When a business transfers to new owners

When all or part of a business is transferred to a new owner, important obligations arise for both the transferor and the transferee, except in the case of bankruptcy, where a receiver sells the business. In the event of a business transfer, employment is automatically transferred to the transferee and dismissals due to the transfer are prohibited. If a limited liability company merely changes ownership without changing its business, the rules on transfer of business do not apply.

The main principles

• Obligation to negotiate with trade unions
  Both the transferor and the transferee must negotiate with trade unions well in advance of the transfer. This ensures that workers have the opportunity to influence the transfer and have their rights respected.
• Protection of employment conditions
  At the time of transfer, all existing employment conditions are transferred to the new employer. Terms and conditions such as pay, holidays and working hours remain valid and cannot be changed directly at the time of transfer. The collective agreement remains in force for a maximum of one year, unless the transferee signs a new agreement.
• Workers' rights
  Employees may oppose a transfer, but this will lead to the termination of employment due to lack of work. In such cases, the employee is entitled to notice and pay during this period.
• Responsibilities of the transferee
  The transferee takes over the financial obligations towards the employees. If there are unpaid wages or other financial obligations from before the transfer, the responsibility is shared between the transferor and the transferee.
• Collective agreements
  If the transferor has a collective agreement still in force at the time of the transfer, it will continue to be binding on the transferee for at least one year, but it is important to note that the collective agreement can be terminated.

Applicable legal text

Employment Protection Act

6 b §   When an undertaking, business or part of a business is transferred from one employer to another, the rights and obligations arising from the employment contracts and employment relationships in force at the time of the transfer are also transferred to the new employer. However, the former employer shall also be liable to the employee for any financial obligations arising from the period before the transfer. This paragraph also applies to workers in the public service and on seagoing vessels.

The first subparagraph shall not apply in the event of transfer in connection with bankruptcy.

The first subparagraph shall not apply to old-age, invalidity or survivors' benefits.

Notwithstanding the first subparagraph, the contract of employment and the employment relationship shall not be transferred to a new employer if the employee objects. Law (1994:1685).

7 § 3 paragraph

"In the event of a transfer of an undertaking, business or part of a business as referred to in section 6b, the transfer itself shall not constitute a valid reason for dismissing the employee. However, this prohibition shall not prevent dismissals for economic, technical or organizational reasons involving changes in the workforce."

Section 25, paragraph 2

"The right of priority applies from the time when notice was given or notification was given or should have been given in accordance with section 15, first paragraph, and thereafter until nine months have elapsed from the date on which the employment ended. In the case of seasonal employment, the right of priority applies instead from the time when notice was given or should have been given in accordance with Section 15, second paragraph, and thereafter until nine months have elapsed from the start of the new season. If, during the above-mentioned periods, the company, the business or part of the business has been transferred to a new employer through a transfer covered by section 6 b, the right of priority applies to the new employer. The right of priority also applies in cases where the previous employer has been declared bankrupt."

The law on co-determination in working life

28 §   When a company, business or part of a business is transferred from an employer who is bound by a collective agreement to a new employer, through a transfer covered by section 6 b of the Employment Protection Act (1982:80), the agreement applies mutatis mutandis to the new employer. However, this does not apply if the new employer is already bound by another collective agreement that can be applied to the employees who follow.

In the case referred to in the first paragraph, the worker may give notice of termination within thirty days of being informed of the transfer. If notice of termination is given within this period, the agreement shall cease to apply at the time of the transfer or, if the notice of termination is given after the transfer, at the time of termination. Nor does the collective agreement apply to the new employer if the previous employer terminates the agreement before the transfer. However, if such notice is given later than sixty days before the transfer, the agreement applies to the new employer until sixty days have elapsed from the notice.

When an employee's employment contract and employment relationships have been transferred to a new employer under section 6 b of the Employment Protection Act (1982:80), the new employer is obliged to apply the terms and conditions of employment in the collective agreement that applied to the previous employer for one year from the transfer. The terms shall be applied in the same way as the previous employer was obliged to apply these terms. However, this does not apply after the period of validity of the collective agreement has expired or after a new collective agreement has come into force for the transferred employees.

Where two or more employers' or employees' organizations merge, the collective agreement of the dissolved organization shall apply to the merged organization as if it had been concluded by the latter. Law (1994:1686).