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Transfer of companies

Lapsing of the right to oppose a company transfer
(Federal Labour Court (BAG), decision of 17/10/2013 – 8 AZR 974/12)

If a company is transferred to a different owner by legal transaction the employees affected by the company transfer pursuant to section 613a(5) of the German Civil Code (BGB) must be comprehensively informed of the company transfer. Breach of this obligation has significant consequences. Other than the risk of an obligation to pay damages to the affected employees in the event of incorrect notification, improperly notified employees are, under certain circumstances, entitled to exercise their right of opposition long after the company transfer is complete. In such a case the employment relationship is not transferred and the employee remains employed by their previous employer.

The right of opposition can only lapse despite incorrect or incomplete notification in exceptional cases. A lapse that would exclude a disloyal, late exercise of rights has a prerequisite of both an element of time as well as an element of circumstance. There must be indications for the employer based on both elements that the employee no longer wishes to exercise their right of opposition. Solely the failure to exercise the right of opposition over a period of several months is not sufficient to determine this. Rather the employee must, through their conduct, give the impression that they no longer wish to exercise their right such that the employer can reasonably expect not to have to the right asserted against it. As the Federal Labour Court (BAG) has now expressed, such conduct can consist in an employee disposing of their employment relationship by bringing an action for unfair dismissal against the party that has acquired the company and comes to a court settlement with that party in which it is recognised that an employment relationship does not exist and simultaneously, that compensation is to be paid. The court held that by bringing such an action, followed by a settlement, the employee had disposed of their employment relationship. The court further held that such a disposition satisfied the element of circumstance required for the claim to lapse, such that the employee would then be prevented from opposing the transfer of their employment relationship vis-a-vis the party that sold the company.

Recommendation for practice:

Since the opposition period pursuant to section 613a(6) of the German Civil Code (BGB) only begins once the affected employee has been properly notified, incomplete notification has incalculable consequences. The notification given to the employee should therefore be as comprehensive and precise as possible. Employers should not under any circumstances rely on the right of opposition lapsing, as this can occur only in exceptional cases.

Thomas Geißler
Thomas Geißler

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