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  • Legal system, currency, language

    Constitutional and civil law with certain application of case law. Pesos (ARS). Spanish.

     

  • Corporate presence requirements & payroll set-up

    A foreign entity cannot hire employees in Argentina without a local corporate presence.

    Employers must pay social security contributions (23% or 27% on top of salaries, depending on the company's activity and revenues). Employees must contribute 17% of their salaries to the social security system (to be withheld by the employer and subject to certain taxable limits). Income tax is also withheld by the employer when paying employees' salaries (maximum rate 35%, subject to a progressive scale).

    Collective bargaining agreements for certain activities provide payments to be made by the employer and/or the unionized employees to the relevant unions.

  • Pre-hire checks

    Required

    • Pre-hire medical checks are required pursuant to resolutions issued by the Occupational Hazard Superintendence. If an employee does not complete a pre-hire medical check, the employee will be deemed to have begun work in optimal health; therefore, any injuries or diseases which subsequently arise will be deemed to have happened during the employment relationship.
    • Criminal record checks are required for foreign employees to obtain a work visa.

    Permissible

    Where criminal checks are not required for work visa purposes, they are only permissible (and often done in practice) for specific roles (eg, high-level managerial positions). Reference and educational checks are common and permissible, provided applicant consent is previously obtained.

  • Immigration

    Foreigners from non-Mercosur countries must obtain a temporary residence permit that permits them to enter and work in Argentina. Temporary residency is granted for a maximum period of up to 1 year, extendable for periods of equal or shorter terms. After 3 consecutive years as a temporary resident, foreign employees are entitled to apply for permanent residence.

    Citizens of Mercosur countries can apply for temporary Mercosur residence in Argentina without the need to present a work contract to the authorities. Temporary Mercosur residence is granted for 2 years and enables the individual to work and to apply for permanent residence on expiry of the temporary residence.

  • Hiring options

    Employee

    Full-time, part-time, fixed-term, indefinite-term employees or trainees.

    The following factors tend to indicate a labor relationship: availability to work for his/her employer; an employer who directs and subordinates the individual; an employer who instructs the services and duties required and creates the individual's schedule. Courts will also look at the extent to which the worker depends economically on the employer.

    Independent contractor

    Contractors should only be engaged where there is no labor relationship, that is, no direction/subordination or economic dependence.

    Misclassification, that is failure to register an individual as an employee, or submission of an incomplete or defective registration, carries the risk of severe sanctions and fines from the authorities (including amounts owed to social security for unpaid contributions). In addition, steep fines are levied upon statutory severance, including the doubling of the amount of severance owed to a (misclassified) employee.

    Agency worker

    Employers can engage workers through agencies. Agencies must be authorized by the authorities to function as an agency.

    The employer will be jointly and severally liable with the agency for all labor obligations arising from the worker's employment.

  • Employment contracts & policies

    Employment contracts

    There is no general, legal requirement to execute employment contracts in a specific form – meaning that they can be in writing, made orally, etc. unless a specific law or collective convention applies and indicates otherwise. Notwithstanding, employers are advised to enter into a written employment contract.

    Probationary periods

    The maximum permitted duration of a probationary period is 3 months. After the end of the 3 month period, the employee will turn into an indefinite term employee.

    Policies

    The law does not require employers to have specific policies in place. Notwithstanding, there are some policies that are strongly recommended to prevent potential conflict, such as bonus policies.

    Third-party approval

    Third-party approval is not required for employment contracts or any policies.

  • Language requirements

    No statutory language requirements; however, in practice, employment contracts are drafted in Spanish.

  • Minimum employment rights

    Employees entitled to minimum employment rights

    The Employment Contract Law No. 20,744 (LCL) governs the minimum employment rights in Argentina.

    Pursuant to Article 3º of the LCL, the law governs everything related to the validity, rights and obligations of the parties, provided the employment contract is performed in Argentina, even if the contract was entered into abroad.

    The LCL applies to "workers" which covers not only employees working under an employment contract, but also other individuals who personally perform "work" or provide services for the employer.

    For this purpose, "work" should be understood as any legitimate activity that is provided in favor of someone who has the power to direct that work, through the payment of remuneration for those activities and/or services rendered.

    The main factors that will tend to indicate that an individual is an employee rather than a worker or self-employed worker, are:

    • The employee must be available to work for his/her employer
    • The employer will direct and subordinate the employee, appoint the services and duties required and order the employee to comply with a schedule

    Courts will also weigh the extent to which the worker depends economically on the income obtained from the alleged employer.

    Working hours

    The general maximum number of hours is 8 hours per day or 48 hours per week for all employed workers in public or private enterprises. Each extra hour worked above these limits is deemed to be overtime.

    Notwithstanding the foregoing, Article No. 3 of Law No. 11,544, in its subsections a), b) and c) regulates exceptions to the abovementioned maximum limitation on working hours. The limitations do not apply to employees performing duties under the form of a "job team," that is, working in a special coordinating rotation system, nor to employees performing duties in high-level positions (main managers, directors etc.).

    Overtime

    Employees in Argentina are allowed to perform overtime. Overtime will be only compulsory in cases of danger or accidents or imminent force majeure, or by exceptional demands of the national economy or the company (Article No. 203 of the LCL).

    Overtime must be paid with a surcharge of 50%, calculated using the employee's usual salary if the overtime hours were worked during business days, and 100% on Saturday after 1pm, Sunday or holidays. In no event may employees work overtime of more than, 3 hours per day, 30 hours per month or 200 hours per calendar year.

    Wages

    The national minimum wage (NMW) is updated regularly by the National Council of Employment dependent of the Ministry of Production and Labor. The NMW rate as of December 2018 is AR$11,300.

