Transfers of business in Spain

A high level outline of the employment implications of a business transfer in Spain.

Introduction

Article 44 of the Spanish Workers Statute implements both the European Acquired Rights and Protection of Employment Directives.

Scope of the law

Article 44 applies when a company, a working centre or an “independent business unit” is transferred.

An “independent business unit” is defined as an autonomous production unit which maintains its identity as an organised set of assets, means or resources suitable for carrying out a business activity. It does not matter whether the activity is central or ancillary to the transferor’s business.

Transfers of isolated assets and employees do not, therefore, constitute a transfer of a business for these purposes. Also a share sale will not constitute the transfer of a business.

Effect of transfer on contracts of employment

On a business transfer, the contracts of employment of the transferor’s employees employed in the business transferred are transferred to the transferee. The transferee is deemed to succeed the transferor as employer of the transferred employees. The transferee is obliged to maintain all existing employment terms and conditions, so that the employees’ rights in relation to their employment are not adversely affected or varied as a result of the transfer.

Right of objection

Employees do not have a right to object to the transfer. Key managers, employed under senior management contracts (contratos de alta dirección), however, have a period of three months within which they can request a termination of their senior management contracts (with indemnification) if the transfer involves a renewal of the management bodies (ie the company's administrative bodies such as the board of directors), or if there is a change to their main duties.

Occupational pension schemes

Any liabilities arising from pension benefit schemes (determined by specific pension regulations) will transfer to the transferee.

Recognition and collective agreements

Collective Bargaining Agreements (CBA) which, at the time of the transfer, apply to any member of the workforce affected by the transfer will continue to apply after the transfer until a new applicable CBA is approved. The transferee and workers’ representatives can, however, agree that this will not be the case once the transfer has been completed.

Employee representatives

The various forms of employee representatives will be maintained provided that the independent business unit transferred maintains its own autonomy once transferred to the transferee.

Changing terms and conditions following a transfer

If the transferee wants to change terms and conditions after the transfer, the employees’ consent will generally be required. If such consent cannot be obtained and the proposed changes amount to a substantial change to employment terms and conditions, as defined by the Workers’ Statute, the transferee must follow the statutory procedures for substantial changes to employment conditions after the transfer.

Regarding terminations linked to TUPE, it should be noted that recently there have been some court rulings analysing termination and collective redundancies in the scope of a transfer. These ruling have declared null terminations that were made right before/after the transfer and linked to it.

Transferor’s obligations to inform transferee

There are no specific legal obligations for the transferor to provide the transferee with any employee liability information, other than those required contractually by the transferee.

Informing and consulting the workforce

Information obligations

Both the transferor and transferee must notify their employee representatives (eg the Works Council) of (i) the anticipated date of transfer (ii) the reasons for the transfer (iii) any legal, economic or social consequences that may affect the employees as a result of the transfer, and (iv) any measures anticipated in respect of the employees.

If there are no employees’ representatives, this information should be made available to the affected employees directly.
The information must be provided sufficiently in advance of the transfer and as soon as is reasonably possible.

Consultation obligations

If, prior to the transfer, the transferor envisages taking measures in connection with the transfer with respect to its own employees, the transferor is obliged to consult the representatives of its own employees (or the affected employees directly, if there are no representatives) about the anticipated measures prior to the transfer.

Notifying employees about change of employer

Other than the information and consultation process with the employee representatives referred above, the employer does not have a separate obligation to give written notice of the transfer to the employees. However, it is common practice to do so.

Joint liability

The transferor and transferee are jointly liable for three years after the transfer in respect of any obligations regarding payment of wages and social security obligations which originated prior to the transfer.

Contracting out

Any provision of any agreement is void insofar as it purports to exclude or limit the operation of Article 44 of the Workers Statute (except insofar as Article 44 provides for an agreement to exclude or limit its operation).

Registration

The change of employer must be registered with the social security authorities within 10 days of completion of the transfer. In addition, if the new employer is not a previously registered employer in Spain, it will have to carry out its own registration as an employer for social security purposes.

Further detail on business transfers in Spain is available here.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.