Legal Newsletter: Transfer of employment in the context of corporate restructuring

Where there is a transfer of undertaking event, the employees will be transferred automatically, by operation of law. The transfer of undertaking would not require the consent of the respective affected employees. Pursuant to the LC, the employees may not object to their transfer to the entity acquiring the activities. No governmental approvals or consents apply either.

The transfer of the employment does not affect the employees’ employment on record and social security on record and the latter remain uninterrupted.

By operation of law, the existing collective agreement applicable to the affected employees shall be valid until conclusion of a new collective agreement, but for not more than one year after the date of the transfer event.

The transfer of employment will trigger some notification and potentially, consultation requirements.

(i)          Notification of the employees

The transferor, on one hand, and the transferee, on the other, are required to notify the employees’ representatives  and trade unions represented at the enterprise (if any) within their respective enterprises of: (i) the contemplated change and its scheduled date; (ii) the reasons for the intended change; (iii) the possible legal, economic and social implications for the employees, and (iv) the measures envisaged in relation to the affected employees, including information as to the party, which shall bear the liability for the obligations towards the employees, which have arisen prior to the transfer of undertaking event. 

In the event that there are no trade union representatives or elected employees’ representatives in the respective enterprise, the information should be provided to all employees concerned. 

The above information process shall take place at the latest 2 months before the transfer. To be in position to prove compliance with the mandatory requirements, it is recommended that the employer provides the information in writing and include both the date and the signatures of the recipients.

(ii)         Consultation

In addition to the notification requirement outlined above, in the event that any of the transferor or the transferee envisages measures in relation to its employees (e.g., dismissals, necessity of professional re-qualification of the employees, etc.), the employer must consult the employees’ representatives and trade unions represented at the enterprise (if any). They must be consulted in good time prior to the business transfer with a goal to reach an agreement on such measures. 

Unlike the requirement for informing all employees, in the lack of trade unions or work councils, the LC does not set a similar requirement to consult with all concerned employees regarding the measures envisaged. However, as a good practice, it is still recommended to arrange for an election of employee representatives to consult with about the TUPE process and the envisaged measures.  

The acquirer will have to notify the Bulgarian National Revenues Agency regarding the transfer of business event and the “acquired” employees. The notification must be submitted within 10 days of the transfer event (i.e., of the date the acquirer becomes the employer of the transferred employees. The notification is made by filing a standard notification form.

In the event that the employer fails to perform its notification obligations and if a violation of labour law is ascertained by the competent authorities, the employing entity may be imposed administrative sanctions ranging between BGN 1,500 and BGN 5,000 (approximately EUR 767 to EUR 2,556).  A fine may also be imposed to the official of the employing entity that has permitted the violation - such fine ranges between BGN 250 and BGN 1,000 (approximately EUR 128 to EUR 511).

In the event that the employer fails to perform its consultation obligations (if required) and if a violation of labour law is ascertained by the competent authorities, the employing entity may be imposed administrative sanctions ranging between BGN 1,500 and BGN 15,000 (approximately EUR 767 to EUR 7,669).  A fine may also be imposed to the official of the employing entity that has permitted the violation - such fine ranges between BGN 1,000 and BGN 10,000 (approximately EUR 511 to EUR 5,112).

The TUPE transfer per se may not be the reason for any redundancies. Hence, if dismissals need to be made, they must be substantiated by one of the available legal grounds provided by the LC.  

Under Bulgarian law unilateral termination of employment by employer are only allowed based on a limited number of legal grounds (these include, among others, closure of a part of the enterprise or reduction of the number of working positions, decrease of workload, etc.). Transfer related dismissal can thus be made if employer can substantiate one of these limited number of legal grounds provided by the LC and following all substantive and procedural requirements of the law pertinent to the termination ground. Failure to comply with any of the statutory rules for dismissal leads to illegality of the termination that could be proclaimed by the competent courts of law upon request of the dismissed employee.  

It is not uncommon that the terms and conditions of employment within the transferor and the transferee differ (for example, the employees of the transferor might be eligible for bonuses that the transferee does not operate).  

In such cases, harmonization of the terms and conditions of employment might be implemented. This is possible post transfer by way of amendments to the individual employment agreements (subject to employee’s individual consent) and/or by amendments to the internal rules regulating the terms of employment at the acquirer’s enterprise (subject to notification).

In general, the LC enables employees to terminate their employment agreement: (i) at any time, without stating any reasons, by furnishing a prior written notice to the employer, or (ii) with immediate effect, should, as a result of the business transfer, the working conditions substantially change to the detriment of the employee (e.g., negative changes in the health and  safety conditions of work or any other element of the content of the employment contract such as working hours, breaks, vacations, remuneration, etc.).

Thus, in case of automatic transition, especially where the employees are not happy with the harmonization of the terms and conditions of employment, the transferred employees could always avail of their right to terminate their employment.