Neither can the outgoing company terminate contracts to avoid this, nor can the incoming company reject the workforce without exposing itself to unfair dismissal.
The subrogation of workers in cases of contractor change is one of the most sensitive issues in current labor law. It is increasingly common for outgoing and incoming companies to seek ways to avoid taking on entire workforces, especially in sectors with high turnover such as cleaning, security, or maintenance.
Consultation and judicial doctrine have made clear a principle that has been consolidated over time: the succession of contracts does not in itself extinguish existing labor relations, so that workers must be taken on by the incoming company with all their rights.
Article 44 of the Workers’ Statute (ET) establishes that, in the event of a transfer of a company, workplace, or autonomous production unit, the new employer is subrogated to the labor and Social Security rights and obligations of the previous employer.
In addition to this legal mandate, there is abundant case law from the Supreme Court and the CJEU that broadens the concept of “autonomous production unit.” The transfer of tangible assets is not sufficient: in labor-based activities (such as cleaning or security), the transfer of the workforce is considered the essential element for declaring the existence of business succession.
At the same time, some sectoral collective agreements further reinforce the obligation of subrogation. For example, the State Agreement for Security Companies and the Agreement for the Cleaning of Buildings and Premises expressly establish the subrogation of personnel as a mandatory clause in changes of contractor, even if there are no material assets to be transferred.
What happens if the outgoing company terminates the contracts?
The practice of carrying out a collective redundancy or objective dismissals to “free” the incoming company from the workforce has been repeatedly rejected by the courts.
Termination prior to the change of contractor does not eliminate the obligation of subrogation.
Estas extinciones se califican como despidos improcedentes, lo que genera el derecho de los trabajadores a ser readmitidos o a percibir indemnización reforzada (33 días por año con un máximo de 24 mensualidades).
Furthermore, the incoming company may be held liable in cases of fraud, given that subrogation cannot be agreed upon in violation of the law, even with union agreement.
In short, it is not possible to “empty” the workforce to avoid labor responsibilities.
An airline has decided not to renew its airport handling services contract with company A and awards the service to company B.
Company A intends to terminate the contracts of baggage handlers and ground staff with compensation for objective reasons.
Company B, upon taking over the service, refuses to take on these workers, arguing that it has not hired them directly.
In this case, in accordance with Article 44 of the Workers’ Statute and the doctrine of the CJEU, company B is obliged to take over the employees as an essential part of the activity, and if it fails to do so, this will constitute unfair dismissal, with the economic and legal consequences already mentioned.
Companies should bear in mind...
- Contract succession entails employee succession: there is no legal loophole that allows this to be circumvented.
- Agreements with employee representatives cannot validate practices that contravene Article 44 of the Workers’ Statute.
- The economic risk of attempting to avoid subrogation (compensation, procedural salaries, litigation) is usually greater than that of complying with the regulations.
- The importance of sectoral collective agreements, which in many cases extend and detail the cases of subrogation beyond what is provided for in the law.
In short, subrogation on contract changes is not a negotiable issue: it is a legal obligation reinforced by doctrine. Neither can the outgoing company terminate contracts to avoid it, nor can the incoming company reject workers without exposing itself to unfair dismissal.
In labor-intensive sectors, the workforce is the fundamental asset. And, as the Supreme Court has reiterated, workers are not an accessory element that can be replaced at the whim of companies, but rather a central part of the productive unit that is being transferred.
Please contact this professional firm if you have any questions or require clarification on this matter.
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