    Most CBAs also provide for a specific minimum wage applicable to employees subject to the CBA.

    Vacation

    Employees with less than 5 years seniority are entitled to 14 calendar days after 6 months of work. This increases to 21 calendar days for employees with between 5 to 10 years of seniority; 28 days for employees with between 10 to 20 years of seniority, and 35 days for employees with more than 20 years of seniority. For employees with less than 6 months of service, employers must grant 1 day of vacation per worked month. Companies should grant vacation to their employees between October 1 to April 30 of the following year.

    Sick leave & pay

    Sick/accident leave of up to 3 months per year must be provided to employees with less than 5 years of seniority, while 6 months must be granted to employees with seniority of 5 years or longer. For employees with "family dependents" (generally understood to be the immediate family that economically depends on the employee’s wage and labor benefits), these periods are doubled, to 6 and 12 months, respectively.

    Maternity/parental leave & pay

    Pregnant employees may take leave of 45 days prior to giving birth and up to 45 days after giving birth. However, the employee may choose to reduce the leave prior to giving birth, but it may not be less than 30 days, and add those days to the maternity leave period after the birth of the child. In the event of premature birth, the period of the leave that has not been enjoyed before the birth will be added to the leave period after the childbirth. Further, the employee is entitled to earn her gross remuneration (without any withholding contributions made to the social security system), during maternity leave. The ANSES (as defined below) pays the remuneration of employees during maternity leave.

    Fathers are entitled to paid leave of 2 consecutive days for the birth of his child. There is no general regulation providing other parental leave after the birth of a child. 

  • Discrimination

    The law prohibits discriminatory acts or omissions based on race, religion, nationality, ideology, political or trade union opinion, sex, economic position, social condition or physical characteristics.

    In addition, Argentina has ratified international antidiscrimination conventions, such as the Convention of Belem do Pará and the Convention on the Elimination of All Forms of Discrimination against Women.

  • Benefits & pensions

    The Social Security National Administration (Administración Nacional de la Seguridad Social, hereinafter ANSES) is the authority in charge of the administration of the social security system in Argentina, called Sistema Integrado de Jubilaciones y Pensiones (SIJP). Employers and employees are required to make contributions to the SIJP which provides for old age pension and disability benefits.

    To qualify for a statefunded pension distribution, male employees must be 65 years old, while female employees must be 60 years old. In both cases, in order to qualify for pension the employee must have contributed to the SIJP for a minimum of 30 years.

    Employers do not have a legal obligation to provide a private pension scheme for employees, as the employees are entitled to state pensions.

  • Data privacy

    The Data Privacy Law No. 24,766 sets limits to the type of personal data that may be collected by prohibiting the collection of sensitive personal data, such as data that is related to political or religious opinions, and regulates the collection, use, processing and transfer of personal data.

    Employers are allowed to monitor employee's work devices, provided the employee is duly notified in advance, and personal information is safeguarded and not disclosed.

  • Rules in transactions/business transfers

    Where there is an asset transfer that qualifies as a business transfer, all obligations arising from the employment contracts that the transferor has executed with its employees will be taken on by the transferee after the transfer. Employment contracts will continue with the transferee and the employees will retain their seniority with the transferor and the rights arising from it. Therefore, on the execution of the transfer, all employees are automatically transferred to the transferee, after their written consent has been obtained.

    Although in practice both internal consultations and collective consultation with trade unions are held before a business transfer takes place, the transferor and the transferee are not required by law to inform or consult employees on a business transfer. However, in order to perform the transfer of staff, the employee’s written consent must be given prior to the transfer. In the absence of this consent, the employee may terminate the employment, with the right to compensation.

    The transferor and the transferee will be jointly and severally liable for any dismissals that arise due to the transfer.

  • Employee representation

    Argentina is a highly unionized country with approximately 3,100 active trade unions with considerable political power. There are unions in nearly all sectors or industries.

    A trade union must be recognized by the Ministry of Production and Labor. Only recognized and authorized unions can enter into a CBA. Employers cannot recognize an unauthorized union voluntarily, not even for collective bargaining purposes.

    The National Constitution sets out collective labor rights in its Article No. 14 (bis), guaranteeing unions the right to collectively bargain and the right to strike.

    CBAs are very common in Argentina. There are different types of CBAs depending on the territory in which they are going to be enforceable. Some CBAs only govern employees within one specific company, whereas other CBAs govern employees performing certain activities in a geographical region or industry.

  • Termination

    Grounds

    Cause is not required for termination of employment; however, it is required to avoid payment of statutory severance. There is no exhaustive and/or exemplary list of behaviors that constitute cause for dismissal; therefore, whether a dismissal is with or without cause will depend on judicial judgment on a case by case basis. 

    Who is subject to termination laws?

    All employees.

    Prohibited or restricted terminations

    Public employees and union delegates cannot be dismissed without cause and without complying with the statutory procedure for these terminations. All other employees can be dismissed with payment of statutory severance, which will differ based on the case (maternity, illness, etc.)

    Pregnant employees are protected from dismissal. If a pregnant employee is dismissed within the period of 7-1/2 months before or after the date of childbirth, the pregnancy will be considered to be the cause of the dismissal, entitling the employee compensation for the discrimination equivalent to their annual salary, in addition to the applicable severance payment.

    Further, if a dismissal occurs 3 months before the marriage of an employee, or 6 months after it, the dismissed employee will be entitled to a special compensation.

    In order to dismiss employees on sick leave, employers must pay a special severance (full severance payment applicable for dismissal without cause, plus the salary which would be payable for the entire period the illness would be expected to last, according to medical opinion).

