Transfer of business in Portugal: your rights

Did you hear that the company was sold, changed owner or lost a tender, and now nobody knows what happens to the contracts? Portuguese law already answered that: your contract passes automatically to the new owner, with everything you already had (Article 285(1) and (3) of the Labour Code). You do not sign a new contract, you do not lose seniority and you do not go back to a probation period.

Your contract does not disappear with the sale

Article 285(1) says it in three lines: on a transfer, by any title, of the ownership of a business, of an establishment or of a part that constitutes an economic unit, what passes to the acquirer is the employer's position in the employment contracts and the liability for fines imposed for labour offences.

"By any title" is the phrase doing all the work. Sale, gift, merger, inheritance, going concern transfer: the legal form of the deal is irrelevant. And paragraph 2 extends the rule to the transfer, assignment or reversion of the operation of a business, which is what happens with restaurants, gyms, cafes and concessions when one operator hands over to another.

Paragraph 3 closes the door on losses: with the transfer you keep all contractual and acquired rights, namely pay, seniority, job category, job content and acquired social benefits. Breaching paragraphs 1, 2 or 3 is a serious administrative offence (paragraph 13).

Look also at what Article 340 says about ending a contract. The ways a contract can end are expiry, revocation by agreement, dismissal for cause attributable to the worker, collective redundancy, redundancy of the post, dismissal for unsuitability, termination by the worker for cause, and resignation. A sale of the company is not there. Anyone telling you that "the contracts end with the sale" is making it up.

What counts as an economic unit

Not every sale of assets is a transfer of business. If the company sells two vans and three computers, that is a sale of equipment, not of a business.

Article 285(5) defines it: an economic unit is a set of organised resources that constitutes a productive unit with technical and organisational autonomy and that keeps its own identity, with the aim of carrying out an economic activity, whether main or ancillary.

In everyday terms: what passes is a part of the business that works on its own, with people, resources and customers, and that is still recognisable on the other side. A bakery inside a supermarket, an assembly line, a regional branch, a customer support operation.

There is an express exception in paragraph 4. If the old employer moves you to another establishment before the transfer, under Article 194, and keeps you in its own service, you do not pass to the buyer. That is why it pays to know the rules on workplace relocation when a company starts reshuffling teams shortly before a sale.

Cleaning, security, transport: the tender cases

This is the point most people do not know about, and the one that affects the largest number of workers in Portugal.

Article 285(10) is explicit: the regime applies to all situations of transfer of a business or establishment arising from the award of a services contract carried out by public tender or by another selection method, in both the public and private sectors, namely the award of security, catering, cleaning or transport services, taking effect at the moment of the award.

Here is what usually happens when the law is ignored: the company that loses the tender sends out dismissal or expiry letters, and the winner offers brand new contracts, with entry level pay and seniority reset to zero. That is unlawful. If it happens to you, keep everything in writing and read the guide on outsourcing after a collective dismissal.

Unpaid wages: who has to pay

Article 285(6) creates a strong safety net: the seller is jointly liable for the worker's credits arising from the employment contract, from its breach or its termination, and for the corresponding social security charges, due up to the date of the transfer, for the two following years.

"Jointly liable" means you can claim the full amount from either of them. You do not have to split the debt or prove which one is more at fault.

There is one more layer in paragraph 2: in an assignment or reversion of the operation, whoever ran the business immediately before is jointly liable as well.

The full step by step on claiming money you are owed, with deadlines and interest, is in the late wages guide. If the relationship does end, check everything due to you in the final pay guide.

They must inform and consult you first

The transfer cannot be a surprise announced on a Friday afternoon. Article 286 imposes a procedure with fixed deadlines on both the seller and the buyer.

What they must tell you (paragraphs 1 and 2): the date and the reasons for the transfer, its legal, economic and social consequences for the workers, the measures planned in relation to them, and the content of the contract between seller and buyer.

How and when (paragraph 3): in writing, before the transfer, in good time, at least 10 working days before the consultation.

The consultation (paragraph 4): both must consult the worker representatives before the transfer, with a view to reaching an agreement on the measures they intend to apply.

And if there are no representatives? (paragraph 7): you can appoint, from among yourselves, within five working days of receiving the information, a representative committee of at most three or five members, depending on whether the transfer covers up to five workers or more than that.

The seller must also inform the ACT, the labour inspectorate, of the content of the contract between the parties and, where an economic unit is involved, of all the elements that make it up (Article 285(8)). This duty applies to medium and large companies and, at the ACT's request, also to micro and small companies (paragraph 9).

