Transfer of business

A transfer of the employer’s business means transferring the company, business, corporation or foundation or an operational part thereof to another employer if the business practiced as a primary or secondary occupation remains as is or similar after the transfer. In practice it can be hard to recognize a transfer of business and the situations must be assessed on a case-by-case basis. For an example, in the assessment attention might be drawn to the number of employees transferred, the property transferred to the new employer, and the fact that the operations continue more or less unchanged.

In a transfer of business, employees transfer into the service of the new employer as “old employees”. The employment relationship continues without interruption. This also means that the terms and conditions of the employment relationship or the employee’s benefits will not be subject to any changes. The applicable collective agreement, on the other hand, may change if the new employer is organized differently than the transferor-employer. The change may take effect only after the term of the collective bargaining agreement has come to an end.

Employees may, in connection with a transfer of business and regardless of the period of notice to be otherwise complied with in the employment relationship or its duration, terminate their employment contracts to end on the date of the transfer, if they have been informed of the transfer of business by the employer or the company’s new proprietor no later than a month prior to the date of the transfer. If the employees are informed of the transfer at a later date, they may terminate their employment contracts to end as of the date of the transfer or after, but in any case, no later than within a month of having been informed of the transfer of business. This right also belongs to an employee who has a fixed-term employment contract.

If the employment contract is terminated because the employee’s terms of employment deteriorate to a material extent due to the transfer of business, the employer is considered liable for the end of the employment relationship. This may be relevant regarding for example unemployment benefits. 

The employment contract transfers as such in a transfer of business. It is common for the transferee to offer a new employment contract, to unify the employment contracts within the company. The employee does not have any obligation to sign a new employment contract and can choose to continue with the current one. It is advisable to compared the new employment contract o the current one and chose the more favorable one.

Obligation to provide information

The employer is not obligated to hold actual cooperation negotiations on the transfer of business with the personnel, but both transferor and transferee must inform the representatives of personnel groups of matters related to the transfer of business.

The matters to be communicated are

  • the time or scheduled time of the transfer;
  • the reasons for the transfer;
  • the legal, social and economic consequences of the transfer; and
  • any planned measures concerning employees.

The transferor must give the information well in advance of the transfer and the transferee no later than within a week of the transfer.