    Third-party approval for termination/termination documents

    Under Decree No. 1043/18 (effective as of November 14, 2018), employers wishing to dismiss indefinite term employees without cause must notify the Ministry of Production and Labor at least 10 business days before the decision goes into effect. This Decree is effective through March 31, 2019.

    As this decree was issued recently, there is no administrative or judicial case law interpreting the Decree.

    Mass layoff rules

    Prior to a mass dismissal, an employer must provide notice to the respective trade union that regulates the employer's industry. Collective consultation may be required depending on employee headcount.

    Prior to executing or communicating dismissals or suspensions due to force majeure, economic or technological causes that affects more than:

    • 15% of the employees where total headcount is less than 400
    • 10% of the employees where total headcount is between 400 and 1,000 and
    • 5% of the employees where total headcount is greater than 1,000

    Employers must comply with the Preventive Procedure of Companies Crisis (PPC) before the Ministry of Production and Labor. During this procedure, the company will engage in negotiation with the respective union acting on behalf of their members. The aim of this procedure is to avoid business shutdowns or bankruptcy. After the company files the request at the Ministry of Production and Labor, the Ministry will forward the claim within 2 business days of the filing to the other party for its response. After a response is made, a settlement hearing will be scheduled within the next 5 business days. If a settlement is not reached, the Ministry will open a "negotiating period" that must not extend beyond 10 business days. If the parties still do not reach to an agreement within that period, the PPC process will conclude. Notwithstanding this, in practice, this procedure normally takes longer than the law sets out.

    Notice

    In order to proceed with termination, employers must give notice to employees before the dismissal. 

    The term of this notice will depend on the seniority of employees:

    • During their probationary period, notice must be given to employees 15 days before termination
    • In order to dismiss employees who have completed the probationary period but who have less than 5 years of seniority, notice must be given 1 month prior to the dismissal and
    • Employees with more than 5 years' seniority must receive 2 months' notice before their dismissal

    Statutory right to pay in lieu of notice or garden leave

    Employers are permitted to pay in lieu of notice. Current legislation does not regulate nor prohibit garden leave.

    Severance

    An employee who is dismissed without reasonable cause is entitled to statutory severance of 1 month's salary for each year of service, or period longer than 3 months. This amount is calculated using the employee's highest monthly, regular compensation received in the last 12 months of work. This baseline cannot be more than 3 times the "monthly payment," which is the average of all compensation set out in the applicable CBA at the time of the dismissal (this average is periodically published). The Ministry of Production and Labor governs the updating of this average for every authorized trade union.  

    If the employee is not subject to a CBA (typically, senior employees), the limits applicable to the activity in which he/she performs duties will apply. In no case will the amount of the compensation payable be less than 1 month of real salary.

    Currently, in the Vizotti case, the Supreme Court of Justice has raised the basis for calculating compensation subject to a limit, establishing that it will be 67% of the employee's monthly and usual compensation, the amount to be multiplied by the years of service of the employee, based on constitutional reasons and in cases where the application of the legal limit imposes a reduction to the severance payment of more than 33%.

    This severance payment may be reduced or increased in other types of termination (eg, force majeure and lack or reduction of work; death of the employee; employer's bankruptcy; employee's retirement; employee's illness; employee's pregnancy; etc.)

  • Post-termination restraints

    Non-compete, customer non-solicitation and employee non-solicitation clauses are often used, especially when the employer and employee negotiate the terms and conditions of the termination of the employment.

    Restrictive covenants are capable of being enforced post-employment, provided the employee receives compensation for the restrictions. Therefore, consideration is required for valid restrictive covenants. The amount must be fair and in accordance with the salary of the employee, his/her position in the company, the agreements that the company intends to impose and the extent (period and territory) of the restrictive covenant.

    The law does not specifically regulate restrictive covenants. However, most restrictive periods range between 2 years to 5 years. However, under certain circumstances the court has enforced a 10 year post-termination restraint period, based on the business and the amount of consideration paid to the employee.

    Where an employee is in breach of an agreement, the employer can file a claim against the employee in court requesting compensation for damages. The complaint may include injunctive relief to stop the violation immediately. Alternatively, courts may declare the covenant null and void if it has been drafted too widely.

  • Waivers

    Pursuant to the LCL, any executed agreement that suppresses or reduces rights granted by the LCL, labor laws related to specific industries, collective agreements or individual employment contracts, either at the time of their agreement or execution, or the exercise of the rights arising from its termination, shall be null and void.

  • Remedies

    Discrimination

    Compensation is available as a remedy for discrimination or harassment. In case the event of a complaint based on harassment, the employee can file a claim requesting the payment of the statutory severance payment applicable to dismissals without cause and an additional amount for the pain and/or emotional distress caused by the harassment.

    Employers are liable for the acts of their employees. Therefore, the employer and the harasser will be declared jointly and severally liable for the payment of any compensation granted to the victim.

    Unfair dismissal

    Employees may challenge a dismissal without cause within 2 years of the dismissal and seek payment of statutory severance, plus interest and court fees. The complaint must be filed before the labor courts.

    Failure to inform & consult

    Not applicable for terminations as there are no consultation obligations.

  • Criminal sanctions

    Breaches of labor law do not entail a criminal breach or sanction unless such a breach or offense is specifically regulated by the National Criminal Code as a crime. In that case, criminal sanctions will be applied for the breach of criminal law and not for the breach of labor law.

  • Key contacts
    Osvaldo Jofre
    Osvaldo Jofre
    Cordova Francos [email protected]

Rules in transactions/business transfers

Argentina

Where there is an asset transfer that qualifies as a business transfer, all obligations arising from the employment contracts that the transferor has executed with its employees will be taken on by the transferee after the transfer. Employment contracts will continue with the transferee and the employees will retain their seniority with the transferor and the rights arising from it. Therefore, on the execution of the transfer, all employees are automatically transferred to the transferee, after their written consent has been obtained.

