5.1 On a business sale (either a share sale or asset transfer) do employees automatically transfer to the buyer?
In terms of the Transfer of Business (Protection of Employment) Regulations, Subsidiary Legislation 452.85, employees are automatically transferred to a transferee upon the transfer of a business.
A transfer of business does not take place when there is simply a transfer of assets or a transfer of shares to new shareholders if employees remain employed by the same company. However, in terms of these Regulations, a transfer of business will be deemed to have taken place even if such transfer is carried out through more than one transaction or if no property, whether movable or immovable, is transferred by the seller to the buyer.
In this case, the contract of employment of each employee initially employed by the seller shall have the same effect as if originally made between the employee and the seller.
5.2 What employee rights transfer on a business sale? How does a business sale affect collective agreements?
All employee rights as outlined in the employment contracts will be transferred together with the transfer of business. Any collective agreements concluded with the prior employer will likewise be transferred to the new employer.
5.3 Are there any information and consultation rights on a business sale? How long does the process typically take and what are the sanctions for failing to inform and consult?
When an undertaking, or part of an undertaking, employing more than 20 employees (including all full-time and part-time employees) is being transferred, such employees will have the right to information and consultation on the transfer of business. The transferor and the transferee are both obliged to inform the employees’ representative of their respective employees affected by the transfer, and provide them with the following information:
- the date or proposed date of the transfer;
- the reason for the transfer;
- the legal, economic and social implications of the transfer for the employees; and
- the measures envisaged in relation to the employees.
This information is to be provided by means of a written statement within at least 15 working days before the transfer is carried out, or before the employees are directly affected by the transfer with respect to their conditions of employment, whichever is the earliest. The Director responsible for Employment and Industrial Relations shall also be informed on the same day as the employee’s representatives.
The transferor and the transferee are also obliged to consult with the employees’ representatives in those cases where the transfer of business includes measures affecting the conditions of employment of the transferred employees. Such consultations shall begin within seven working days from the day on which the employees’ representatives have been notified of the intended transfer.
The obligations of informing and consulting subsist irrespective of whether the decision resulting in the transfer is taken by the employer or an undertaking controlling the employer. Failure to comply with this obligation shall, on conviction, result in a fine of not less than €1,164.69 for every employee that is affected by the transfer.
5.4 Can employees be dismissed in connection with a business sale?
Dismissing an employee in connection with a business sale is construed as an unfair dismissal, since a transfer of business will not constitute a good and sufficient cause for termination in terms of Maltese law.
5.5 Are employers free to change terms and conditions of employment in connection with a business sale?
Upon a transfer of business, the contracts of employment are transferred to the new employer. The terms and conditions of employment may not change for any reason related to the transfer of business.
Av. Charlene Gauci
This article was first published in ICLG – Employment & Labour Law and may be accessed on the ICLG to Employment and Labour Law 2023 publication.
For more information you can contact one of our Team Members at Mifsud & Mifsud Advocates.