Termination of an Employment Relationship due to a Business Transfer
The Employments Contracts Act provides regulation regarding the transfer of a business. The transfer of a business refers to transfer of an enterprise, business or an operative part thereof to another employer (company) where the business or the part thereof remains the same or similar after the transfer. It is then considered to be a transfer of a business.
It is often said that in connection with a business transfer, the employees are transferred to the new company as “old employees”. The concept “old employees” primarily signifies the right of the employees to transfer into the service of the new employer with the same employment terms and conditions they had before the transfer. The new employer cannot unilaterally amend the terms and conditions or give notice to an employee solely on the basis of the transfer. Furthermore, the new employer is bound to the collective agreement that bound the former employer, usually until the end of the term of that collective agreement.
The transferee does not have the right to terminate employment agreements on the basis of the business transfer. The transferor is also forbidden to terminate employee relationships before the business transfer on the basis of the transfer. If work has genuinely diminished because of the business transfer, the new employer has the same rights to termination as the former employer. The employer must then have a termination ground specified in the Employment Contracts Act. See further [Product-Related, Financial and Reorganizing Related Grounds as Termination Grounds]. Naturally, it is possible to terminate or cancel an employment agreement, if there is an employee-related reason. For further information see [Termination Grounds Related to the Employee].
If the salary claim of an employee has expired before the transfer, but it is still unpaid at the time of the transfer, the employee may demand the payment either from the transferor or the new employer, i.e. the transferee. The new and the former employer are solidary liable for the employee claim.
If a business transaction does not constitute a business transfer, e.g. when it is deemed as a company shutdown followed by and the startup of a new one, the employee does not have the right to transfer to the new company. in such a situation the new employer can take the employees into his/her service, but then new employments agreements are to be signed, and the employee does not have the right to demand and refer to his/her old working terms and conditions.
The employee has the right to terminate his/her employment agreement as from the date of the transfer regardless of if he/she is employed until further notice or for a fixed term, and his/her regular notice period otherwise applied to the employment relationship, if he/she has been informed of the transfer by the employer or the new proprietor no less than one month before the date of the transfer. If employee has been informed of the transfer less than a one month before the transfer, he/she is entitled to terminate his/her employment agreement as from the date of the transfer or from a date thereafter, though no later than within one month of having been informed of the transfer.
If the transferee plans to dismiss, transform agreements into part time ones or lay off employees, he/she is obliged to undertake cooperation negotiations. For further information see [Cooperation Negotiation Obligation in Reducing the Use of Personnel].