Increased Employee Protection In Belgian Insolvency Proceedings By Transfer Of Undertakings

Author:Ms Catherine Longeval
Profession:Van Bael & Bellis
 
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Judgment of Court of Justice of the European Union

On 16 May 2019, the Court of Justice of the European Union (the "ECJ") held that European Council Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses (the "Directive"), must be interpreted as precluding national legislation, which, in the event of a transfer of a business which has taken place in proceedings for judicial restructuring by transfer under judicial supervision applied with a view to maintaining all or part of the transferor or its activity, entitles the transferee to choose the employees which it wishes to keep.

On 23 April 2012, Echo NV entered into a judicial reorganisation proceeding. A collective agreement could not be reached and on 19 February 2013, proceedings for judicial restructuring by transfer under judicial supervision ("JRTJ") were initiated. On 22 April 2013, Prefaco NV took over the business of Echo NV together with two-thirds of the total employees of the transferor.

Ms. Plessers, who is one of the dismissed employees, argued that Article 61 § 3 of the Belgian Law on Business Continuity (now Article XX.86 § 3 of the Code of Economic Law) is in breach of the Directive. According to Article 61 § 3 of the Law on Business Continuity, the transferee can choose which employees it wishes to keep, provided that the decision is dictated by technical, economic and organisational reasons and that the choice is carried out without unlawful distinction (the so-called "right of option"). This provision indeed deviates from the principle that the employee's rights and obligations arising from an employment contract existing on the date of a transfer will be transferred to the transferee (Article 3(1) of the Directive).

The question before the ECJ was whether the right of option for the transferee under Belgian law, insofar as the JRTJ is applied with a view to maintaining all or part of the transferor or its activities, is compatible with the Directive.

In order to answer this question, the ECJ had to determine whether:

the "right of option" granted to the transferee falls under the exception laid down in Article 5(1) of the Directive, which requires that the transferor is subject to a bankruptcy proceeding or any analogous insolvency proceedings which have been instituted in view of the...

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