KMU-Magazin No. 7/8, July/August 2025 Employment relationships in the event of a transfer of business
In the event of a transfer of business, all employment contracts assigned to the transferred business (or part thereof) are automatically transferred to the acquirer, along with their existing rights and obligations. This article outlines the possible courses of action and what employers need to bear in mind.
If a transfer of business occurs, i.e. entire businesses or parts of businesses are transferred, this has far-reaching consequences for the parties involved. The automatic transfer of employment relationships from the transferor to the transferee, as provided for in Art. 333 CO, serves primarily to protect employees by preserving entitlements dependent on the duration of an employment relationship, such as notice periods, continued payment of wages in the event of incapacity to work or length-of-service gifts. The following section outlines the scope for employers to deviate from this rigid regulation.
Legal basis
According to Art. 333 para. 1 CO, in the event of a transfer of business, all employment contracts assigned to the transferred business (or part thereof) are automatically transferred to the transferee with their previous rights and obligations. The purpose of this provision is to protect employees and, in particular, to ensure that they retain their rights based on length of service.
In principle, there is no contractual leeway for the contracting parties, i.e. the transferor and the transferee, with regard to the transfer of employment relationships. The only exceptions are a right of refusal for the employees concerned (Art. 333 para. 1 and 2 CO) and joint and several liability of the transferor and transferee for certain claims (Art. 333 para. 3 CO).
Joint and several liability covers claims that become due up to the date of the transfer of the business. It also covers claims that become due after the transfer until the date on which the employment relationship could be terminated in the normal way or is terminated if the employee rejects the transfer.
There is also an obligation to inform employees or their employee representatives in good time before the transfer of the business takes place about the reason for the transfer and its legal, economic and social consequences (Art. 333a para. 1 CO). In the case of a transfer without changes to the employment relationships or working conditions, simple information is sufficient. However, if measures affecting employees are planned as part of the transfer of operations, the employees or their employee representatives must be consulted in good time before a decision on these measures is taken (Art. 333a para. 2 CO).
Compliance with these principles is fundamental. Nevertheless, there is scope for action within narrow limits, which is permissible and does not qualify as a circumvention of Art. 333 CO. We explain this below using certain example cases.
Remaining with the transferor
In practice, it often happens that the transferor has an interest in continuing to employ certain persons who actually belong to the transferred business. This may be for economic reasons or because they cannot do without certain specialist knowledge for a part of the business that is not being transferred. The following approaches are available in this case.
In the case of a so-called genuine change of function, the employees concerned are assigned to another function or another part of the business that is not covered by the transfer, thereby removing their affiliation with the transferred business. However, this restructuring must not be merely for appearance's sake; it is essential that the employee's function is actually adjusted. Otherwise, this constitutes an impermissible circumvention of Art. 333 CO.
Another option is for the employee to refuse the transfer in combination with a new employment contract. In the event of a transfer of business, the employees affected have a legal right to this under Art. 333 para. 2 CO. The consequence of this is the termination of the previous employment relationship within the statutory, and not the contractual, notice period. At the same time, a new employment contract can be negotiated with the transferor. It is normal for the previous contractual conditions to be maintained or even improved. A deterioration in working conditions is also conceivable, but the adjustment should be made in compliance with the notice period and there should be objective reasons for it.
If the timing of the implementation and the notice periods cannot be reconciled, it is advisable to settle the contractual situation by mutual agreement. For example, a termination agreement, i.e. a mutual agreement between the employer and the employee, can be used to agree on the termination of the employment relationship without regard to notice periods. For such an agreement to be effective, the usual framework conditions for such contracts must be observed.
On the one hand, it is important to note the prohibition on waiving claims arising from mandatory provisions of the law or from provisions of a collective labour agreement (Art. 341 CO), and on the other hand, the reasonable interest of the employee in wanting to modify other claims. At the same time, a new employment contract is concluded with the transferor. The termination of the old employment contract and the effectiveness of the new one must be harmonised with the date of the transfer of the business and made conditional upon the actual execution of the transfer.
