A team from our Frankfurt office has won a long-running transfer of undertakings case, Klarenberg v Minteq International GmbH.  Last month, the German Federal Labour Court (Bundesarbeitsgericht) decided in favour of our client, Minteq International GmbH, the German subsidiary of Minerals Technologies Group, following an important ruling made in the European Court of Justice (ECJ) over two years ago. The case has been widely reported in the German legal and business press, including the Financial Times Deutschland Financial Times Deutschland.

The case resulted from an asset deal five years ago where this firm represented Ferrotron (later renamed Minteq International GmbH) in its acquisition of certain product lines, contracts, IP rights, patents, and so on from ET Electrotechnology GmbH, a company which manufactured products for the steel industry and which later became insolvent. Mr. Klarenberg, Head of the Research and Development department at ET Electrotechnology, brought a claim against our client, arguing that his employment relationship was transferred by law to it in the sale. After Klarenberg’s claim was rejected, he appealed to the Düsseldorf Labour Court which presented the case to the European Court of Justice European Court of Justice.

In February 2009, in a decision widely discussed in the legal press at the time, the ECJ extended the scope of the transfer of an undertaking in contradiction of previous decisions of the German Federal Labour Court.   The ECJ took the view that to fall within the German regulations implementing the Acquired Rights Directive it would not be necessary for there to be more than a “functional link” between the business unit being transferred and the activities carried out post-transfer, while the Federal Court had required the business unit to retain its identity, a tougher test.

In its final ruling, the Federal Labour Court has now confirmed its previous precedents.  It ruled that Klarenberg was not transferred to the purchaser and finally rejected his claims.   In the end the case did not resolve the tension between the “functional link” and “retained identity” tests.  Instead the Federal Court concluded that what had been acquired by Minteq had not constituted a business unit even at ET Electrotechnology, and so could not have transferred as such to Minteq, regardless of what had happened to it once it got there.