TRANSFER OF UNDERTAKING OR ESTABLISHMENT
| PORTUGAL |
| TRANSMISSÃO DA EMPRESA OU DO
ESTABELECIMENTO TRANSFER OF UNDERTAKING OR ESTABLISHMENT |
The effects of the legal transfer of an enterprise or establishment on its employees' contracts of employment are regulated by Article 37 of the Contract of Employment Act as regards the individual employment relationship and by Article 9 of the Collective Labour Relations Act as regards the collective aspect. These provisions institute the principle that the contract of employment is maintained with the transferee. The transfer does not affect the employee's legal position, since contractual rights and obligations corresponding to an existing employment relationship are automatically transferred to the transferee. In other words, the transfer results in the automatic replacement of the employer: a subject with a new identity is transplanted into the existing relationship, the content of which remains unchanged. This principle is complemented by a special system of joint and several liability in regard to existing employer obligations. The provisions cover "any legal transfer", which must be given a broad interpretation as including all situations in which the identity of the head of the establishment changes, whatever the legal form in which this change is effected. Hence, such transfer includes sale, merger, splitting-up, nationalization, privatization and, in the words of Article 37(4), "any acts or deeds which entail transfer of the operation of an establishment." The fact that the Act refers to "the establishment in which employees perform their work" implies that this system of regulation applies whether the transfer involves an entire enterprise or only part of one.
It is, however, permissible for the contract of employment to be maintained with the original employer, provided there is an agreement to that effect between transferor and transferee and provided the legal rules on changing the location of an employee's place of work are observed. Such an agreement has no binding effect for the employee and may not prejudice his or her rights and guarantees. The only situation in which the contract may in this way be maintained with the same employer (transferor) is where the employee is transferred to another of that employer's establishments, and this is also subject to the condition that it is not seriously detrimental to the employee. If this condition is not met, the employee may object; the contract is then continued with the transferee and the employee remains employed in the same establishment.
Employee participation
The legal rules relating to the transfer of an enterprise or establishment make no provision for employee participation in the process which leads up to the transfer. However, some of the rights granted to workers' commissions are of relevance here, namely, their right to be provided with information and their right to scrutinize and monitor management, which empowers them, among other things, to assess and give an opinion on the enterprise's budgets and economic plans (Article 29(a), Workers' Commissions Act). Although they make no express reference to the situation of legal transfer of an enterprise or establishment, it must be concluded from these provisions on workers' commissions that employee representatives in Portuguese enterprises possess not only the right to be informed of any proposed transfer but also the right to prior consultation. Consequently, Portuguese law may be said, by and large, to be in accordance with EC Directive 77/187. However, one point on which present Portuguese law does not appear to correspond to the Directive concerns the safeguarding of employees' rights to benefits under company schemes outside the state social security system (Article 3(3) of the Directive). In particular as regards prospective entitlements, no mechanisms exist which guarantee the liability of employers and ex-employers. Existing or prospective entitlements to benefits under company schemes, even when they are transferred to the new employer, are not protected by any guarantees of payment. This appears to be the only point on which Portuguese law does not yet comply with the Directive. See also personnel coverage of collective agreements .
Please note: the European industrial relations glossaries were compiled between 1991 and 2003 and are not updated. For current material see the European industrial relations dictionary.
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