PURPOSE: to amend Directive 77/187/EEC on the approximation of Member States' laws relating to the safeguarding of employees' rights in the event of transfers of undertakings, in the light of the impact of the internal market (and the necessary protection of workers which this entails, as laid down in the Community Social Charter of 09/12/89), the legislative tendencies of the Member States with regard to the rescue of undertakings in economic difficulties, the case-law of the European Court of Justice, Council Directive 75/129/EEC on the approximation of Member States' laws relating to collective redundancies and the legislation already in force in most Member States. COMMUNITY MEASURE: Council Directive 98/50/EC amending Directive 77/187/EEC on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses. CONTENT: Directive 77/187/EEC is intended to promote the harmonisation of the relevant national laws ensuring the safeguarding of the rights of employees and requiring transferors and transferees to inform and consult employees' representatives in good time. In the light of the afore-mentioned legislative developments, this directive amends Directive 77/187/EEC in the following areas: -clarifying the legal concept of transfer as well as the concept of "employee" and to require that Directive 77/187/EEC should apply to private and public undertakings carrying out economic activities, whether or not they operate for gain; - with a view to ensuring the survival of insolvent undertakings, expressly allowing Member States not to apply certain Articles of the amended directive to transfers effected in the framework of liquidation proceedings, permitting certain derogations from the directive's general provisions in the case of transfers effected in the context of insolvency proceedings and also allowing such derogations for one Member State which has special procedures to promote the survival of companies declared to be in a state of economic crisis; - in order to ensure equal treatment for similar situations, ensuring that the information and consultation requirements laid down in the directive are complied with irrespective of whether the decision leading to the transfer is taken by the employer or by an undertaking controlling the employer; - clarifying that, when Member States adopt measures to ensure that the transferee is informed of all rights and obligations to be transferred, failure to provide that information is not to affect the transfer of the rights and obligations concerned; - clarifying the circumstances in which employees must be informed where there are no employee representatives. ENTRY INTO FORCE: 17/07/1998. DEADLINE FOR TRANSPOSITION: 17/07/2001.

The President of the Council outlined the current situation on this matter. It will be examined further by the Permanent Representatives Committee under the incoming Spanish Presidency. The aim of the proposal is to revise Council Directive 77/187/EEC of 14 February 1977 in the light of the impact of the internal market, new tendencies in Member States’ laws on the rescue of undertakings in economic difficulties, the case-law of the Court of Justice, the adopted revision of the Directive on collective redundancies and the legislation already in force in most Member States. The following are the main changes proposed by the Commission: - to clarify the application of the obligations of the Directive to transnational transfer decisions and to groups of undertakings; - to make provision for greater flexibility for transfers carried out in the context of insolvency proceedings; - to reformulate and clarify the scope and definitions of the existing Directive; - to clarify the laws on the transfer of one part of the undertaking’s activity.

In its Opinion the Committee of the Regions stressed that the areas of uncertainty that still existed in the directive should be resolved and should not impose new burdens on local and regional authorities, while providing protection for employees and the consequent benefits. The Committee also called upon the Commission to examine the possibility of including in the directive the principle of safeguarding employees’ entitlements to old age, invalidity or survivors’ benefits on the basis of supplementary occupational or inter-occupational welfare schemes operating independently of Member States’ compulsory social security systems. It called for clarification of: the scope of the directive, the distinction between bankruptcy proceedings instituted with a view to liquidation and insolvency proceedings not involving liquidation, the new provisions on joint liability for contractual obligations, and the choice of the number of employees as a criterion for determining the size of an undertaking.

The shortcomings and loopholes of the 1977 Directive had to be eliminated in order to address the need for high levels of employment and social protection in the EU. However, the 1977 Directive had to be revised without prejudice to workers’ rights. Unfortunately, the Commission’s proposals introduced a distinction between ‘economic entity’ and the ‘activity’ of an undertaking, which seemed highly ambiguous and would require further interpretation by the Court of Justice, notably as regards the contracting out of services. Thus the proposal could be interpreted as a step backwards compared with the 1977 Directive, since it would once again bring into question issues that seemed to have been already resolved from a legal point of view. In contrast with its declared aims (safeguarding employees’ rights in the event of transfers of undertakings, businesses or parts of businesses), the proposal undermined employees’ rights in this respect. As a result, the Opinion suggested specific changes concerning this vital issue.