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Amendments introduced to the Labour Code

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Amendments introduced to the Labour Code – transfer of the undertaking or business to a new service provider

Law 18/2021, dated April 8, aimed at extending the regime for the transfer of an undertaking or business in case where services are transferred through public tender, direct award or other means.

 

Pursuant to Article 285 (1) and (3) of Labour Code, in the event of transfer, by any means, of ownership of undertaking, business or part of the undertaking or business that constitutes an economic unit, the employer’s position in the employment contracts of the respective employees shall pass to the transferee, who shall retain all contractual and acquired rights, i.e. remuneration, seniority, professional category and functional content, as well as acquired social benefits.

 

Article 2 of Law 18/2021, dated April 8, inserted, among other amendments, a new paragraph (10) in Article 285 of the Labour Code, which provides that the aforementioned regime for the transfer of an undertaking or establishment summarised above also applies to “any transfer of an undertaking or business through the award of services under a public tender or other selection procedure, i.e. the award of contract for the provision of surveillance, catering, cleaning or transport services, with effect from the date of the award” (emphasis added).

 

It should be noted that the employee covered by the transfer of undertaking regime may object to the transfer of the employer’s position while retaining the original employment relationship based on the circumstances provided for in Article 286-A (1) (manifest lack of solvency or difficult financial situation of the transferee or the fact that the transferee’s work organisation policy is not trustworthy).

 

A final note concerns the timing of the application of the changes introduced by Law 18/2021, dated April 8. To this end, it is important to refer to the provision of the substantive transitional law in Article 3, which provides that “the amendments introduced by this law shall also apply to public tenders or other selection procedures in the public and private sectors carried out during 2021, including those in which the awarding act has been completed” (emphasis added). It is well known that the award of contracts by public bodies involves a complex process of contract formation, which includes a pre-award procedure and an act of selection of the co-contracting party (the act of awarding the contract). For this reason, the last paragraph of this provision (“…carried out during 2021, including those in which the awarding act has been completed“) and paragraph 10 of Article 285 of Labour Code (“…with effect from the date of the award“) show that the amendments introduced by this law apply, in particular, to all public contracts in which there is a transfer of undertaking or business (i.e. those relating to the provision of surveillance, catering, cleaning or transport services), in accordance with the provisions of Article 285 of the Labour Code, the award of which took place in 2021, regardless of when the pre-contractual procedure was initiated, and therefore applies retroactively. In other words, this law applies to all those contracts that were already in force before April 9 (see article 4 of Law 18/2021 of April 8), provided that the relevant award act was carried out in the current year.

Marco Real Martins and Pedro Madeira de Brito, Partners

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