A company (the "Company") had been undertaking real estate development projects and its subsidiary (the "Subsidiary") had been contracted to perform building operations in relation to these development projects. The Subsidiary had been suffering serious problems with its business and it was therefore decided to liquidate it. In connection with the liquidation, the staff were informed in writing that cooperation with another building contractor (the "Building Contractor") was to be initiated. The Subsidiary had at that point in time an ongoing contract that was transferred to the Building Contractor.
The Subsidiary was subsequently declared insolvent. Some of the Subsidiary's employees were not transferred to the Building Contractor. Two of those employees commenced proceedings through their trade union (the "Union") against the Building Contractor and claimed that there had been a business transfer since the Building Contractor had taken over the ongoing building operations and the majority of the employees, and also since the Building Contractor continued the building operations using the same tools and materials that had been used by the Subsidiary.
The employer argued that there had not been a business transfer since the Building Contractor neither took over an organised group of employees nor a project from the Subsidiary. This should rather be regarded as the contracting of labour for a limited period of time. The Building Contractor had been employing construction workers in connection with the liquidation of the Subsidiary, but since the Company was still in need of a workforce in relation to ongoing building operations, the Building Contractor agreed to contract out the construction workers to the Company that were previously employed by the Subsidiary. The Labour Court found that it was not proven that any existing economic entity had been transferred from the Subsidiary to the Building Contractor. There was no written agreement between the parties regarding a business transfer and it had not been claimed that an oral agreement had existed. It was not disputed that 20 of the 28 employees at the Subsidiary had been employed by the Building Contractor and the Labour Court therefore held that the majority of the workforce had been transferred to the Building Contractor. The Labour Court found, however, that circumstances existed that supported the argument that labour had been hired since there was documentation showing that the Building Contractor had invoiced the Company for this. Ultimately, the Labour Court held that a building contract involves far-reaching commitments for the parties and that it appeared unlikely that the Building Contractor would have taken over the building contract without formal requirements, particularly since the Subsidiary was suffering from economic difficulties.
In conclusion, it can be said that even though a majority of employees had been taken on by another employer, this did not mean that there had been a business transfer. For such a business transfer to take place it is required that an entire organisation, which makes it possible to permanently continue the vendor's business, and not only a certain type of work is transferred. (Labour Court judgment 2010, number 25)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.