A dynamic incorporation clause relating to a collective bargaining agreement is an agreement in the employment contract whereby the provisions of a collective bargaining agreement, as they will read from time to time (hence the term dynamic), are declared applicable to the employment relationship.
Employees transfer by operation of law and under the same terms and conditions of employment
With the transfer of all or part of an enterprise (within the meaning of Section 7:663 of the Civil Code), employees of the transferring party enter the employ of the acquiring party by operation of law. This takes place under the same terms and conditions of employment.
Collective bargaining agreement also continues to apply
This means that a dynamic incorporation clause will also apply to the employment relationship between the employees of the transferring party and the acquiring party. In other words, the provisions of the collective bargaining agreement that applied to the employment relationship between the employees and the transferring party will apply to the employment relationship between the employees and the acquiring party after the transfer of the enterprise. Óeven if the acquiring party’s enterprise does not fall within the scope of the collective bargaining agreement.
Terms and conditions of employment may not be changed at or because of the transition
It is important to note, that the acquiring party cannot prevent this by offering the employees at the transfer of the company a new employment contract that does not include the dynamic incorporation clause. Not even if the transferring party’s works council has agreed to it.
The reason is that the terms of employment may not be changed at the time or because of a transfer of all or part of an enterprise. Modification of terms and conditions of employment after the transfer of the undertaking is, however, permitted.
Post-transition adjustment via unilateral modification clause
This is possible, for example, if the (transferred) employment contract contains a so-called unilateral modification clause, which allows the transferee to modify provisions in the contract if the transferee has such a compelling interest in doing so that the interests of the transferred employees must reasonably and fairly give way.
Post-transition adjustment due to good employment practice
If the employment contract does not contain a unilateral modification clause, the transferred employees may under circumstances be required by the standard of good employee character to accept a reasonable proposal from the transferee to modify the terms and conditions of employment.
Include the effects of the dynamic incorporation clause in negotiations with the transferor
It is therefore uncertain, whether a dynamic incorporation clause can lapse after the transfer of the business. The consequences of “bringing in” collective bargaining provisions, even when the transferee itself does not fall within the scope of the collective bargaining agreement, can be great. For example, the transferee may be obliged to increase the salaries of the transferred employees in accordance with the collective bargaining agreements. It is therefore important to give due attention to these issues prior to the transfer of the business and to include the consequences in the negotiations with the transferring party.
Information
If you have any questions about this article or this topic, please contact Peter Verheijden, an employment law attorney at LVH Advocaten.
