We will review in this article how Bulgarian legislation regulates the transfer of employees from one company to another.
The following standpoint presents the general regulation upon changing the employer and observing the employment relationship. It is based on the effective employment legislation in Bulgaria. It doesn’t present a consultation on the legal manner and structure for transferring of the employees.
Bulgaria is popular outsourcing destination and attractive business location in CEE. In this regard it is a common occurrence foreign companies to “enter” local market via mergers and acquisitions, allocation of activities, and transfer separate specified part of their enterprise. In those scenarios, often comes the question of the regulations and general rules applicable to the transfer of employees in the case of a transfer of an undertaking (as per the meaning under the employment legislation).
Transfer of employees from one employer to another – legal directives
The EU Directive 2001/23/EU from March 12th, 2001 regulates the resources transfer. Bulgarian Labor Code has implemented the directive since July 1st, 2007 in Articles 123 to 123a and Article 130b of the Bulgarian Labor Code (Labor Code).
According to the Bulgarian Commercial Law the term “business enterprise” includes:
- All rights (assets) – property rights & limited real rights over real estate & movables, receivables, shares & stocks, trademark rights, etc.
- All obligations (liabilities) – loans, credits, collateral for the benefit of third parties, liabilities under contracts with customers, suppliers and employees, etc.
- Factual relations – trade secrets, know-how, clientele, distribution channels, etc.
Transfer of employees along with the business in Bulgaria
As per the law, in Bulgaria employees are transferred automatically along with the business. By operation of law it is done in any of the following cases:
- Corporate reorganizations (mergers and acquisitions, allocation of activities, and the transfer of a separate specified part of an enterprise).
- Legal transformations (a change of the legal form of a legal entity; a change of the owner of the enterprise or specified part of it).
- The transfer or assignment of an activity, along with the transfer of tangible assets from one enterprise to another.
- A lease, tenancy or concession of an enterprise or a separate specified part of it.
Generally, in these cases, the old employer transfers their employees automatically to the new employer without any changes to employees’ work conditions. However, if employment conditions are worse as a result of a transfer, the transferring employees can terminate their employment contract unilaterally without a notice period. In addition, employees can claim a compensation of a minimum one (1) salary.
Harmonization in terms and conditions of transferring employees with those of the existing workforce
In this respect there are no specific rules provided by the Bulgarian law. As a general rule, at any time an employer can provide more favorable conditions to its employees unilaterally. In case the harmonization leads to less favorable conditions, the transferee must obtain the agreement of each transferring employee.
Also, employers must provide, as a minimum (Bulgarian Protection from Discrimination Act) equal working conditions to all employees and equal pay for identical or equivalent work.
Employers who don’t comply with the anti-discrimination requirements towards transferring employees can be liable for discrimination. In this case, the Commission for Protection against Discrimination can impose to the employer monetary sanctions. These sanctions range from BGN250 to BGN2,500. In addition, the courts can order the transferee to pay compensation for damages suffered by discriminated employees.
Dismissals before or after the transfer of employees?
Employees must be automatically transferred to the transferee (the new employer). This means that their employment contracts cannot be terminated for any reasons related to the transfer.
Transfer of employees implemented as a secondment?
Sometimes arises the question in what circumstances (if any) can the parties agree & implement the employee arrangements of a transfer as a secondment? Under Bulgarian law, the secondment of employees is generally considered as a business trip or a lease of personnel.
To perform valid lease of personnel, both parties must comply with a number of strict requirements including, but not limited to the following:
- The employer providing personnel (temporary work agency) must have a license of a temporary work agency.
- The employment contracts with the agency workers must be concluded for a fixed term based on one of the specific grounds exhaustively listed by law.
The user undertaking cannot use more than 30% of leased personnel. They must comply with a number of requirements as factual employer.
Information to be provided by old & new employer company in relation to the employees
General rule is that all current employees are automatically transferred on the same terms and conditions. The transferor (old employer) should in practice provide to the transferee (new employer) at least all employment-related documents and all relevant information on the employment terms & conditions applicable to each transferring employee.
Informing Government bodies
Additionally, the transferee must inform the National Revenue Agency of the transfer through a specific procedure. This must be done within any one of the following terms:
- Ten days after the execution or termination of the transfer agreement, in the case of a lease, tenancy or concession of an enterprise (or part of it)
- Ten days after registration of the transfer on the Commercial Register, if required by law
- Ten days after the factual change of employer, if none of the above applies
The transferee must provide to the National Revenue Agency information relating to the:
- Identification of both employers
- Change of employer
- Data of the transferred employees (including all available personal and official data)
Non-compliance with the above notification procedure is subject to a monetary sanction ranging from BGN1,500 to BGN15,000.
Notice timeframe and obligations that arise for the transferor & transferee further to the employees
Each party must follow a mandatory information and consultation procedure with their employees before the effective date of the transferring transaction.
Both procedures must be addressed to:
- The trade unions’ representatives and the duly appointed employees’ representatives
- The appointed employees’ representatives, if no trade union is represented within the employer entity
- All current employees, if none of the above applies
The communication in a formal manner must contain details about the:
- Planned transfer and its effective date
- Objective business reasons for the transfer
- Legal, economic and social consequences arising from the transfer and how the transfer is expected to affect the respective employees
- Measures envisaged regarding the affected employees (for example, changes relating to working time and to the structure of remuneration)
- Joint liability of the transferor and transferee for obligations arising before the effective date of the transfer
The above information must be provided at least two months (60 days) before the effective date of the transfer.
In order to comply fully with these mandatory requirements, the employer should provide the information in written, including date and signature of the recipients.
Consultaions & protocols
If the transferor and/or the transferee envisage measures that may affect the employees, each of them separately (as applicable) must conduct consultations with the representatives/employees before the transfer. The purpose of the consultations is to obtain the opinion of the employees on the intended transfer. The outcome of the consultations must be documented in a protocol signed and dated by all participants.
If the old and new employer companies do not fulfill their information and/or consultation obligations, the employees can file a complaint before the Labor Inspectorate for formal non-compliance. Labor Inspectorate can impose penalties for non-compliance with the applicable procedures. The monetary sanction may range from BGN1,500 to BGN5,000. In practice, the information/consultation procedures take place after the execution of the transfer agreement. However, in order to comply with the mandatory term, these can in some cases take place before the execution of the agreement.
As a member of the European Union Bulgaria has implemented within its legislation the EU directive regarding transfer of employees. It was part of the steps for approximation of the laws of the Member States in the EU in connection to guaranteeing the rights of employees when transferring enterprises, business activities or parts of enterprises or economic activities.
It is a good practice for foreign businesses, who enter new markets via acquisitions, mergers, etc. to rely on the services of local, competent outsourcing partner. This partner’s job is to ensure a smooth transition for all engaged parties: old employer, employees, new employer, as well as full compliance to the employment legislation and regulations.
If you plan to step on the Bulgarian market through some of the above methods and need to navigate easily the whole transfer of employees and assets then let’s have a talk. As your outsourcing partner in Bulgaria we have the knowledge and competence to help the process significantly.