Business Succession in Spain: What Happens to Your Contract?

🇪🇸 Read the original in Spanish

When a company changes hands, it is completely natural for workers to feel uncertain about their job security and wonder if they will keep their positions, salaries, or seniority. Under the Spanish legal system, the transfer of an economic entity is not a valid reason to terminate employment contracts, as the principle of job stability acts as a protective shield for the workforce. Through the legal mechanism of sucesión de empresa (business succession), the law guarantees that the new employer steps into the rights and obligations of the previous one, allowing your employment relationship to continue under the exact same conditions you originally agreed upon.

What is Business Succession and How is it Regulated in Spain?

The sucesión de empresa (also known in commercial transactions as subrogación empresarial or business subrogation) is a legal mechanism designed to protect the employment stability of workers when there is a change in the ownership of a company, a workplace, or an autonomous productive unit.

The benchmark regulatory framework in Spanish labor law rests on three fundamental pillars:

• *The Estatuto de los Trabajadores (Workers' Statute, Royal Legislative Decree 2/2015, of October 23): Specifically in its Article 44*, which regulates "Sucesión de empresa". This article establishes that the change of ownership does not in itself terminate the employment relationship, leaving the new employer subrogated to the labor and Social Security rights and obligations of the previous one.
• *The Ley Reguladora de la Jurisdicción Social (Law Regulating Social Jurisdiction, Law 36/2011, of October 10):* Which determines the procedural channels to claim in the event that workers' rights are violated during this process.
• *The Ley General de la Seguridad Social (General Social Security Act, Royal Legislative Decree 8/2015, of October 30):* Which establishes joint and several liability regarding outstanding contributions and benefits.

For Article 44 of the Estatuto de los Trabajadores to apply, it is essential that what is transferred is an "economic entity that retains its identity, understood as an organized set of resources in order to carry out an economic activity, whether essential or ancillary". The mere transfer of isolated elements (such as a desk or a computer) is not enough; an operational structure capable of functioning on its own must be transferred.

What Happens to Your Contract? The Substantive Rules

The general rule is absolute continuity. The new employer (cesionario or transferee) steps exactly into the same legal position as the previous employer (cedente or transferor). This has very specific implications for your day-to-day conditions:

1. Respect for Basic Working Conditions

The new employer has a legal obligation to maintain your:

• **Antigüedad (Seniority):** Your original start date with the company is preserved for all purposes, which includes the calculation of future severance pay, promotions, and seniority bonuses.
• Salary: They cannot lower your base salary or consolidated salary supplements by citing the change of ownership.
• Professional Category and Duties: You maintain your professional group and the tasks you have been performing.
• Working Hours and Schedule: The agreed working hours and their distribution must be respected.

2. The Applicable Convenio Colectivo (Collective Agreement)

Unless there is an agreement to the contrary (by means of a collective agreement once the succession has been completed), the employment relationships of the workers affected by the transfer will continue to be governed by the convenio colectivo (collective agreement) that was applicable to them in the transferring company at the time of the transfer.

This application will be maintained until the expiry date of the original collective agreement or until the entry into force of another new collective agreement applicable to the transferred entity.

3. Joint and Several Liability: Debts and Social Security

The Estatuto de los Trabajadores establishes a very powerful financial guarantee for the worker: joint and several liability (responsabilidad solidaria).

The transferor and the transferee will be jointly and severally liable for a period of 3 years for labor obligations that arose prior to the transfer and that have not been satisfied. If the outgoing company owed you salaries or bonuses, you can legally claim them from either of the two companies.

In the area of Social Security, the Ley General de la Seguridad Social also determines that both employers will be jointly and severally liable for the payment of contributions and benefits accrued prior to the transfer. If the succession is judicially declared as a "succession of workforce" (sucesión de plantilla) or is classified as a fraudulent transfer, this liability period may not apply, meaning both will always remain liable without limit.

Practical Step-by-Step Steps in a Business Succession

If your company is going to be transferred or the change of ownership has already occurred, these are the practical steps to follow and the checks you should make as a worker:

1. Receipt of Written Notification: Both the transferring and the receiving companies are obliged to inform the legal representatives of the workers (or directly the employees if there is no committee/delegates) sufficiently in advance. This notification must detail: the planned date of the transfer, the reasons for it, the legal, economic, and social consequences for the workers, and the measures planned regarding the workforce.
2. *Checking your Vida Laboral (Employment History): Once the transfer has taken place, request a vida laboral report from the Tesorería General de la Seguridad Social (General Treasury of the Social Security). You must check that your deregistration (baja) from the previous company and registration (alta*) in the new company have been processed with the date of the following day, ensuring there is no interruption in contributions and that your real seniority date is respected.
3. Signing the Subrogation (or Novation) Document: The new company usually delivers a subrogation letter formally notifying the changes in the employer's tax details. Important: You are not obliged to sign a new employment contract. If you are presented with a new contract, read it carefully and, if you have doubts, write "No conforme" (Not agreed) next to your signature and the date to safeguard your rights.
4. Claiming Outstanding Amounts: If there are unpaid salaries by the previous company, file a papeleta de conciliación (conciliation petition) before the corresponding mediation service of your Comunidad Autónoma (Autonomous Community) within the legal deadline, directing the claim against both the transferring and the receiving company to enforce joint and several liability.

