Transitional Companies ("Transfergesellschaften") As Instruments For Changes In Operations

In larger restructurings involving staff reductions, the transitional company has become an established means of reorganization. It offers advantages for the employer, the works council, and the staff—without necessarily leading to higher costs for the company.

In several recent cases, a transitional company was used in a way deemed by the labor courts to be an abuse of legal rights. Thus, it is forbidden for employees to change to a transitional company for a few hours, only to be rehired by the acquirer (see the article herein by Georg Mikes).

If, however, the parties involved observe certain legal prerequisites, this procedure may be a reasonable component of a social plan.