Employees not belonging to the business
It also happens that the acquirer wishes to take on employees who are not formally part of the transferred business. As these employment relationships are not covered by Art. 333 CO, special agreements must be made.
On the one hand, a tripartite agreement between the transferor, the transferee and the employee concerned is conceivable. On the other hand, a new employment contract can be concluded between the transferee and the employee, whereby the old employment relationship is terminated by mutual agreement by means of a termination agreement.
As can be seen, it is not possible to take on an employee from outside the company without their express consent. It is advisable for all parties to insist on written agreements in order to create clear legal relationships.
Terminations
Employers often ask themselves whether terminations may be issued before or in connection with a transfer of business in order to prepare the workforce for the upcoming transfer. The aforementioned consultation obligation under Art. 333a para. 2 CO applies in the case of such personnel adjustments. In concrete terms, this means that it is not only necessary to inform the employees or their employee representatives, but also to engage in dialogue with them so that their opinions and suggestions can be taken into account in the decision.
In principle, the freedom to terminate employment remains in place, but only if there are objective reasons such as restructuring of the business or a demonstrable economic emergency. If, on the other hand, the sole aim is to avoid unpleasant transitions, case law recognises this as an inadmissible circumvention of Art. 333 CO. Such dismissals are then null and void and the employment relationship is nevertheless transferred to the acquirer. Such void terminations occur in particular if the termination is intended to prevent certain employees from transferring to the acquirer because the acquirer does not wish to take them on, or if it is intended to prevent the occurrence of legal consequences such as the maintenance of rights based on length of service, the one-year validity of an existing collective labour agreement under Art. 333 para. 1bis CO or the statutory joint and several liability under Art. 333 para. 4 CO.
It is therefore advisable for employers to document all personnel decisions, and in particular the reasons for them, as well as the consultation of employees, in detail and in full, so that in the event of any legal disputes, reference can be made to the objectively valid motives. This makes the legitimacy of the procedure tangible and prevents objections of abuse by employees.
Options for adjustment
However, the legal requirements for a transfer of business do not prohibit the acquirer, once it has become the employer, from adjusting the contracts of the transferred employees to its existing salary and social benefits. However, three restrictions must be observed. Rights based on length of service may not be impaired even after the transfer of business; for example, a new probationary period may not be agreed.
As with dismissals, the statutory joint and several liability between the transferor and the acquirer under Art. 333 para. 4 CO cannot be waived, and the continued validity of any collective labour agreement under Art. 333 para. 1bis CO also remains inviolable in this case.
In addition, the principle already outlined applies, namely that any significant deterioration in working conditions requires objective justification in order to avoid being considered abusive. Since such contract adjustments are considered dismissals for change unless they are made by mutual agreement, the mass dismissal procedure under Art. 335d ff. CO must be observed when the relevant thresholds are reached. Otherwise, the dismissal with the option of altered conditions of employment qualifies as abusive, in which case ‘only’ an amount of two months' salary is relevant as a penalty (Art. 336 para. 2 lit. c CO in conjunction with Art. 336a para. 3 CO), instead of the usual limit of six.
On the question of when such an adjustment of working conditions can be made, there is agreement in legal doctrine that it is possible to present adjustments to employees with effect from the date of the transfer as soon as the transfer agreement has been signed. To date, the courts have only confirmed that adjustments can be made from the date of the transfer of the business.
Recommendations and conclusion
Despite the initially rigid legal regulation of the transfer of business under Art. 333 CO, employers retain a certain degree of flexibility in the implementation of transfers of business if they observe the following points. Early planning with timely information and consultation with the workforce (or their representatives) can eliminate ambiguities and clarify needs in advance of a transfer of business, thereby preventing conflicts from arising in the first place. An amicable contract adjustment is ideal and desirable. Experience shows that this is feasible if the transfer of business can be planned with sufficient lead time. If this is not possible, special attention must be paid to clear written documentation and to safeguarding the rights of employees in order to avoid provoking unnecessary conflicts.
If these points are taken into account, business transfers can be organised efficiently and in a legally compliant manner. At the same time, companies benefit from the opportunity to adjust unwanted personnel constellations or integrate new talent.
