Decision of the Federal Labour Court on a transfer of business

Federal Labour Court, decision dated 29 June 2023 (2 AZR 326/22)

In its decision of 29 June 2023 (2 AZR 326/22), the Federal Labour Court once again deals with the requirements for a transfer of business and the requirements of an information letter pursuant to Section 613a (5) of the German Civil Code (BGB). Th new decision of the Federal Labour Court's provides very clear and helpful statements on the requirements for complete and correct information in the information letter with regard to the legal consequences of a transfer of business as well as on the duty to inform with regard to changes occurring after the time of the transfer of business.

Section 613a BGB, which is based on a European regulation on the transfer of undertakings, requires that a "business" or "part of a business" is transferred to a new owner. According to the case law of the ECJ, this is to be understood as the transfer of an economic unit that retains its identity in the sense of an organised pooling of resources to pursue a main or ancillary economic activity. In the event of such a transfer of business, Section 613a BGB regulates the transfer of the employment relationships existing in such a business or part of a business to the acquirer in order to protect the employees. To enable the employees concerned to make their own assessment of the effects and consequences of such a transfer, Section 613a (5) BGB stipulates the joint obligation of the old and new employer to inform the employees concerned about the (planned) date of the transfer, the reason for the transfer, the legal, economic and social consequences of the transfer for the employees and the measures envisaged with regard to the employees.

One specialty of German law in this regard is the possibility for affected employees to object to the transfer of their employment relationship within one month of receiving the information letter, with the result that their employment relationship with the previous employer remains in place.

For this reason, the transferor and/or transferee must inform the employee in such a way "that the employee can "form an opinion" about the object of the (partial) transfer of the business and the person of the transferee as well as about the circumstances specified in Section 613a (5) BGB. The employee should also be given the opportunity to make further enquiries and, if necessary, seek advice in order to then decide on this basis whether to object to the transfer of his or her employment relationship". The one-month deadline to object to a transfer of the individual employment relationship only begins to run if the information in the information letter is correct and complete.

In this case, a non-tariff employee objected to a transfer of business after the transfer had occurred in light of a further reorganisation that took place at the new employer approximately eight weeks after the transfer of business. He referred to alleged errors in the information letter with regard to the economic and legal consequences of the transfer of business and argued that due to mistakes in the information letter, the objection period was not set in motion so that he was still entitled to object to the transfer of his employment relationship.

According to the established case law of the BAG, the legal consequences within the meaning of Section 613a (5) No. 3 BGB initially include the legal consequences resulting directly from the transfer of business. According to the BAG, this requires a reference to:

• the transferor's entry into the rights and obligations arising from the existing employment relationship (Section 613a (1) 1 BGB),
• the joint and several liability of the transferee and the transferor pursuant to Section 613a (2) BGB and
• the situation under which the employment relationship can be terminated.

The rights and obligations applicable to the transferee also include the applicability of collective bargaining standards and the question of the extent to which collective bargaining agreements and works agreements applicable to the transferor are replaced by collective bargaining agreements applicable to the transferee. According to the further explanations of the Federal Labour Court, it is not necessary to draft different information letters for individual groups of employees (employees covered by collective agreements/non-tariff employees), but the explanations for different groups of employees can be summarised in one standard letter.

In this context, "the employer cannot be required to provide comprehensive legal advice in individual cases. The legislator also does not assume that the purpose of the information is to inform each individual employee of all possible consequences of the transfer of business, but only that the employee can obtain more detailed information or advice following the information. It is therefore sufficient if the written information enables the employee – as in the case in dispute – to assign his employment relationship to one of the groups of employees named in the notification letter and he can thus recognise the legal consequences arising from the specific transfer of business".

The reason for the employee's objection was a new restructuring that occurred at the new employer approx. eight weeks after the transfer of business. With regard to this restructuring, approx. six weeks after the transfer of business, the new employer reached an agreement with its group works council to extend an existing collective bargaining agreement to non-tariff employees, which meant that the plaintiff was also affected by the unfavourable provisions of said collective bargaining agreement.

While the Regional Labour Court stated in its decision that it could not be ruled out that the agreed extension could have taken place at a point in time before the transfer of the business, so that this legal consequence should have been mentioned in the information letter, the Federal Labour Court dismissed these statements as “pure speculation” and clarified that it had not been established that the extension of the collective agreement to non-tariff employees had already reached the stage of concrete planning at the time of the transfer of the business. It was also not apparent that the merger, which took place nine weeks after the (partial) transfer of operations, had already taken on such a concrete form at the time of the notification that it required detailed information. The former and new employer were not obliged to make speculative statements in the information letter.

The preparation of information letters is usually very error-prone, as the Federal Labour Court has set the requirements for the completeness and accuracy of information letters very high. What is helpful about this decision is the renewed explanation of the requirements for the legal consequences of the transfer of business. At the same time, the Federal Labour Court clearly rejects the lower court's approach of assuming that certain decisions must have already been known at the time of the transfer of business due to a close temporal connection. In connection with a transfer of business, it is therefore essential to make a precise distinction between possible changes and concrete planning in order to be able to draft a correct information letter in situations where different changes occur in a tight timing context.