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Accession heralds change in company transfers

02.07.2004

Amendments to the Employment Contract Act came into force on May 1 2004. Among other things, the amendments concern the inheritance of employment contracts in the event of a company transfer.

The current principle - that a company transfer does not in itself constitute a basis for the employer unilaterally to change or terminate employment contracts - remains in force. Nevertheless, the Employment Contract Act now obliges current and new employers to provide the employees' representatives (or the employees themselves) with written information about the transfer of their employment contracts at least one month before the transfer is due to occur. At the very least, the information must include the following details:

• the date of the planned transfer of the employment contracts;
• the reasons for the change of employer;
• the legal, economic and social consequences of the change of employer for the employees; and
• planned measures regarding the employees.

If the current or new employer intends to make changes in relation to the workforce upon the transfer of the employment contracts, the employees' representative must be consulted in order for an agreement to be reached in this respect.

In the course of consultations the representatives are entitled to call meetings with members of the directorial bodies of the employers. The representatives are also entitled to submit written proposals on the proposed measures within at least 15 days of delivery by the employers of the aforementioned notice. The employers may refuse to accept the proposals, but must at least give reasons for doing so.

According to the Law of Obligations Act, in such cases all obligations (including those arising from employment contracts) transfer to the transferee. The transferor and transferee remain jointly and severally liable towards creditors for the performance of all obligations that arose before the transfer of the enterprise (and which become due by the time of the transfer or within five years thereof). The Employment Contract Act differs somewhat, stating that the current employer is liable for obligations that arise from transferred employment contracts and which become due by the time of the transfer. The new employer cannot be required to perform such obligations. Moreover, under the amended act the current and new employer remain jointly and severally liable for all obligations under the employment contracts that arose before the change of the employer and which fall due within one year of the transfer. In relation to obligations arising from the employment contracts generally, the time limit of the joint and several liability of the current employer is shorter than that for other obligations in such situations.

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