Although in practice both internal consultations and collective consultation with trade unions are held before a business transfer takes place, the transferor and the transferee are not required by law to inform or consult employees on a business transfer. However, in order to perform the transfer of staff, the employee’s written consent must be given prior to the transfer. In the absence of this consent, the employee may terminate the employment, with the right to compensation.

The transferor and the transferee will be jointly and severally liable for any dismissals that arise due to the transfer.

Australia

At common law, employees cannot be transferred from one employer to another without their consent.

Under the Fair Work Act, there are rules which apply if there has been a "transfer of business". The transfer of business rules apply when there is a connection between two employers (including the sale and purchase of all or part of a business, certain outsourcing and in-sourcing arrangements and where the two employers are associated entities), the new employer agrees to employ some or all employees of the old employer and there has been no significant change to the work performed by those employees. The main effect of the transfer of business rules is that a transferrable instrument (ie, a collective agreement) that covered the employee before the transfer will continue to apply after the transfer. The Fair Work Commission can make certain orders altering the effect of the transfer of business rules if it deems it appropriate.

Austria

Automatic transfer under the Austrian rules implementing the EU Acquired Rights Directive in a business sale or service provision change. Significant restrictions on changing terms and conditions following a transfer. Duty to inform and consult with employees and/or the works counsel (if any). Any dismissal connected to the transfer would be void unless for a good reason.

Bahrain

No automatic transfer principles and no laws covering business transfers. Employees transfer through termination and rehire in an asset deal.

Belgium

Automatic transfer under the EU Acquired Rights Directive/Collective Bargaining Agreement no. 32, in a business sale or service provision change. Significant restrictions on changing terms and conditions following a transfer. Duty to inform and consult with employee representative bodies, or, in absence of employee representative bodies, provide this information directly to employees. Any dismissal connected to the transfer is unfair unless for an economic, technical or organizational reason.

Brazil

There is no obligation to notify the government before asset or share deals. There are significant restrictions on changing terms and conditions of employment.

Canada

In most jurisdictions, legislation exists which will either:

  • Require the transfer of employees as a result of a sale of a business
  • Provide that employees who accept an offer of employment with the purchaser will have their employment deemed continuous and their past service honored

Unless a contract or collective agreement provides a right or option to claim termination amounts, employees accepting a purchaser's offer of employment will not be entitled to claim termination amounts from the seller.

Chile

There is no obligation in Chile to inform unions or labor authorities of any transaction or business transfer.

Chilean law permits the transfer of all or part of a business, in case of which in principle the new company that continues the operations will be considered the employer of the employees that work for that business. Under this scenario, the employees maintain seniority as well as all their rights and obligations under the employment agreements and practices in place with the former company, which must be honored by the new employer.

If the new company needs to change the employment conditions of the employees that will be transferred with the business, termination of the employment agreement by the transferring company and a new employment agreement with the new company generally is the most suitable solution.

China

No automatic transfer of employment in an associated company transfer or change of business ownership. Therefore, the previous employer will need to terminate the employee's employment contract and the new employer will need to offer (and the employee accept) employment. If the new employer recognizes the service years with the previous employer, then the previous employer may be able to avoid liability for a severance payment.

Colombia

Employment transfers may be implemented via employer substitution or the assignment of employment agreements, or by termination and re-hire. Employees transferred by substitution or assignment are entitled to receive at least the same benefits and to perform their work subject to the same terms and conditions as before the transfer. The employer who has been substituted will be jointly responsible with the new employer as to the labor obligations arising prior to the employer substitution.

An employer substitution occurs (regardless of the will of the parties) when the following 3 criteria are met:

  • Change of employer (for any reason)
  • Continuity of establishment (understood as the core business of seller)
  • Continuity of employment agreement

Czech Republic

Automatic transfer under the Transfer of Undertakings Directive 2001/23/EC and the Czech Labor Code where there is a transfer of an employer’s activities or tasks (or part thereof). Duty to inform and consult with employees and employee representatives. Protection of employees against significant deterioration of working conditions (significant restrictions on changing terms of employment following transfer, rights to claim severance pay in case of deterioration). Employees cannot be dismissed by virtue of a transfer.

Denmark

Under the Danish Act on Employees' Rights in the event of Transfers of Undertakings, employees' contracts of employment transfer automatically in the event of a business transfer or service provision change.

There are certain requirements for employers to inform and consult with their employees prior to a transfer.

Dismissals due to the transfer of an undertaking, or part thereof, will not be considered reasonably justified unless the dismissal is due to economic, technical or organisational reasons entailing changes in the workforce.

Finland

The Employment Contracts Act stipulates that, on the transfer of an undertaking, existing employees transfer on their existing employment terms. The Act on Co-operation within Undertakings stipulates consultation obligations with the personnel. Employees cannot be dismissed merely because of a business transfer, and dismissals or change of employment terms are possible only on normal grounds after the transfer. Employees or unions cannot object or prevent the transfer but an employee who is affected by the business transfer is entitled to resign with a shorter notice period. A share sale is not considered as a transfer of undertakings.

France

Automatic transfer of the employment contract under the EU Acquired Rights Directive/Article L. 1224-1 of the French Labor Code in case of a modification in the employer's legal situation (eg, sale, merger) and provided the criteria set by case law are met, meaning that it is a transfer of a standalone business that maintains its identity within the transferee.

In case of a partial transfer of undertaking, the transfer of protected employees will require the labor inspector's prior approval.

