In a merger or acquisition, employees with different working conditions come to work under one roof. This regularly leads to imbalances and frustration in the workplace. It is therefore understandable that employers want to harmonize terms of employment. However, this is not always legally permissible. Especially during a transfer of undertaking, strict rules apply that employers often overlook in practice.
Transfer of undertaking: protection of employees
When a takeover involves a transfer of undertaking within the meaning of the law, the employees are automatically transferred to the new employer, while maintaining their existing terms and conditions of employment. This protection mechanism is mandatory: employees cannot opt out even if they do not lose out. Any proposal to change working conditions related to the transfer can be annulled later.
In a takeover via share transfer, this protection does not apply because the employer remains formally the same. In that case, the normal rules for changing employment conditions can be applied.
Harmonization after transition: timing and motivation crucial
The desire to equalize terms of employment is understandable, especially if differences create internal tensions or red tape. Yet this desire may not result directly from the transfer of undertaking. Harmonization is prohibited in that case, even if the employee does not lose out on paper.
If an employer still wants to change terms of employment, it should be based on a different reason and preferably only some time after the transition. The link between transition and change must be blurred. The longer one waits, the more likely a change proposal will stand.
Change by consent: offering benefits helps
If there is no direct link to the transition, conditions of employment can be adjusted, provided the employee agrees. With deteriorations, this is more difficult, but not impossible. Employers can ease the pain with a phasing-out arrangement or a one-time bonus upon consent. If improvements are involved, consent will usually not be a problem.
Unilateral modification: high threshold
Sometimes an employee is unwilling to agree. Then the employer can invoke a unilateral modification clause, if it is included in the employment contract. Even then, there must be a compelling interest, such as financial distress or reorganization. Merely striving for equal employment conditions is not sufficient for this.
Without a change clause, the employer can try to invoke good employment practice. In doing so, the proposal must be reasonable and arise from changed circumstances within the organization. The employee may then not refuse without good reason.
Works council not forgotten
In some cases, the works council has the right of consent when changing terms and conditions of employment, such as pay systems or working hours. Although the Works Council's consent does not have a legally binding effect on individual employees, a positive opinion does weigh in when assessing whether a proposal is reasonable. Therefore, involve the Works Council in good time.
Conclusion: harmonizing can be done, but not just like that
Harmonizing working conditions after a merger or acquisition requires care. If there is a transfer of undertaking, the rights of employees are legally protected and may not be changed just like that. Without consent, a change can only succeed if strict conditions are met. Therefore, wait with harmonization until the transition is sufficiently behind you, motivate the change well and involve both employees and the works council in the process. Only then will there be the greatest chance of a sustainable and legally tenable harmonization.
This blog was written by mr. Stijn Blom, employment lawyer at Arbeidsadvocaat.nl B.V. Stijn has extensive experience in employment law and supports entrepreneurs and employees on a daily basis with a variety of employment law issues. From dismissal cases to drafting watertight contracts and regulations - with his practical and personal approach, he helps employers and employees move forward. Want to know more? Visit Stijn's page.
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April 2025
