Moldova: 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).

Quote: 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.

This article was originally published in the schoenherr roadmap`14 - if you would like to receive a complimentary copy of this publication, please visit: pr.schoenherr.eu/roadmap.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.