Workplace equality after takeover of employees: how to address differences?
A merger, purchase of a part of business, or transfer of activity: these are the typical situations when employees are automatically (by operation of law) transferred from their original employer to the acquiring entity. This process, referred to as the transfer of rights and obligations from employment relations, raises numerous issues concerning the equal treatment and remuneration of employees. A recent judgment of the Supreme Court has addressed this issue for the first time and provided valuable conclusions.
Transfer of rights and obligations - what does it involve?
Upon the transfer of rights and obligations from employment relations, workers automatically become employees of the acquiring employer without having to sign a new employment contract. They are transferred to the new employer with a package of their existing rights and obligations arising from their original employment contracts, collective bargaining agreements or internal regulations of the previous employer. Thus, there may be employees with different sets of rights at a single workplace, as the successor employer may have different arrangements for their employees’ rights and obligations. Legislation and until recently case law provided no guidance on how to deal with this situation: i.e. whether the employees’ rights need to be levelled to the higher standard, whether they can be levelled to the lower standard, or whether duality should be maintained, and if so, for how long.
Equal treatment and remuneration in the context of transfers of employees
The judgment dealt with a case where an employee sued her employer for unequal remuneration following a transfer of employees’ rights and obligations: employees of another organisation had been transferred to the plaintiff’s employer and were carrying out the same work, but for better wages. The employer argued that they did not cause the inequality but only preserved the existing rights for the old and new employees, i.e. did not level them.
Nevertheless, the courts found that the employer was in breach of the principle of equal treatment enshrined in the Labour Code. The conclusion was confirmed by the Supreme Court, as it stated that the transfer of rights and obligations was not a justifiable reason to (permanently) favour one group of employees over another if they perform comparable work. The Supreme Court also declared that it was not necessary to level the employees’ rights to a higher standard and that it was also possible to curtail them. In the court’s opinion, the rights of both groups of employees should be levelled within two months of the transfer, except for rights arising from the original employer’s collective agreement, which could for a time be maintained. If an employer fails to comply with this obligation, the employee may seek redress in court.
Implications for practice
The judgment clearly shows that equal treatment and fair remuneration are fundamental principles of labour law that cannot be ignored even in the context of the transfer of employees’ rights and obligations. If, as a result of a transfer, there are groups of employees with different rights and obligations at a single employer, the employer should act promptly and level their rights within two months. Otherwise, they risk a penalty for an unequal treatment and possibly a lawsuit by employees seeking their rights to be levelled.
For rights arising from a unilateral document, employers themselves can decide whether to level them upwards or downwards. However, if they decide to level the rights to the lower standard, they must bear in mind that, should this be the reason for an employee to terminate their employment, they may be entitled to severance pay. Where unequal rights arise from a contract, employers should initiate an amendment to the contract. However, this situation can be rather complex, and the employee's cooperation will be necessary.