Buy franchise business and the laid off sick employee from 7 years ago

On January 23, 2019, the court in Utrecht ruled on the question of whether a Bruna franchisee, when selling the franchise company to Bruna, should have stated that seven years ago an employee had left employment sick.

An employee of the franchisee became ill a long time ago and, as a result, also left employment sick. Since the sick employee left his employment, there has been no contact with the employee in question or the UWV in that context. The employee concerned is eligible for a WGA benefit. This is a benefit based on partial incapacity for work, the aim of which is for someone to return to work fully in the short term. In principle, the benefit is for a certain period, but that period depends on the time that has already been worked.

Under the law, an employer can choose to become a self-insurer. The employer then bears the risk of the employees’ incapacity for work and also pays less employee premiums. The payment of the WGA benefit and the costs of reintegration will then be borne by the employer. The franchisee was not a self-insurer.

When the franchisee was sold to Bruna, the franchisee had not considered mentioning the fact that an employee had left his employment sick seven years ago. On the other hand, Bruna had not asked any questions about this either. In the purchase agreement, the parties had agreed that the franchisee would be responsible for all debts and obligations that have arisen or will arise during the period that the franchisee carried the business.

After the takeover of the franchise company by Bruna, Bruna is confronted with a notice from the UWV that Bruna is obliged to pay an amount of € 1,125.14 per month to the UWV as of the takeover date. This monthly obligation continues until 10 years after the sick employee has left employment. Bruna turns out to be a self-insurer.

Bruna then turns to the former franchisee and believes that (1) it should have been communicated that a sick employee had left employment seven years ago and (2) that it was agreed that the former franchisee is responsible for the debts that arose in the period that the franchisee operated the business.

The court rules that Bruna itself should have investigated possible sick former employees, especially now that Bruna is self-insurer itself. Moreover, the former franchisee did not know that Bruna was a self-insurer and could therefore experience adverse consequences. After all, the franchisee himself was not a self-insurer and therefore had no obligation to disclose in this case.

Bruna’s appeal to the agreement that the former franchisee would be responsible for debts and obligations that would have arisen at the time of the operation by the franchisee also does not hold. The court rules that the costs for the WGA benefit of the employee in question arose due to the transfer of the company, as well as the fact that Bruna is self-insurer. The relevant costs therefore did not arise in the period that the company was run by the franchisee, according to the court.

If a (franchise) company is taken over by a party that is not a self-insurer, it is very important for that acquiring party to inquire in advance whether employees who are unfit for work have also left the company in the past ten years.

mr. AW Dolphin  – franchise lawyer

Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl