to their employment relationship being transferred to the new owner can be offered temporary employment instead.

In the event of a transfer of business, one of the important issues is the treatment of so-called 'objectors' in the workforce and the associated costs of separation. Now, the German Federal Labour Court (the 'BAG') has provided an option that eliminates a key risk of objection.

In a transfers of a business in Germany, the employment relationships are automatically transferred from the seller of the business to the acquirer of the business. The employee can prevent this by lodging an objection, but the objector can no longer be employed in the same job by the seller, because the job is now with the acquirer. One solution to this muddled situation has been to offer the employee employment with the acquirer. If the employee refused this, he or she had to have the lost earnings offset against the 'default of acceptance' wage under the German Civil Code, and the result was zero. Now the BAG has provided an avenue that eliminates the risk of default of acceptance.

The case

In the context of a spin-off, the defendant seller of a business had agreed with the purchaser of the business that, in the event of objections to the transfer by employees, the resulting vacancy at the purchaser would be 'compensated' for a period of twelve months by way of employee leasing. Accordingly, the objecting plaintiff employee was offered a job as a temporary employee for a limited period of twelve months under unchanged conditions in the business of the acquirer. After the plaintiff rejected the offer and the defendant seller did not want to continue employing her in its own company, the defendant terminated the employment relationship with the plaintiff. In the ensuing legal dispute over protection against dismissal, the plaintiff also claimed default pay until the end of the notice period; the plaintiff argued that she could not reasonably be expected to work as a temporary employee and that this was not contractually owed.

Confirmation of the rehiring model...