Background and course of the proceedings
The central question in this case is whether a transfer of undertaking pursuant to Section 7:662 of the Dutch Civil Code has taken place from Martinair Cargo to KLM and whether, as a result thereof, the rights of the cargo pilots arising from length of service and seniority have been transferred to KLM.
Earlier, the cargo pilots of Martinair Cargo were found to be in the wrong. The Amsterdam District Court (April 2016) and the Court of Appeal of Amsterdam (May 2018) ruled that there was no transfer of undertaking, among other things, because it concerned a capital-intensive undertaking and the aircraft of Martinair Cargo had not been transferred to KLM. In November 2019 in cassation at the Supreme Court, a turnaround took place. The Supreme Court annulled the judgment of the Amsterdam Court of Appeal and referred the case back to the Court of Appeal of The Hague. That Court ruled on 8 June 2021 that indeed a transfer of undertaking has taken place.
According to the Court of Appeal, the cargo pilots have been employed by KLM since 1 January 2014, whereby the rights and obligations arising from their employment agreement with Martinair have been transferred. KLM must now offer the cargo pilots an employment agreement after all and allow them to work. However, the Court of Appeal rejected the cargo pilots' claim to be placed on KLM's seniority list while retaining the seniority level accrued with Martinair. The Court's considerations are explained below.
Transfer of undertaking in brief
Transfer of undertaking means 'the transfer, by means of an agreement, merger or demerger, of an economic entity which retains its identity'. The decisive factor in determining whether a transfer of undertaking has taken place is whether the identity of the undertaking is preserved. It should be examined whether it concerns the transfer of an ongoing business. This may be the case if the business is in fact continued or resumed by the new entrepreneur with the same or similar assets. When assessing whether a transfer of undertaking has taken place, all facts and circumstances must be taken into account. For a transfer of undertaking in the aviation sector, the transfer of the equipment (the aircraft) is considered to be essential.
Transfer of undertaking from Martinair Cargo to KLM
In reaching the opinion that a transfer of undertaking from Martinair Cargo to KLM has taken place, the Court of Appeal of The Hague considered the following factors important:
Integration of operational and commercial activities
The transfer of undertaking has taken place in several stages. After KLM acquired a 100% stake in Martinair, the operational and commercial activities of Martinair Cargo were gradually merged with KLM's cargo division. Martinair has transferred almost all air cargo transport activities to KLM. Furthermore, since 2014, Martinair has only been an operating carrier, with KLM as its only customer. However, the economic risk is borne by KLM. According to the Court of Appeal, this has made Martinair Cargo commercially completely dependent on KLM.
Effective control of Martinair Cargo fleet
Despite the fact that the aircraft of Martinair Cargo have not actually been 'transferred' to KLM, the Court of Appeal is of the opinion that KLM has effective control over the fleet of Martinair Cargo and that KLM in fact operates the aircraft as part of KLM's business. For air cargo transport, Martinair Cargo currently uses four aircraft, three of which are owned by KLM and leased to Martinair by KLM (in addition, there is one spare aircraft owned by Martinair). The Court of Appeal considers it important that as a result the aircraft of Martinair Cargo used for air cargo transport must be deemed replaced by aircraft of KLM. Furthermore, by means of the ‘bellies and combis first’ strategy, KLM determines how, where and when the fleet is operated (Martinair can no longer decide on fleet planning independently). Therefore, according to the Court of Appeal, the requirement that a transfer of the control over the aircraft from Martinair Cargo to KLM has taken place has been met. Transfer of ownership is not required in this respect.
Takeover of destinations
Another factor is that KLM has taken over a number of destinations from Martinair Cargo. This follows from the fact that Martinair Cargo started flying less to those destinations or stopped flying to those destinations at all. Moreover, there is a considerable overlap between the cargo carried by Martinair Cargo and the cargo carried by KLM.
On the basis of the above, the Court of Appeal of The Hague comes to the conclusion that KLM, as transferee, has continued the operation of Martinair Cargo as part of its own business, thereby preserving the identity of Martinair Cargo. According to the Court of Appeal, this means that a transfer of undertaking has taken place. According to the Court of Appeal, this transfer had already taken place on 1 January 2014.
For the 116 cargo pilots of Martinair Cargo, this means that on 1 January 2014 they entered into employment with KLM, retaining the rights and obligations arising from their employment agreement with Martinair.
Length of service and seniority
In the aviation industry, great importance is attached to job level, seniority and length of service. The commencement date of employment determines the length of service and the position on the seniority list. The position on such list has consequences for, among other things, deployment, stationing and secondment. For the cargo pilots, it was therefore important that they would be placed on KLM's seniority list while retaining the level of seniority they accrued with Martinair. The Court of Appeal of The Hague rejected this claim. According to the Court of Appeal, seniority is not a financial right linked to length of service that is transferred in the event of a transfer of undertaking, taking into account the case law of the Court of Justice of the EU.
With the judgment of the Court of Appeal of The Hague, it has become clear that, for the question whether a transfer of undertaking in the aviation sector has taken place, it is not decisive whether aircraft have actually been transferred to the transferee. Furthermore, the Court of Appeal ruled that seniority is not a 'financial right attached to length of service' and therefore does not transfer to the transferee.
We continue to closely monitor the labour law consequences of a transfer of undertaking. In case of any questions about this topic, the specialists of the practice group Employment & Benefits will be happy to advise you.