The Supreme Court today issued a ruling that is important to the employment law and M&A practice in the Netherlands. The case concerns the question of whether a "dynamic incorporation clause" in an employment agreement passes automatically to the new owner after a transfer of undertaking (TUPE) within the meaning of article 7:662 Dutch Civil Code. A dynamic incorporation clause is a clause that provides that not only the collective bargaining agreement in force at the start of the employment but also later versions of that collective agreement, will apply to the employment agreement. We previously reported on the case in this article.

In its 2017 Asklepios decision, the European Court of Justice ruled that such a dynamic clause passes to the new owner in the case of a transfer of undertaking, but only if national law provides sufficiently effective options for the transferee to amend the incorporation clause, either in consultation with the employee or unilaterally. Today, the Supreme Court ruled that Dutch law meets those requirements. It substantiated this decision by pointing to (a) the employee's option under Dutch employment law to include a unilateral amendment clause in the employment agreement (article 7:613 DCC) and (b) in the absence of such a clause, the employer's option to amend terms and conditions of employment on the basis of article 7:611 DCC (the obligation to act as a good employee/good employer).

The Supreme Court's ruling means that employees involved in a transfer of undertaking and having a dynamic incorporation clause in their employment agreement, can also derive rights from post-transfer versions of the incorporated collective bargaining agreement. This only changes if the new owner and employer has validly cancelled the incorporation clause after the transfer. Indeed, today's ruling also shows that the cancellation of such an incorporation clause may not be implemented at the time of, or in connection with, the transfer of undertaking, even if the employee agrees to it. The incorporation clause is a right under the employment agreement and the employee may not waive such a right because, or at the time, of a transfer of undertaking. A change in terms and conditions of employment can only be validly implemented after the transfer of undertaking has taken place and as long as that change has nothing to do with the transfer itself.