## Facts

- Albert Merckx and Patrick Neuhuys were sales representatives employed by Anfo Motors SA, a Ford dealership for the Brussels area.
- Ford Motors Company Belgium SA was Anfo Motors’ supplier and majority shareholder.
- Anfo Motors ceased operating as the Ford dealer.
- Ford arranged for the dealership to be operated by Novarobel SA, which continued the same dealership activity for the territory.
- Novarobel took over part of Anfo Motors’ staff with retention of acquired rights (including seniority), and Anfo Motors informed customers of the change and recommended Novarobel.
- No tangible assets (premises, equipment, stock) were transferred from Anfo Motors to Novarobel, and there was no direct contract between them for a sale or business transfer.
- Merckx and Neuhuys refused employment with Novarobel, asserting they could not be required to work for a different undertaking under altered conditions without assurance their customer base would follow.
- The Brussels Labour Court of Appeal sought a preliminary ruling on the application of Directive 77/187/EEC (as implemented in Belgium) to the dispute.

## Issues

1. Whether Directive 77/187/EEC applies where a dealership activity continues under a new dealer that takes over some staff and customers, despite no asset transfer and no direct contractual link between the old and new dealer.
2. Whether Article 3(1) permits an employee to object to the transfer of their employment relationship to the transferee, and if so, how to characterize any resulting termination under Article 4(2), including where linked to reduced remuneration.

## Decision

- The court held that Article 1(1) applies where a territorial motor vehicle dealership ceases with one operator and is taken over by another that continues the activity, takes on part of the staff, and is recommended to customers, even without asset transfer or direct contractual relations between the undertakings.
- The court held that Article 3(1) does not prevent an employee from objecting to the transfer of the employment relationship to the transferee.
- The court held that the consequences for the employment relationship with the transferor after an objection are determined by Member State law.
- The court held that where the employment relationship ends following a change in remuneration linked to the transfer, the termination must be treated as brought about by the employer for purposes of Article 4(2).

## Legal Principles

- A “transfer” under Directive 77/187 turns on whether the economic entity retains its identity, shown by actual continuation or resumption of operations, rather than on formalities such as an asset conveyance or a contract between transferor and transferee.
- The directive’s automatic-transfer rule (Article 3(1)) does not bar Member States from allowing employees to refuse transfer of their employment relationship to the transferee.
- The post-objection status of the contract with the transferor is left to national law, subject to the directive’s constraints.
- If the transfer entails a substantial detrimental change in working conditions—specifically including reduced remuneration—and the employment relationship ends as a result, the employer is treated as responsible for the termination under Article 4(2).

## Conclusion

The court interpreted the transfer-of-undertakings regime broadly to cover a dealership reallocation that preserved the economic activity’s identity despite no asset transfer or sale contract, and it confirmed that employees may object to transfer while ensuring that terminations tied to pay reductions caused by the transfer are attributed to the employer.


Merckx v. Ford Motors Co. Belgium SA, Joined Cases C-171/94 & C-172/94 (C.J.E.U. 1996)