Guide to employment obligations in cases of corporate restructuring

It is increasingly common for our clients to seek legal advice in relation to corporate restructuring operations, such as mergers, demergers, absorptions, carve-outs and/or internal reorganisations. These operations form part of the growth, efficiency or market adaptation strategy of many companies.

However, a significant mistake is often made: analysing these decisions solely from a financial, tax, commercial or corporate perspective, without taking into account employment aspects or the legal obligations relating to employees and social security.

This lack of analysis may result in certain aspects being overlooked which, had they been known in advance, could have influenced the decision or avoided undesirable consequences. In some cases, the transaction ends up generating operational costs without achieving the intended objectives, due to the fact that Spanish employment law establishes a clearly protective framework for employees.

Ignoring or downplaying these obligations can seriously jeopardise the success of the transaction, generate significant financial costs and adversely affect corporate reputation.

In this article, we set out clearly the main employment obligations in cases of corporate restructuring that companies must take into account.

Continuity of employment relationships in corporate restructuring

Employment law protects the continuity of employment relationships. The basic principle is that if the business activity continues, the employment of the employees must continue as well.

This principle is set out in Article 44 of the Workers’ Statute, which governs the transfer of undertakings, understood as the transfer of an economic entity that retains its identity.

In such cases, employment contracts are not terminated; instead, there is an automatic transfer to the new employer, and the integration of the workforce is mandatory and not subject to negotiation.

It is important to note that corporate restructuring does not automatically justify dismissals. These will only be valid where there are genuine and substantiated economic, technical, organisational or production-related grounds, and the legal procedures are followed.

Acting incorrectly may result in unfair or void dismissals, with financial and reputational consequences.

Maintenance of employment conditions in cases of corporate restructuring

Not only are the contracts maintained, but so too are the existing employment conditions, including salaries, allowances, length of service, working hours, employee benefits and individual agreements.

The resulting company inherits all existing employment obligations, which makes a thorough prior employment analysis essential.

In addition, as a general rule, the original collective agreement remains in force and cannot be automatically replaced by another agreement.

A change of collective agreement is only possible by express agreement with the employees’ legal representatives following the transaction.

This aspect is key, as it directly affects labour costs and internal harmonisation.

Joint liability in corporate restructuring

There is joint and several liability between the transferor and the transferee for a period of three years.

During this period, both are liable for outstanding wages, compensation and social security debts.

This means that employment-related risks do not disappear as a result of the transaction, but must be properly managed.

Organisational changes following corporate restructuring

Following corporate restructuring, it is common to consider organisational changes. The law allows this, but requires compliance with legal procedures, proper justification of the decisions and the incorporation of social dialogue.

There is an obligation to:

• Inform the employees’ legal representatives
• Communicate the reasons and consequences
• Open a consultation period where collective measures are involved

Beyond formal compliance, this should be understood as a strategic tool to reduce conflict, strengthen credibility and improve the working environment.

Furthermore, restructuring cannot be used to undermine the employees’ legal representation, whose members retain their mandate, their rights and their priority in terms of job retention.

Specific considerations in cases of corporate restructuring: partial demergers

In partial demergers, the correct allocation of employees is essential.

This must be based on objective criteria and verifiable elements. An arbitrary allocation increases the risk of litigation and internal disputes.

Conclusion: key employment considerations in corporate restructuring

Integrating the employment dimension into corporate restructuring is not only a legal obligation, but also a strategic decision.

Non-compliance may result in:

• Employment disputes
• Administrative penalties
• Unforeseen costs
• Deterioration of the working environment
• Reputational damage

For this reason, it is essential to carry out a thorough prior assessment in order to manage the transaction properly and ensure its success.

FAQ – Employment obligations in cases of corporate restructuring

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Labour Law