In share or asset deals, until December 31, 2019 at the latest, there is a requirement for the impacted companies to consult with their works council and also very likely, in the case of an asset deal, with their Health, Safety and Working Conditions Committee. As of January 1, 2018, the CSE must be consulted when in place. Between 15 days and 4 months of consultation may be required depending on the circumstances.

Under certain circumstances, employees of SMEs must be informed of a proposed sale of the business or of shares, to give them the opportunity to make an offer, although there is no obligation on the employer's part to accept any such offer.

Germany

Automatic transfer of employment under the EU Acquired Rights Directive/Germany's transfer of business (sec. 613a Civil Code) rules in case of an asset deal or service provision change. Employees shall receive detailed written information prior to the transfer and may object to the transfer within 1 month after receipt thereof. Duty to inform and consult with the works council. Significant restrictions on changing terms and conditions following a transfer. Any dismissal connected to the transfer would be unfair; dismissals for other reasons are possible.

Hong Kong

No automatic transfer of employment. This includes an associated company transfer or change of business ownership, or a merger situation where the employment entity will be changed. Therefore, the previous employer will need to terminate the employee's employment contract and the new employer will need to offer (and the employee accept) employment. If the employee accepts employment with the new employer or unreasonably refuses employment with the new employer in circumstances where the offer of new employment is on the same terms or terms and conditions no less favorable than the terms and conditions with the previous employer, then the previous employer may be able to avoid liability for a severance payment. There is no duty to consult (either individually or collectively) with employees or employee representatives.

Hungary

Where there is the transfer of a business, there will be an automatic transfer of the employment relationships, existing at the time of the transfer. The entire employment relationship, with all rights and obligations, will transfer.

Duties to inform the authorities and to inform and consult with the works council exist.

Any dismissal based purely on the fact of the transfer will be unfair and unlawful.

These rules do not apply to share deals or to a business transfer when the transferor is subject to a liquidation (insolvency) procedure.

India

Indian employment law does not provide for the automatic transfer of employees. IDA provides that upon transfer of the ownership or management of an undertaking, every ''workman'' who has been in continuous service in any industry for at least 1 year (ie, 240 days) will be deemed to have been retrenched (ie, terminated) and will be entitled to retrenchment compensation (equivalent to 15 days' average pay for every completed year of continuous service or any part thereof in excess of 6 months) and to receive 1 month's notice or wages in lieu thereof, unless the following applies:

  • The employee consents to their employment being transferred to the transferee
  • The transferee agrees to provide the employee with continuity of service on terms no less favorable than those which applied prior to the transfer

On and from the date of transfer, the transferee steps into the shoes of the transferor and becomes responsible for liabilities and obligations relating to such workmen including central and state taxes, provident fund contribution, gratuity, accident compensation, employee state insurance contribution.

With respect to liabilities prior to the date of transfer, the transferor and transferee both shall, in accordance with ESI Act and EPF Act, be jointly and severally liable to make provident fund and insurance contributions in respect of the period up to the date of the transfer, provided the liability of the transferee is restricted to an amount equivalent to the value of the assets obtained by way of the transfer.

With respect to employees other than workmen, they will usually resign from their service and will be reappointed by the transferee unless they do not wish to transfer. In the event the transferee agrees to provide continuity of service, that continuity will then be reflected in the employment contract.

Indonesia

Employees are not automatically transferred on a business transfer, which includes a merger. Indonesia does not have TUPE or TUPE-style regulations. Employees should be consulted, and the following 3 options are possible in relation to permanent employees:

  • The employee is not willing to continue their employment with the new employer, in which case they must be paid a stipulated severance pay, plus long service pay (if applicable) and compensation (if applicable)
  • The new employer is not willing to accept the employee, in which case the employee is entitled to 2 times the stipulated severance pay, plus long service pay (if applicable) and compensation (if applicable)
  • The new employer and the employee are willing to continue the employment as if no business transfer has occurred, with the employment relationship continuing on the basis of the same terms and conditions (or better) as before the transfer, and usually carrying forward accrued seniority. Employees cannot be given less beneficial terms unless they are terminated by the former employer/made redundant and rehired by the new employer. In that case, the new employer may rehire on its own terms

A non-permanent worker who chooses not to accept a transfer of employment offer, or who is not offered a transfer, is generally entitled to receive the wages for the remaining period of his or her fixed-term contract.

No protection against dismissal for employees in a business transfer. However, as with nearly all terminations of employment, Industrial Relations Court (IRC) approval is required before the employee's employment can be terminated, and severance entitlements must be paid.

Ireland

The EU's Acquired Rights Directive has been transposed into law by virtue of the European Communities (Protection of Employees on Transfer of Undertakings) Regulations. Provides for automatic transfer of employees with undertakings (or parts of undertakings) which retain their identity post-transfer.

Duty to inform and consult with employee representatives. Prohibition on transfer related dismissals, unless justified on economic, technical or organizational grounds.

Israel

Acquisitions that entail change of ownership will generally not result in changes in employment relations. Transfer of employees to a new employer as part of an asset transfer requires the employees consent. This can be achieved through assumption of employment arrangements by buyer (including seniority-based rights) or through a "fire-rehire" approach (there may still be transfer of residual liabilities deriving from the period of employment preceding the transfer).

Italy

Automatic transfer of those employees who belong to the transferred business/branch of business, without any interruption of the employment, to the transferee, regardless of the employees' consent. The transferred employees maintain all the rights to which they were entitled with the transferor. The transferor and transferee are jointly liable for entitlements that the transferred employees had at the time of the transfer. Duty to inform and consult with employee representatives.

Japan

In an acquisition by business transfer, employees of the selling company will continue as employees of the selling company. If employees are to be transferred to the buyer, it is typical for the employee to resign from the selling employer and then be newly hired by the buyer under a new employment contract executed by the employee.

