Employment transfer. What rights do you have if the company changes?

Employment subrogation refers to a change in the employer who has hired the worker. It may occur as a result of one company being bought out or taken over by another, a change in the company’s name, or because one company takes over the services previously provided by another, taking on some or all of its workforce.

Employment subrogation in the Workers’ Statute

Firstly, you should be aware that there is no specific law on employment subrogation in Spain. Specifically, this concept is regulated by Article 44 of the Workers’ Statute. It specifies that a change in ownership of a company, workplace or autonomous production unit shall not in itself terminate the employment relationship. On the contrary, the new employer must assume the labour and social security rights and obligations of the previous employer.

For example. Imagine you work in a small car repair shop and your boss, just a few months away from reaching the statutory retirement age, decides to sell his business to a larger company. This company will be responsible for taking on the workers, including you, who were on the payroll of your previous employer.

Types of employment subrogation

Following on from the previous example, and now that we have defined what employment subrogation is, it is time to explain the different types that exist. Specifically, we can distinguish between two:

• By transfer of undertaking: this occurs when a company, workplace or production unit changes ownership. It is governed by the provisions of the aforementioned Article 44 of the Workers’ Statute.

• By collective agreement: when subrogation is imposed by the agreement, although this does not preclude it from being regulated in accordance with the provisions of Article 44 of the Workers’ Statute. This is common in agreements for the cleaning, hospitality and security sectors.

Subrogation of an employment contract: What are the implications for the employee?

As we have already mentioned, subrogation does not terminate the employment relationship, as the new employer is obliged to take on the workers from the previous employer. However, if there are objective grounds, whether of an economic, technical, organisational or production-related nature, the employer may modify the terms and conditions, provided that this does not infringe upon the minimum rights of employees recognised in the collective agreement or in the Workers’ Statute.

For example, a transferred employee does not lose the length of service they had at their previous company. Therefore, going back to the previous example, if the car workshop employee had been working there for 12 years, the new owner will have to respect that status when they take over the business.

Can you object to the transfer of employment?

The answer is no. Why? Employment subrogation does not involve a substantial change to your working conditions and, therefore, you must accept it. Obviously, you retain the right to resign voluntarily if you do not wish to work for the new employer, but you must remember that this will deprive you of the right to receive severance pay and unemployment benefit.

That said, the employer may decide to make a substantial change to your working conditions, citing the aforementioned objective grounds. In that case, you can refuse the changes. To do so, you have two options:

• Challenge the change in court: this is the only option available to you if you believe the employer’s decision is detrimental to you, but you do not wish to terminate the contract.
• Terminate your employment contract: once you have been notified of the changes, you may terminate the contract and are entitled to compensation of 20 days’ pay per year worked, up to a maximum of 9 months.

The obligations of the previous and new owners in the transfer of employment

Once the previous and new owners have reached an agreement, they must send a letter regarding the transfer of employment to the workers’ representatives or to the employees themselves. This letter must state the expected date on which the subrogation will take effect, the reasons for the subrogation and the legal, economic and social consequences for the employees, if any. It must also include any measures planned for them, if any have been envisaged.

The Workers’ Statute does not specify a specific deadline for notifying the transfer, but merely states that it must be done sufficiently in advance so that the workers are not adversely affected. Below, aware of the doubts that a process of this kind may raise, we would like to answer some frequently asked questions of interest.

Who is liable for outstanding wages?

It is possible that the company you work for owes you one or more pay packets. In fact, it would not be unusual for this financial situation to have been what prompted your employer to sell off their business. In this case, both the new and the previous employer are obliged to pay you the amounts owed, so do not worry.

Who is liable for Social Security debts?

The same applies. Both the new and the former employer are responsible for paying Social Security contributions, without the employee suffering any loss.

Is it necessary to sign a new contract?

The contract for the transfer of employment and ownership is signed by the employers. However, employees do not need to sign anything. In other words, their previous employment contract remains in force.

The only situation in which an employee needs to sign anything is if the new employer wishes to make substantial changes to the terms and conditions of employment for objective reasons. But, if this is not the case, the employee need not worry about this.

If the company you work for is facing a transfer of employment, or if you are the one acquiring a business, please contact us. Our labour lawyers will advise you on everything you need.