In the event of a merger or acquisition, employees with differing terms and conditions of employment end up working under one roof. This often leads to imbalances and frustration in the workplace. It is therefore understandable that employers want to harmonize terms and conditions of employment. However, this is by no means always legally permitted. Especially in the case of a transfer of a business, strict rules apply that employers often overlook in practice.
Transfer of a Business: Protection of Employees
If a takeover involves a transfer of an enterprise as defined by law, the employees are automatically transferred to the new employer while retaining their existing terms and conditions of employment. This protective mechanism is mandatory: employees cannot waive this right, even if it does not result in a deterioration of their conditions. Any proposal to change terms and conditions of employment related to the transfer may still be declared null and void at a later date.
In the case of an acquisition through a transfer of shares, this protection does not apply, because the employer formally remains the same. In that case, the normal rules for changing terms and conditions of employment may be applied.
Harmonization After Transition: Timing and Motivation Are Crucial
The desire to standardize employment conditions is understandable, especially when differences lead to internal tensions or administrative red tape. However, that desire should not stem directly from the transfer of the business. In such cases, standardization is prohibited, even if the employee’s conditions do not worsen on paper.
If an employer wishes to change the terms of employment after the fact, this must be based on a different reason and, preferably, only some time after the transition. The link between the transition and the change must have faded. The longer the employer waits, the greater the chance that a proposed change will be upheld.
Changing with Consent: Offering Benefits Helps
If there is no direct link to the transition, terms of employment may still be adjusted, provided the employee agrees. In the case of reductions in benefits, this is more difficult, but not impossible. Employers can ease the impact with a phased-out arrangement or a one-time bonus upon consent. When it comes to improvements, obtaining consent is usually not a problem.
Unilateral changes: high threshold
Sometimes an employee is unwilling to agree. In that case, the employer may invoke a unilateral amendment clause, if one is included in the employment contract. Even then, there must be a compelling reason, such as financial hardship or a reorganization. Merely seeking to ensure equal terms of employment is not sufficient for this purpose.
Without a clause allowing for changes, the employer may attempt to invoke the principle of good employment practices. In such cases, the proposal must be reasonable and stem from changed circumstances within the organization. The employee may not refuse without good cause.
Don’t forget the Works Council
In some cases, the works council has the right to approve changes to terms and conditions of employment, such as compensation systems or working hours. Although the works council’s approval is not legally binding on individual employees, a positive recommendation is taken into account when assessing whether a proposal is reasonable. Therefore, involve the works council in the process at an early stage.
Conclusion: Harmonization is possible, but it’s not that simple
Harmonizing employment terms and conditions following a merger or acquisition requires careful consideration. If there is a transfer of a business, employees’ rights are legally protected and cannot be changed arbitrarily. Without consent, a change can only be implemented if strict conditions are met. Therefore, wait to harmonize terms and conditions until the transfer is sufficiently complete, clearly justify the changes, and involve both employees and the works council in the process. Only then is the likelihood of a sustainable and legally sound harmonization greatest.
This blog was written by Stijn Blom, Esq., an employment law attorney at Arbeidsadvocaat.nl B.V. Stijn has extensive experience in employment law and assists employers and employees on a daily basis with a wide range of employment law issues. From dismissal cases to drafting watertight contracts and policies—with his practical and personalized approach, he helps employers and employees move forward. Want to learn more? Visit Stijn’s page.
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April 2025