In a merger, the merged entity will cease to exist and the surviving entity shall succeed to the contractual obligations of the merged entity, including employment agreements. Consequently, employees of the merged entity will automatically become employees of the surviving entity, keeping terms and conditions of employment including those under the merged entity's work rules.

In a statutory company split, the split of the employees should be handled in accordance with the Labor Contract Succession Act, and some employees may automatically transfer with the business that is being transferred. The splitting company must provide notice, in writing, as to the split-plan or agreement to the employees, who will be transferred at least 2 weeks before the approval of the company split. An employee:

  • Who is mainly assigned to the target business but not included in the transfer to the purchaser
  • Who is not mainly assigned to the target business but is included in the transfer to the purchaser has the right to object within 2 weeks of receipt of the notice

Kenya

Kenya does not have a specific law governing employment on the transfer of a business. Normally this is treated as a redundancy irrespective of whether alternative employment is offered by the transferee at no less favourable terms with recognition of past years of service with the transferor. Employees are terminated by the vendor and new employment contracts with the purchaser are to be entered into simultaneously.

Kuwait

Employees transfer through termination and rehire in an asset deal.

Luxembourg

In case of business transfers falling under the scope of the EU Acquired Rights Directive, as implemented in Luxembourg, all employment contracts existing at the date of the transfer have to be maintained with the new employer. All employees' rights are maintained and transferred to the transferee.

Duty to inform and consult the employees' representatives.

Any dismissal connected to the transfer would be unfair unless for an economic, technical or organizational reason.

Malaysia

No provision for automatic transfer of employment. Employees will remain employed by the seller in a sale of business transaction. The "transfer" of employees in a sale of business transaction is effected by a termination (by the seller) and rehire (by the buyer), and in this scenario the seller will be exempted from paying any statutory severance payment if the new offer from the buyer is under terms and conditions of employment not less favorable than those under which the employee was employed by the seller. An employee will not be entitled to statutory severance payment if the employee unreasonably refuses the new offer.

Mexico

Employment transfers may be implemented via an employer substitution letter. Transferred employees are entitled to receive at least the same benefits and perform their work subject to the same terms and conditions as before the transfer. The employer who has been substituted will be jointly responsible with the new employer for a period of 6 months.

Morocco

Automatic transfer pursuant to article 19 of the Labor Code in a business transfer.

Information to the employee's representatives (if any exist in the company) but no authorization/consent required.

Mozambique

In the event of a transfer of a business, the employees are automatically transferred to the new employer (unless the employees decide to terminate the employment contract). The rights and obligations under existing employment contracts and collective labor regulation instruments, including those arising from an employee's length of service, pass to the new employer.

Communications must be made to the Ministry of Labor and to the trade union (if any) informing them of the transfer, the date, the reasons, consequences thereof and the intention to respect the rights acquired by the employees in the previous labor relationship. The law does not set a minimum time period, but in practice it would be appropriate for communications to be made 30 days in advance.

Myanmar

There are no specific rules governing employment implications of transactions/business transfers, other than as below.

An employer must pay a statutorily prescribed severance payment to the affected employees in accordance with relevant laws in the case of the employer's breach of contract, liquidation, sale of the business, winding-up the business or reducing the number of workers.

The severance payment is based on the length of time the employee has continuously served the employer, and on the basis of the employee's last salary (without overtime premium). See ''severance" below.   

Netherlands

Automatic transfer under the EU Acquired Rights Directive/Dutch civil code in a business sale or service provision change. Significant restrictions on changing terms and conditions following a transfer. Duty to inform and consult with employee representatives. Any dismissal connected to the transfer would be unfair unless for an economic, technical or organizational reason. Works council has the right to advise.

New Zealand

New Zealand law does not contain any automatic transfer provisions except for a few limited classes of employees.

If a business is sold, transfer of employees depends on the nature of the sale.

Where a business, or part of the business, is acquired by way of an asset and goodwill purchase, the employees do not automatically transfer to the new owner but must agree to do so. Where a business, or part of the business, is acquired by way of a share purchase, the employment of employees remains unchanged.

Special provisions apply for businesses that employ ''vulnerable employees.'' This is a special category covering, for example, cleaning and catering staff.

There are also requirements under the Employment Relations Act 2000 for there to be a process for consultation with staff in business transfer situations. These are called ''Employment Protection Provisions'' and are process requirements only, meaning there is no substantive right to transfer.

Nigeria

No legislation on transaction/business transfer except if provided in the employment contract. Where the contract of employment does not provide for transfer of undertaking, consent of the employees is required for the transfer of the employment. Termination and rehire is also an alternative.

Norway

Automatic transfer under business transfer regulations. Rights and obligations under the employment contracts are transferred to the new employer. Restrictions on changes to terms and conditions following a transfer. Duty to inform and consult with employee representatives. The transfer is not in itself grounds for dismissal.

Oman

Omani employees will automatically transfer to the purchaser; however, expatriate employees will not.

Philippines

In a share deal, employment continues.

In an asset deal, the parties can agree to assume the employment agreements, which requires employee consent. Alternatively, employees can be terminated and rehired, which would result in the seller being liable for separation pay of 1 month per year of service or at least 1 month's pay, whichever is higher.

Poland

Automatic transfer of employees under the EU TUPE Directive and the Polish Labor Code. The transferor and the transferee are jointly and severally liable for the obligations resulting from the employment relationships that arose before the transfer of a part of an undertaking. They have certain information and consultation obligations towards the employees and the employees' representatives (trade unions and works council). A transferred employee has the right to terminate his/her employment relationship within 2 months of the transfer date, without notice, providing 7 days' prior notice. Termination according to this procedure has the same legal effect as if the employment relationship was terminated with notice by an employer. Dismissal solely due to transfer is unlawful. The transferee is obliged to apply any CBA adopted by the transferor and applicable to the transferred employees for a period of 1 year after the transfer date, unless the transferee applies more favorable conditions than those resulting from this CBA.

