Employment

Transfer of Employees in Moldova in Case of Business Transfers: Pitfalls

Moldovan legislation provides for two possibilities of business transfer: (i) share deal and (ii) asset deal by means of a sale purchase agreement having as object an enterprise as a sole asset complex (complex patrimonial unic; ESAC). While in the first case no major labour issues arise (mainly given that the employer remains unchanged), when using the second option the involved parties must take into consideration a series of legal aspects to avoid commonly committed mistakes.

General aspects

Under the Moldovan Labour Code (Labour Code), trans­fer of employ­ees is per­formed either by amend­ing indi­vid­ual labour agree­ments con­clud­ed with the employ­ees ((i) trans­fer of an employ­ee to a new job with a same employ­er or (ii) trans­fer with the employ­er to a new city) or by con­clud­ing anoth­er indi­vid­ual labour agree­ment (if the trans­fer occurs to a new employ­er). Both are sub­ject to pre­lim­i­nary writ­ten con­sent by involved employ­ees (Arti­cle 74(1) Labour Code).

In light of the above norm, employ­ees employed with an ESAC will enjoy the right to refuse the trans­fer. In prac­tice, such for­mal­i­ty may con­sti­tute a deal-break­er or influ­ence the val­ue of the sold ESAC. Fur­ther­more, in cas­es where a sell­er refus­es to pro­cure the employ­ees’ due con­sent for trans­fer, it will like­ly lead to an adjust­ment of the pur­chase price.

Pitfall of procuring employees’ prior consent

Should there be no due con­sent by the employ­ees, no labour trans­fer to the new employ­er can hap­pen. If there is no trans­fer, the employ­ees stay in a labour rela­tion­ship with the sell­er (trans­fer­or). Hence, the pur­chas­er (trans­fer­ee) may not like such an approach since the ESAC remains with­out, for exam­ple, skilled labour.

Fur­ther, the sit­u­a­tion gets even more com­pli­cat­ed if no employ­ees’ con­sent is in place, since a trans­fer­or may not ter­mi­nate the indi­vid­ual labour agree­ments of its employ­ees with­out cause. The grounds upon which a trans­fer­or is enti­tled to dis­miss its employ­ees are exhaus­tive and are list­ed in Arti­cle 86 Labour Code. Note that in Moldo­va an employ­er may not ter­mi­nate indi­vid­ual labour agree­ments by uni­lat­er­al noti­fi­ca­tions (with minor excep­tions, eg, top man­age­ment).

Solu­tions for a trans­fer­or who could not obtain con­sent of its employ­ees to be trans­ferred com­mon­ly involve either staff redun­dan­cies (Arti­cle 86(1) c) Labour Code) or even liq­ui­da­tion of the trans­fer­or (Arti­cle 86(1) b) Labour Code). It should be not­ed that the Moldovan Insol­ven­cy Act pro­hibits dis­missal of employ­ees as a result of sale of an ESAC of an insol­vent trans­fer­or (Arti­cle 95(2)).

Pitfall of collective bargaining convention(s)/agreement(s)

The aspect with col­lec­tive bar­gain­ing agreement(s) in place should be sep­a­rate­ly assessed while affect­ing ESAC asset deals. Gen­er­al­ly, rights and oblig­a­tions aris­ing out of col­lec­tive bar­gain­ing con­ven­tions (con­ven­tii colec­tive) at a nation­al or branch lev­el will not auto­mat­i­cal­ly pass from a trans­fer­or to a trans­fer­ee as a result of a busi­ness trans­fer, unless: (i) the trans­fer­ee also con­clud­ed or adhered to a respec­tive col­lec­tive bar­gain­ing con­ven­tion; (ii) the employ­ees to be trans­ferred from a trans­fer­or to a trans­fer­ee con­clud­ed or adhered to a respec­tive col­lec­tive bar­gain­ing con­ven­tion by means of their rep­re­sen­ta­tives; or (iii) the trans­fer­ee is a part of an employ­ers’ asso­ci­a­tion that con­clud­ed a col­lec­tive bar­gain­ing con­ven­tion (Arti­cle 38 Labour Code). The issue with col­lec­tive bar­gain­ing agree­ments at a unit / sub-unit lev­el and their pass­ing to the trans­fer­ee is more com­pli­cat­ed and requires an indi­vid­ual approach.

In con­clu­sion trans­fer­ees are high­ly rec­om­mend­ed to indi­vid­u­al­ly assess all legal aspects of the trans­fer of col­lec­tive bar­gain­ing convention(s)/agreement(s) and, if appro­pri­ate, address such in the ESAC sale pur­chase agree­ment.

Liability

Under gen­er­al rules of law, the trans­fer­or is liable for any dam­ages caused to its employ­ees as a result of an ille­gal trans­fer of such to a trans­fer­ee. Should a trans­fer be held ille­gal, besides being oblig­ed to re-employ the ille­gal­ly trans­ferred employ­ees (Arti­cle 90 Labour Code), a trans­fer­or must also repay any mate­r­i­al and moral dam­ages caused, and imme­di­ate­ly pay out­stand­ing salaries.

The gen­er­al lim­i­ta­tion peri­od inside which an employ­ee can raise claims to be re-employed equals three months as of the day the employ­ee knew or should have known about the ille­gal dis­missal (Arti­cle 355(1) a) Labour Code). Fur­ther, the lim­i­ta­tion peri­od for mate­r­i­al claims is three years as of the day the employ­ee knew or should have known about the infringed right(s) (Arti­cle 355(1) b) Labour Code).

In time of global crisis, ESAC asset deals are becoming more and more popular. Especially given that purchasers can get a good price from a company in insolvency. Still all parties should bear in mind that the labour aspect (besides other legal issues) should be carefully addressed to avoid unpleasant surprises.