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Transfer of An Undertaking: Protection of Employment

A transfer of an undertaking occurs when a business or part of a business (for example, a business unit) is taken over as a result of a transfer or a merger (or demerger). When under Dutch Caribbean a transfer of an undertaking takes place there is, by operation of law, a legal obligation on the new employer to take on the existing staff of the business or the part of the business concerned. The employee’s accrued service with his or her original employer is deemed to have been with the new employer.

The important criterion is whether “an economic unit which keeps its identity” is transferred. This was confirmed by the Supreme Court in a recent Aruban case, regarding a casino business. In that case it was ruled that, although some characteristic elements (location, staff and inventory) of the old casino had partially returned to the new casino, there was no retention of identity and therefore no transfer of an undertaking within the meaning of the law.

A court will take into account all facts and circumstances in its assessment. The assessment is usually based on, inter alia, the type of business or company involved, whether tangible and intangible assets are transferred, whether the customers are transferred, any similarity of activities before and after the transfer, the functionality of the business after the transfer and the capability to carry out the same or similar activities.

Generally speaking, if specific assets have been transferred, such as inventory, buildings, licenses, customers, know-how, goodwill and so on, this is an important indication that a transfer of an undertaking within the meaning of the law has taken place. A transfer can also occur if the only “asset” that has been transferred is the staff. However, this rule appears to apply only in branches where the employees mainly personify the identity of the work carried out.