Transfers of business - international snapshot

​A high level overview of the employment implications of a business transfer across France, Germany, Hong Kong, Italy, Japan, Netherlands, Spain and the UK.

Further information on transfers of business can be found on our International Employment Issues microsite.

France

The rules on transfers of businesses only apply when an “autonomous economic entity” is transferred and continued after the transfer. In such cases, employment contracts automatically transfer, there is no option to opt out of the transfer and employees cannot be dismissed because of the transfer. There are consequences in relation to the mandate of employee representatives in that they are either terminated or transferred, depending on the circumstances.  Collective agreements must be maintained for a maximum of 15 months.

The transferor must inform and consult its employee representatives.

Further details are available here.

Germany

On a transfer of a business to which Section 613a of the German Civil Code applies, employees employed in the business transfer to the transferee by operation of law. Employees’ acquired rights are protected. Individual employees must be informed and have a right to object to the transfer (within one month of receipt of the notification letter). If an employee objects, their employment remains with the transferor. Employees must be given comprehensive information about the transfer and its impact on them. A failure to comply with this obligation means that an employee can object to the transfer of their employment and no time limit applies. If there is a works council, the works council will have participation rights if the transfer will result in operational changes such as site closures, split-ups of the affected site or mass redundancies. Post-transfer variations of employees’ acquired rights to the detriment of employees are subject to legal restrictions. It is not possible to give notice of termination because of the transfer of business (although termination on other grounds such as breach of contract is possible).

Further details are available here.

Hong Kong

Hong Kong law does not make provision for the automatic transfer of employees on the transfer of a business. For a “transfer” of employment to occur, an employee must first be dismissed by the transferor and then accept an offer of employment with the transferee. It is for the transferee to decide which, if any, of the transferor’s employees it wishes to retain. The transferee is generally free to determine the terms of employment it offers to the transferor’s employees (but in the context of a transfer of a trade, business or undertaking, the transferee is obliged to recognise the employee’s prior service with the transferor). Upon a transfer, the transferor (as employer) is liable to pay the relevant employees’ termination entitlements (although the transferor and the transferee may agree that accrued entitlements will be “rolled over” and recognised by the transferee).

Further details are available here.

Italy

In the event of a transfer of business, employment contracts are not terminated and have effect as if originally made with the transferee. Generally, employees continue to be employed by the transferee on the same terms and conditions on which they were employed by the transferor. The transferor and/or the transferee must inform and, if requested by the representative bodies (the trade unions), consult the representative bodies. The duty to inform is mandatory if the transferor employs more than 15 employees. Information and consultation requirements are subject to a specific timetable established by law.

Further details are available here.

Japan

There is no legislation which specifically sets forth employment issues and procedures related to employees in a case of the transfer of businesses. 

Employment contracts between a transferor and its employees do not automatically terminate or transfer on the transfer of a business.  The transferor and the transferee must determine who will be transferred and obtain each employee’s consent to the transfer of his/her employment individually.  Transferred employees and the transferee can agree to change terms and conditions of employment for any reason, and most transferees obtain the consent of employees being transferred to any changes to their terms and conditions at the same time that they obtain their consent to transfer.

The transfer of a business does not constitute grounds for dismissal either by the transferor or the transferee.  There must be another reason which can be grounds of dismissal such as poor performance, health problems, or redundancy. 

Further details are available here.

Netherlands

On the basis of a transfer of business in principle all obligations for the transferor on the basis of the employment with the employee will transfer to the transferee by operation of law on the transfer date. This applies to the employment agreements of all employees who are employed in the service of and appointed to perform their duties in the part of the business which is transferred, as well as persons who are formally employed by another employer, but are permanently seconded to the transferred business. These will be transferred to the transferee by operation of law. The transfer includes seniority rights/length of service (certainly with regard to calculating the severance payment, if applicable) and all rights, benefits accrued and obligations arising from the employment agreements and collective labour agreements. The employees can prevent being transferred by operation of law by explicitly rejecting to transfer, resulting in the employment being terminated as per the transfer date, without the employer being obligated to pay any compensation to the employee. Special rules apply to the rights and obligations arising from pension commitments, which in principle pass to the transferee by operation of law. However, depending on whether the transferor and the transferee have a pension scheme, different consequences will apply.

Further details are available here.

Spain

A transfer of undertaking occurs where there is a transfer of  a company, a working centre or an "independent business unit".  An "independent business unit" is defined as an autonomous business 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. There is no right to object in the transfer of employees as defined by the ECJ. Transfers of isolated assets and employees or a share sale will not give rise to TUPE.

Further details are available here.

UK

On a transfer of an undertaking, employees assigned to the undertaking automatically transfer to the transferee (although employees can object to the transfer in which case the transfer will terminate their contract). With certain exceptions (including pensions), the transferor's rights, powers, duties and liabilities are transferred to the transferee. The transferor must give the transferee specific “employee liability information” not less than 14 days before the transfer. Both the transferor and transferee must inform affected employees and where measures are envisaged, consult the appropriate representatives of the affected employees. Employment contracts cannot be terminated and employees cannot be dismissed because of the transfer itself, or a reason connected with it which is not an economic, technical or organisation reason entailing changes in the workforce.

Further details are 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.