Home / Publications / Rules for the Transfer of Undertakings

Rules for the Transfer of Undertakings

Meet the Law

21/3/2018

Through Law no. 14/2018, of March 19, the Labour Code was amended for the thirteenth time. This amendment concerns the legal framework applicable to the transfer of undertakings and it also "strengths the employees rights" in this regard (making a transcription of the diploma).

The amendments were substantial and will have a significant impact on the companies that intend to use this legal regime, which is why it is important to introduce you to this diploma.

Densification of the concept of "economic unit"

It is considered an economic unit the set of organized means that constitutes a productive unit endowed with technical-organizational autonomy and that maintains its own identity throughout the transfer. 

Contractual and acquired rights

It is now expressly foreseen that the employees transferred to the transferee retain all the acquired rights, as well as the contractual ones agreed with the transferor - namely regarding remuneration, seniority, professional category, functional content and acquired social benefits.

Joint Liability

The rule of joint liability of the transferor was expanded (now, the joint liability falls on the labour credits arising from the employment contract, from its violation or from its termination, as well as from the corresponding social charges, due at the time of the transfer) and the date of its existence was increased from 1 to 2 years.

Transfer of undertaking's production of effects

From now on, the transfer of undertaking will only be effective after 7 working days. Moments from which this period is counted:

  •  Designation of the representative committee
  • The deadline for designating said committee being due without it happening
  • Agreement between representatives of the employees and the company
  • Due of the period for consultation with the representatives of the employees

Duty to inform the AWC

Companies are now obliged to inform the Portuguese Authority for Working Conditions (AWC) of the content of the contract between transferor and transferee and all the elements that constitute the economic unit (if it is the case).

Information to AWC:

  • Mandatory: for medium and large companies
  • At the request of AWC: in case of micro or small enterprises
     

Labour Misdemeanours

It constitutes a very serious labour misdemeanour:

  •  The non-occurrence of a transfer of undertaking when there is a transmission of employment contracts based on this regime
  • Non-recognition of the transmission of employment contracts by the transferee when there is a transfer of undertaking

The enforceable judgment must declare if the employment contracts were transmitted or not.

 

This way, lawsuits in which the request is the acknowledgment of the transmission or of non-transmission of those employment contracts are now avoided.

Extension of the duties of information to the employees

The company will also have the duty to inform the employees/representatives of employees of the content of the contract between transferor and transferee.

There is now a duty of information towards the employees, even if there are employee representation structures (cumulative duty of information).

The companies now have the obligation to immediately inform the employees covered by the transfer of undertaking of the reaching of an agreement or of the end of the consultation of the employees´ representatives if there has been no intervention by the representative committee.

The violation of the above mentioned duties constitutes a serious labour misdemeanour.
Alongside of the extension of the information duties, there is a constant caveat regarding the employees' representative structures' duty of confidentiality as for the information that they receive from the company. 

Intervention of the competent department of the Ministry responsible for labour matters

At the request of either party, the competent department of the Ministry of Labour shall intervene in the negotiations between the transferor and the transferee with the employees´ representatives, in the same terms as the procedure of collective dismissal - in other words, this entity is now assigned with the following functions: 

  •  Promoting the regularity of the substantive and procedural instructions of the negotiation;
  • Reconciling the interests of the parties; and
  • The respect for the employees´ rights.

Representative Committee

In similar terms as the collective dismissal procedure, the employees covered by the transfer of undertaking that are not represented by any collective representation structures may designate, from within five working days (of receipt of the information, regarding to the transfer of undertaking), a representative committee.

 

Maximum number of members: 

  • 3 members - if the transfer includes up to 5 employees
  • 5 members - if the transfer includes 5 or more employees
     

Only employees covered by the transfer can be appointed to this committee.

Right of opposition

 

One of the main innovations (if not the main one) of this diploma.

 

The employees included in a transfer of undertaking may exercise the right to oppose the transfer of their employment contracts, maintaining the link to the transferor.

Grounds for the employee´s right of opposition:

 

1. If he/she invokes serious impairment, such as: 

  • For patent lack of solvency of the transferee
  • Due to the financial dificulties of the employee

2. If the work organization policy of the transferee does not provide him/her confidence 

The employee has 5 working days to exercise his/her right of opposition (counted since the end of the period for the appointment of the representative committee, if that appointment has not been made; after the reaching of an agreement; or upon the termination of the consultation of the employee´s representative's period).

This right shall be exercised in writing, mentioning:

  • The identification of the employee
  • The contracted activity
  • Grounds of the opposition

Just cause of termination

The transfer of undertaking is now considered as a just cause for the termination of the employment contract by the employee.

The grounds shall be the same as the ones of the right of opposition.

In case of this termination of the employment contract, the employee is entitled to compensation in the same terms as the ones applicable to the collective dismissal.

 

In other words, the employees are now entitled to choose one of the following possibilities, if they disagree with the transfer of undertaking: 

  • Termination of the employment contract with the right to compensation
  • Opposition of the transfer of his/her employment contract, remaining in the transferor

 

Collective bargaining agreement 

The CBA applicable to the employees shall remain as applicable if, upon the end of the effectiveness of such bargaining agreement or at least after a period of 12 months, the transferee does not have any CBA in force.

 

This application will fall under the following matters: 

  •  Remuneration
  • Category and respective definition
  •  Working time
  • Social protection schemes if the benefits are substitutive of those guaranteed by the general social security scheme or with protocol of substitution with the National Health Service

The violation of this duty constitutes a serious labour misdemeanour.

These amendments will have a significant impact on the companies - both transferors and transferees - revealing itself as a true game changer.

Despite the complexity of this diploma, it will enter in force today, March 20.

Authors

Picture of Sofia Mateus
Sofia Mateus
Partner
Lisbon
Joana Nobre Saraiva
Associate
Lisbon