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Regulation of Employment Relations in Case of Business Entity Transfer

Regulation of Employment Relations in Case of Business Entity Transfer

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On 15 May 2024, the Law of Ukraine “On amendments to the Labour Code of Ukraine on employment relations in case of business entity transfer” entered into force. The new Law establishes additional guarantees to employees in the event of business transfer. The Law aims at approximation of the national legislation to the Transfers of Undertakings Directive 2001/23/EC of 12 March 2001.

The transfer of a business entity means a change of ownership of an entity, its reorganization (merger, acquisition, division, transformation), spin-off, as well as a change of owner/user of property of the individual employer, which property is an organized group of resources, while maintaining the same type of economic activity carried out by the transferor.

The main provisions are as follows:

  • in the event of a transfer of a business entity, the employment relations of employees continue with the transferee;
  • the rights and obligations under employment agreements that existed between the employees and the transferor are transferred to the transferee;
  • the employer is obliged to notify the employees of the transfer of the business entity no later than 10 days before the transfer;
  • the trade union or employees' representatives are entitled to initiate consultations with the transferor and/or transferee within 5 days of receiving the information on the reasons for the transfer and its consequences, as well as measures to minimize the negative impact on employees;
  • in the event of a transfer, the status and functions of a trade union or other representative body of employees remain unchanged;
  • if the transfer of an entity results in changes in the essential working conditions, the employee must be notified no later than 2 months in advance.

By Inesa Letych, Counsel, and Iryna Shaposhnikova, Associate, Asters

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