Stefan Daub, Fachanwalt für Arbeitsrecht

Labor law: No transfer of business if there is no change in the person responsible for the operation of the economic unit

The legal transfer of an employment relationship to a new employer on the basis of a transfer of business according to Section 613a (1) BGB [German Civil Code] requires inter alia that the natural or legal person, responsible for the operation of the economic unit, who enters the employer obligations towards the employees, changes within the framework of contractual relations.

Facts of the case

The employee had been in an employment relationship since 1976. In March 2011, the employer and a new company concluded an “Agreement on contract manufacturing and agency agreement on operations management”, according to which the new company was, from April 01, 2011, to continue the entire production of the hitherto employer by way of contract manufacturing with the employees active there and to take over the operational management of the entire business operation for the employer. It was agreed inter alia that the new company would act exclusively on the account of and in the name of the employer to the extent the operation management would be carried out in connection with contract manufacturing and the production; the new company obtained general power of attorney in this respect.

The employer and the new company also informed the employee that his employment would pass over to the new company as a result of the transfer of business.

After termination of the employment relationship by the new company due to the closure of the business in 2014, the employee argued that an employment relationship still existed between him and his previous employer beyond March 31, 2011.

Reasons for the decision

In the view of the “Bundesarbeitsgericht” (BAG) [German Federal Labor Law Court], the employment relationship was not transferred from the previous employer to the new company in the course of a transfer of business pursuant to Section 613a (1) Sentence 1 BGB. A transfer of business requires that the natural or legal person responsible for the operation of the company, who enters into the employer obligations towards the employees, changes within the framework of contractual relations. The BAG decided that this requirement was not met because the previous employer had not surrendered its responsibility for the business to the new company. There was therefore no transfer of business.

In the opinion of the BAG, the employee was also not barred in the present constellation and in accordance with the principle of good faith (Section 242 BGB) from claiming the continuation of his employment relationship with the previous employer.

The fact that even an action for protection from dismissal by the employee against the new company was also rejected was in the end irrelevant for the BAG.

Notes for practice

The BAG’s decision is important for contractual practice and the employees affected by this. The Berlin-Brandenburg State Labor Court had already viewed the contract concluded between the employer and the new company as a so-called “real” operating contract, in which the operator acts in the name and on behalf of the holding or owner company. In the case of an “artificial” operating contract, the operator on the other hand acts regularly in its own name, that is to say that externally it is entitled or obligated to make legal transactions itself, although internally it is still active on the account of the owner company.

A real operating contract, as in the case decided, following the decision of the BAG does not represent any possibility to divide a company into a holding and an operating unit with the result that employment relationships are transferred by this in the course of a transfer of business. We will be able to better assess whether this can be achieved through the agreement on an artificial operating contract pursuant to the BAG’s decision once the BAG’s decision becomes available in its entirety; currently only a press release is available.

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