Portugal

Automatic transfer under the EU Acquired Rights Directive and the Portuguese Labor Code in case of change of employer (eg, sale of an independent stand-alone business unit, merger or spin-off). Right of the employees to maintain the same terms and conditions. The transfer is not by itself a cause for fair dismissal. Duty to inform, and, in case labor measures are planned (eg, change of work center, change of employment conditions), duty to consult with employee representatives. Under certain circumstances, the employee may oppose the transfer or may resign after the transfer, with entitlement to legal compensation (constructive dismissal).

Qatar

No automatic transfer principles and no laws covering business transfers. Employees transfer through termination and rehire in an asset deal.

Romania

Automatic transfer under the EU Acquired Rights Directive and Romanian Transfer of Undertaking Law No. 67/2006 (TUPE) in asset deals typically involving a business/undertaking sale. This entails transfer of the rights and obligations arising from the transferred employees' individual employment agreements and the applicable collective bargaining agreement (for its duration) in force on the transfer date. There are restrictions on changing terms and conditions of employment following a transfer. There is a duty to inform and, in certain cases, to consult with the employee representative bodies for both the transferor and the transferee. Any dismissal connected to the transfer is prohibited.

Russia

Employees need to consent to a transfer of employment, and generally cannot be terminated because of the transfer. It is possible to terminate the agreements with the general director, his/her deputy and chief accountant no later than 3 months after a change of the owner in certain instances.

Saudi Arabia

If the ownership of a company is transferred to a new owner, or a change takes place in its legal form through merger, partition or otherwise, the employment contracts shall remain in force and service shall be deemed continuous. As for the employees' rights accrued for the period prior to the change (such as wages or unrealized end-of-service gratuity on the date of transfer of ownership), the predecessor and the successor shall be jointly and severally liable.

However, in the case of an asset sale, employees generally transfer through termination and rehire, but the predecessor and the successor may agree to transfer all the previous rights of the employee to the new owner with the written consent of the employee. If the employee disapproves, he or she may request the termination of his or her contract and collect his or her dues from the predecessor.

Singapore

Under the EA, EA Employees are automatically transferred if an undertaking or part thereof is transferred from one person to another. There are notification and consultation requirements required under the EA relating to the automatic transfer of EA Employees. Non-EA Employees do not transfer automatically, and instead will have to have their employment contractually terminated by the transferor on a business transfer, after which they can then be rehired by the transferee (or have their contracts novated).

Slovak Republic

Automatic transfer of employment under the EU Acquired Rights Directive/Slovak Labor Code's rules where there is a transfer of an economic unit (via sale of enterprise, or in certain cases via an asset deal).

Employees must receive detailed written information no later than 1 month prior to the transfer, and may object to the transfer. Duty to inform and consult with employee representatives. Significant restrictions on changing terms and conditions following a transfer. Any dismissal connected to the transfer will be unfair; dismissals for other reasons are possible.

South Africa

Employees automatically transfer to the new employer in the event of a transfer of a business or service as a going concern. No general consultation requirement, but terms of service can only be amended by agreement. Disclosure of information required, with failure to do so resulting in limited joint and several liability for the two employers. No dismissal by reason of the transfer, but dismissals due to operational requirement may still be effected if the reason for dismissal is unrelated to the transfer.

South Korea

The transferee automatically assumes the transferor's responsibilities with regard to the employees (including their working terms and conditions, and liabilities), unless the employees otherwise agree. Unless there is just cause, employees are protected against dismissal (before or after the transfer).

Spain

Automatic transfer under the EU Acquired Rights Directive and Section 44 of the Workers' Statute in case of change of employer (eg, sale of an independent stand-alone business unit, merger or spinoff). Right of the employees to maintain the same terms and conditions of employment. The transfer is not by itself a cause for fair dismissal. Duty to inform, and in case labor measures are planned (eg, change of work center, change of employment conditions, collective dismissal), duty to consult with employee representatives.

Sweden

Rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a business transfer are automatically transferred, under the Employment Protection Act (EPA). The employer has a duty to inform and consult with trade unions if the company is bound by a collective agreement, or if any trade union whose members employed by the company will be affected by the transfer. Any dismissal connected to the transfer would be in breach of the EPA, unless for an economic, technical or organizational reason.

Switzerland

Automatic transfer of all employment agreements in case of transfer of business undertakings (mostly asset deals). Duty to inform and consult with employee representatives, if any; or, if none, with the employees.

Taiwan

There is no automatic transfer of employees in an asset sale. The new employer must inform the employees of the new terms and regulations, and obtain the employees' formal consent to the offer of new employment. If an employee refuses to accept the new terms and conditions, the previous employer must make severance payments to the employee. There is also a duty to inform and consult with employee representatives (unions).

In a merger and acquisition situation, 30 days' advance notice of the acquisition and the terms and conditions of employment with the new employer must be provided to the employees. Employees then have 10 days to accept or decline the offer with the new employer. The employee's failure to respond presumes consent. Past seniority must be recognized.

Thailand

There is no automatic transfer of the employment relationship from one entity to another under the LPA. Employees would normally be transferred in two ways:

  • The transfer of employment from the transferor to the transferee with the employee's clear written consent or with a tripartite agreement entered into between the transferor, transferee and the employee, stipulating that all rights and benefits enjoyed by the employee during his/her employment with the transferor will continue and the employee's service with the transferor will be recognized by the transferee
  • Or full termination of the employee's employment with the transferor and the entering into of a new employment agreement with the transferee

In the latter case, the transferor will be liable to provide the employee with statutory severance pay and other compensation as provided under the LPA and the employee's employment contract. With the employee's employment fully terminated by the transferor, the transferee can offer the employee new employment with different terms and conditions (which may be less favorable than those offered by the transferor), and the employee's service with the transferor will not be recognized.