Breaching the information and consultation duties in paragraphs 1, 2, 3, 4 or 9 of Article 286 is a serious administrative offence (paragraph 10).

You can say no: the right to object

Article 286-A gives you a way out that almost nobody uses, because almost nobody knows it exists. You can object to the transfer of the employer's position in your contract when it may cause you serious harm, namely:

• manifest lack of solvency of the acquirer;
• a difficult financial situation of the acquirer;
• if the acquirer's work organisation policy does not merit your confidence.

The objection prevents the transfer and keeps you bound to the old employer (paragraph 2). It is not a request: it is a right you exercise.

The form matters as much as the grounds (paragraph 3). You must inform your employer in writing, within five working days of the end of the deadline for appointing the representative committee (if none was set up) or of the agreement or end of the consultation under Article 286(4), stating:

1. your identification;
2. the contracted activity;
3. the grounds for the objection.

If the company transfers you anyway after you object, it breaches paragraph 2 and commits a serious administrative offence (paragraph 4).

In current interpretation, objecting is a double edged tool. You stay with the seller, but if the seller's business disappears with the sale, your post may be made redundant soon afterwards. Weigh the risk on both sides before writing the letter, and see how redundancy of the post works.

Does the collective agreement still apply?

Yes, and for a guaranteed minimum period. Article 498(1) states that the collective agreement binding the seller applies to the buyer until the end of its term or, as a minimum, for 12 months from the transfer, unless another negotiated collective instrument starts applying to the buyer in the meantime.

In other words: if your meal allowance, your schedule or your seniority payments come from the collective agreement of the old sector, those rules travel with you for at least a year.

After that period, if no collective instrument applies to the new owner, the effects already produced in your contract are maintained for the matters listed in Article 501(8) (Article 498(2)). Breaching paragraph 2 is a serious administrative offence.

If you had a works council or union delegates, Article 287 guarantees that the status and role of your representatives do not change, provided the business or establishment keeps its autonomy after the transfer and the requirements for that representation structure are still met.

Can they dismiss you because of the sale?

Not on that ground. The sale is not among the ways a contract can end in Article 340, and Article 285(1) requires the contract to pass intact.

If the new owner wants to cut headcount after the transfer, it has to use one of the procedures the law provides, each with its own grounds, deadlines and compensation:

• collective redundancy, when several workers are affected;
• redundancy of the post, when the post itself ceases to exist;
• dismissal for unsuitability, in tightly defined cases.

In any of these, the seniority that counts towards the compensation is your full seniority, including the years with the previous employer, because it was never lost (Article 285(3)). If it happens to you, work out the figure and compare it with whatever is being offered.

If the company denies there was a transfer

This is where the law has its sharpest teeth. Article 285(11) treats two mirror image behaviours as a very serious administrative offence:

• claiming a transfer that did not happen, to push workers onto another entity;
• refusing to recognise a transfer that did happen, when the deal went through.

Paragraph 12 adds a practical consequence that is rare in the Labour Code: the decision imposing the fine must declare whether the employer's position transferred or not. So the enforcement case settles the underlying question, not just the penalty.

What to do, in order:

1. Write, do not phone. Ask in writing for the information in Article 286(1): date, reasons, consequences and planned measures.
2. Do not sign what you do not understand. A "new contract" or a "termination by agreement" put in front of you in the middle of a sale may be erasing your seniority. Ask for a copy and time to read it. See the mutual agreement guide.
3. Keep working and keep a record of everything: hours, managers, tasks, location. If nobody tells you where to report, report where you have always worked and confirm it in writing.
4. Keep proof of the old relationship: contracts, payslips, working time records, emails.
5. File a complaint with the ACT. The step by step process is in the ACT complaint guide, and the complaint can be anonymous.

Are you an employer? Transfers are one of the areas with the heaviest fines, and almost always because of a procedural failure rather than bad intent. Inform in writing before the transfer, with the 10 working days of notice before the consultation, consult the representatives, and only complete the deal after the 7 working days in Article 285(7) have passed. Notify the ACT of the content of the contract and of the elements of the economic unit if you are a medium or large company. Do not ask transferred workers to sign new contracts: their contracts have already passed, and asking for a signature can be read as an attempt to erase seniority. And budget the seller's labour debts before agreeing a price, because liability is joint for two years. The rest of the formal obligations are in the employer obligations guide.

This guide is general information and does not replace legal advice for your specific case. Questions? ola@despacho.pt