Transmission of a business or establishment constituting an economic unit and the rights of workers. What has changed with this new law? Pedro Madeira de Brito, laywer and partner at BAS, answers this question.
Law No. 14/2018 of March 19, which amended the legal regime applicable to the transfer of a business or establishment and strengthens the rights of workers, has recently been published by making the thirteenth amendment to the Labour Code, approved in an annex to the Law No 7/2009 of 12 February, amending Articles 285, 286, 394, 396 and 498 thereof and adding a new Article 286-A.
Of the set of articles of the Labour Code altered or introduced by said Law two important legislative changes result:
a) Modifications in terms of the procedures to be followed when transmitting a business or establishment;
b) Granting of the right of opposition by the employee to the transfer of the position of the employer in their employment contract to the business or establishment transmitting entity;
c) Insertion of the possibility of termination with just cause of the employment contract.
What has changed?
Modifications to the procedures are as follows:
a) The possibility for affected workers to appoint a representative committee (ad hoc committee), with a maximum of three or five members depending on the transfer including up to five or more workers, in the absence of workers’ representatives (workers’ committees, associations union commissions, union delegates) (article 286, paragraphs 6 and 7, with the wording introduced by Law no. 14/2018, of March 19);
b) The obligation of the transferor and the purchaser, in addition to informing the representatives of their employees or the employees themselves of the date and reasons for the transfer, the legal, economic and social consequences for the employees and the measures planned in relation to them , they must now also inform them of the content of the transfer contract concluded between the transferor and the purchaser (Article 286 (1), as amended by Law No 14/2018 of 19 March) ;
c) The possibility that the information concerning the content of the contract may not be provided or be classified as confidential by the transferor or the purchaser in a reasoned and written manner on the basis of objective criteria based on management requirements, circumstances which may be contested by the employee’s representation structure, in accordance with the Labour Procedure Code (articles 286, paragraph 1, with the wording introduced by Law no. 14/2018, of March 19, and 412, and 413);
d) The obligation of the transferor employer to inform the service with the inspecting competence of the ministry responsible for the labour area (i.e. the ACT- Authority for Work Conditions) of the content of the contract between the transferor and the purchaser and all the elements that make up the unit (as a “set of organized means that constitutes a productive unit endowed with technical organizational autonomy and that maintains its own identity, with the purpose of carrying out an economic activity, central or secondary”), in the case of medium or large companies or upon request of that service in the case of micro or small companies (article 285, paragraphs 8 and 9, with the wording introduced by Law no. 14/2018, of March 19);
e) In this case, information concerning the content of the contract may also not be provided or be qualified as confidential by the transferor or the purchaser in a reasoned and written manner, on the basis of objective criteria, based on management requirements, circumstances that may be challenged by the department with the inspection authority of the ministry responsible for the labour area, in accordance with the Labour Procedure Code (articles 286, 8, b), with the wording introduced by Law No. 14 / 2018, of March 19, and 412 and 413);
f) The possibility for any of the parties involved (transferor, purchaser, workers and their representatives) to request the competent department of the Ministry responsible for labour matters (which in this case will be the Directorate General for Employment and Labour Relations) to participate in the negotiation, with the goal of promoting the regularity of its substantive and procedural instruction, conciliation of the interests of the parties and respect for the rights of workers (Article 286 no. 5, as amended by Law 14/2018 of 19 March);
g) The attribution to the said competent department of the ministry responsible for the labour area, in particular, of the faculties to warn the employer if it considers that there is an irregularity of the substantive and procedural instruction and, if it persists, to include this mention of the minutes of the negotiation meetings (articles 286 no. 5, with the wording introduced by Law no. 14/2018, of March 19, and no. 362, no. 2);
h) The possibility of any of the parties involved (transferor, purchaser, workers and their representatives), as well as the competent service of the Ministry responsible for labour matters (in this case DGERT – Directorate-General for Employment and Labour Relations) may request the regional employment services, vocational training and social security to indicate the measures to be taken in their respective areas in accordance with the legal framework of the solutions adopted (Articles 286 no. 5, with the wording introduced by Law no. 14/2018, of March 19, and no. 362, no. 3);
i) The obligation for the transferor to only take effect after seven working days after the deadline for the appointment of the representative committee (in the absence of workers’ representatives: workers’ committees, trade unions, inter-union commissions, union committees), if this has not been established, or after the agreement on the measures to be applied to workers following the transfer or the end of the consultation for that purpose (Article 286 no. 7 with the wording introduced by Law no. 14/2018, of March 19); and finally,
j) The obligation for the transferor to immediately inform the workers covered by the transfer of the content of the agreement or the end of the consultation, if no intervention has been made by the representative committee (Article 286 no. 8 as amended by Law no. 14/2018, of March 19).
Main changes
From the substantive point of view, the new Law contemplates:
a) a right of opposition by the employee to the transmission of the position of the employer in his contract of employment; and
b) a right of the worker to terminate the contract of employment, following the transfer, which entitles him to compensation for the termination of the contract.
As regards, in particular, the granting of a right of opposition by the worker to the transfer of the employer’s position in his contract of employment in the event of the transfer, assignment or reversal of a business or establishment or part of a business or establishment constituting an economic unit, inserted in the article 286-A, paragraph 1, added to the Labour Code by Law no. 14/2018 of March 19, it depends on the invocation of serious damage, and, by way of example, the legislator provides in paragraph 1, of the article in question, two situations in which the indeterminate concept can be fulfilled:
a) When there is a clear lack of solvency or difficult financial situation of the purchaser; and
b) When the work organization policy of the purchaser does not merit the worker’s trust.
According to the wording of Law no. 14/2018, of March 19, for Articles 394, no. 3, d), and 286-A, paragraph 1, the employee may also resort to the mechanism of the resolution with just cause of his employment contract, promoting their termination by invoking the same grounds of opposition “in consequence of the transfer of the business in accordance with Article 285 no.2 on the same grounds as the opposition to the transfer.
Concept of economic unit
It is also interesting to note that the concept of economic unity was changed from “the organised grouping of resources with the purpose of exercising an economic activity, principal or accessory” to become “the organised grouping of resources that constitutes a productive unit endowed with technical-organizational autonomy that maintains its own identity with the purpose of exercising an economic activity, principal or accessory”.
It is well known that the concept of economic unity derives from developments in the case law of the European Union Court of Justice obtained in the context of the European regime for the transfer of a business. However, this amendment does not combine well with European Union law inasmuch as it seems to cumulatively requires that the production unit has technical and organizational autonomy and its own identity (see Article 1, no.1, paragraph b) of the Council Directive 2001/23/EC of 12 March 2001).