Change of ownership of business through shares acquisition

A mere transfer of shares in the employing entity will not be considered a transfer of business or employer, as the employing entity will remain the same.

Turkey

There are several provisions under separate laws governing transfer of employees from one employer to another:

  • Turkish Code of Obligations No. 6098 (the TCO)
  • Labor Law
  • Turkish Commercial Code No. 6102 (the TCC)

The provisions under the TCO govern transfer of employment agreements from a company to another in a broader sense, while the Labor Law specifically governs transfer of workplace and the TCC specifically governs transfer of employment agreements in corporate transactions.

The application of above laws may differ depending on the nature of the transaction; whether the employees will be transferred through a spin-off or by way of a business transfer.

In the event of a spin-off transaction

If the employees are to be transferred to another entity within the context of a spin-off transaction to take place in Turkey, the provisions under the TCC will be applicable. According to Article 178 of the TCC, the employees will be transferred to the transferee with all rights and obligations, unless the employees object to such transfer. In this regard, the TCC provides "a right of objection" to the employees.

Turkish law does not stipulate any specific requirement as to when and how a notification must be made to the employees. However, it is naturally advisable for the transferor to notify the employees in writing regarding the contemplated transfer, before the spin-off is affected. Upon such notification, if the employees do not object to the transfer of their employment contracts, the transferee becomes their new employer following the effectiveness of the spin-off transaction.

If the employees are going to be transferred with exactly the same terms and conditions, that is, no special benefit will be provided to employees of different seniority or position, a template letter addressed to each employee will suffice.

If an employee objects to the transfer, his/her employment contract will be deemed terminated following completion of his/her notice period. In this event, the employee will be paid his/her outstanding salary and other labour entitlements (eg, annual leave entitlements, premiums, bonuses etc.). The TCC remains silent on whether or not the employees become entitled to receive severance pay in the event of such termination. However, certain scholars opine that in the event of such termination, the employees become entitled to receive severance pay. The importance of this matter is, as per the 3rd paragraph of Article 178, both the transferor and the transferee are jointly liable for payment of the employees' such entitlements, including severance pay.

In the event of a business transfer transaction

If the employees are to be transferred to the transferee within the context of a business transfer transaction to take place in Turkey, the provisions under the Labor Law and the TCO will be applicable.

According to the TCO, if the employment contracts will be transferred from one employer to another, the employees' prior written consent must be obtained. However, the TCO remains silent on what would happen, if the employee does not give consent to the transfer. As modern labor law's main concern is protecting the employees' benefits, it suggests permanence in employment relations. In line with this concern, contrary to what the TCC provides, Article 6 of the Labor Law.

Uganda

Automatic transfer under the Employment Act and additional regulations on a transfer of business. Significant restrictions on changing terms and conditions following a transfer. Period of continuous service is preserved. Where only employees are being transferred or the employer is being changed, there is a duty to obtain the consent of employees and consult with employee representatives, if any.

If an employee transfers from one employer to another without necessarily transferring the business, in the absence of a written agreement between the new employer and the employee, terminal benefits must be paid within 2 months of the transfer. These include accrued but untaken leave and/or overtime, certificate of service and any other contractual benefits under the employee's old terms of employment.

Any dismissal connected to the transfer would be unfair unless for an economic, technical or organizational reason.

Ukraine

In the event of a change of a company's ownership or a company's reorganization (merger, spin off, etc.), employment continues with the company or its successor without change in terms and conditions. In case of an asset deal, however, employment will need to be terminated and rehired.

 

United Arab Emirates

No automatic transfer principles and no laws covering business transfers. Employees transfer through termination and rehire in an asset deal. Both contracts of employment and the residence visas and work permits need to be addressed.

United Kingdom

Automatic transfer under the EU Acquired Rights Directive/UK's Transfer of Undertakings (Protection of Employment) Regulations (TUPE) in a business sale or service provision change. Significant restrictions on changing terms and conditions following a transfer. Duty to inform and consult with employee representatives. Any dismissal connected to the transfer would be unfair unless for an economic, technical or organizational reason.

United States

None, except if it results in a plant closing or mass layoff, in which case employees are generally entitled to at least 60 days' notice, if feasible (see Mass Layoff Rules below). In an asset sale, employees can be transferred through termination and rehire.

Venezuela

When a transaction involves a transfer of assets, a substitution of the employer will take place, and the employees, Labor Ministry and unions (if any) must be notified. The consent of employees is not necessary. However, employees may retire with justified cause within 3 months from receipt of the notice of transfer, where the substitution is deemed contrary to their interests. In this case, employees are entitled to an indemnity for unjustified dismissal, for the amount of their severance entitlement.

The substitute employer may not reduce the benefits granted to transferred personnel, and must recognize prior periods of service for all legal purposes.

Vietnam

Upon a transfer of assets or change of ownership of the company, the previous employer must prepare a labor usage plan. After a merger, consolidation, division or separation of the company, under labor laws, the successor employer must continue to employ the current number of employees of the target company, whose labor contracts will remain valid. The labor contracts may be amended or supplemented by the successor employer. If the successor employer is unable to employ all current employees, it must prepare and implement a labor usage plan in accordance with the Labor Code 2012.

Where an employer reduces its workforce due to an asset transfer or change of ownership of the company or merger, consolidation, division or separation of the company, the employer must pay a severance allowance to the affected employees.