Practical Examples with Figures

To understand how the protection of business succession operates in reality, we analyze two common scenarios:

Example 1: The Calculation of Carlos's Severance Pay

Carlos has been working as a software developer at the company "TecnoAlfa" since June 1, 2018, earning a gross salary of €2,500 per month (including the pro-rata distribution of extra payments). On January 1, 2023, "TecnoAlfa" is absorbed by the multinational "GlobalTech" through a business succession regulated by Article 44 of the Estatuto de los Trabajadores.

In March 2024, "GlobalTech" decides to carry out an unfair dismissal (despido improcedente) of Carlos, claiming that his profile no longer fits.

• The company's mistake: "GlobalTech" attempts to calculate the severance pay for unfair dismissal (33 days of salary per year of service) counting only from January 1, 2023 (the date he started working for them), which would add up to barely 1 year and 2 months of seniority, offering him a severance payment of approximately €3,850.
• The legal reality: Carlos has the right to have his entire seniority computed from June 1, 2018. The correct calculation must be made over a period of 5 years and 9 months. With his daily salary of €83.33, the actual severance pay he is entitled to for unfair dismissal amounts to €15,833. Carlos can challenge the dismissal before the Jurisdicción Social (Labor Courts) to demand the financial difference.

Example 2: Accumulated Salary Debts in the Transfer of a Clinic

María is a physiotherapist at a clinic that changes hands on October 1, 2023. The former owner owed her the paychecks for July, August, and September 2023, which totaled €4,500. The new owner informs María that he has nothing to do with the debts of the previous owner and that she must claim them from him privately.

• The legal reality: As this is a business succession, the joint and several liability of Article 44.3 of the Estatuto de los Trabajadores operates for a period of 3 years. María can file a payment claim lawsuit (demanda de reclamación de cantidad) claiming the €4,500 jointly from both employers. If the former owner declares bankruptcy, the new owner will be legally obliged to pay her this amount in full.

Mistakes You Must Avoid

During a business transfer process, confusion or pressure can lead you to make mistakes that harm your rights. Avoid falling into the following errors:

• Signing a Voluntary Resignation and a New Contract: Some fraudulent companies ask the worker to sign a voluntary resignation (baja voluntaria) from the original company to then hire them "from scratch" in the new one. Never do this. If you sign a voluntary resignation, you will lose all your accumulated seniority and the right to receive severance pay if things go wrong.
• Accepting a Substantial Modification of Conditions Without Negotiating: The new employer cannot lower your salary or change your schedule unilaterally by simply claiming that "this is how things are done in this company now." Any significant change must follow the procedure of Article 41 of the Estatuto de los Trabajadores (Modificación Sustancial de las Condiciones de Trabajo or Substantial Modification of Working Conditions), which requires justified economic, technical, organizational, or production causes and gives you the right to terminate the contract with a severance pay of 20 days per year worked.
• Failing to Claim Within the Legal Deadline: If after the succession an disguised dismissal or an unauthorized substantial modification occurs, you have very strict deadlines. The deadline to challenge a dismissal is only 20 business days (días hábiles, excluding Saturdays, Sundays, and public holidays) from its effective date. Do not let time pass relying on verbal promises.

Frequently Asked Questions (FAQ)

Can they fire me by taking advantage of the business succession?

No. The change of ownership of the company is not, in itself, a justified cause for dismissal. If they dismiss you using the transfer as the sole argument, the dismissal will be declared unfair (improcedente) (or null, if fundamental rights have been violated) by the courts. However, the new company could carry out dismissals in the future if real economic, technical, organizational, or production causes exist, but always paying the corresponding severance pay calculated from your original seniority date.

What happens to my accrued and untaken holidays?

Untaken holidays are transferred to the new company. The new employer is obliged to allow you to enjoy the holiday days you had accumulated with the previous owner of the company. They cannot "erase" them or force you to cash them out in a settlement (finiquito) if the employment relationship continues under subrogation.

If I decide not to continue with the new company, am I entitled to unemployment benefits and severance pay?

Generally, if you decide to leave voluntarily because you do not like the change of owner, it will be considered a voluntary resignation (baja voluntaria), meaning *you will not be entitled to severance pay or to apply for unemployment benefits (paro)*. The only exception is if the new company makes substantial modifications to your working conditions (such as a geographical relocation that forces you to change your residence or a drastic reduction in duties) that legally justify the termination of your contract with the right to severance pay and unemployment benefits.

What happens if the previous company enters insolvency proceedings?

If the transfer of the productive unit takes place within insolvency proceedings (concurso de acreedores), the insolvency judge can define which assets and liabilities are transferred. Although Article 44 continues to protect the contracts of the workers who continue in the productive unit, there are special rules regarding Social Security debts and outstanding salaries, which in many cases are taken over by the Wage Guarantee Fund (FOGASA) within the established legal limits.

In Summary

• Business succession guarantees that your employment contract remains in force under the same conditions of salary, working hours, and duties.
• Your original seniority is preserved intact for the purposes of promotions, bonuses, and the calculation of future severance pay.
• The new and old employers are jointly and severally liable for 3 years for labor and Social Security debts prior to the transfer.
• You must never sign a voluntary resignation or a new contract that eliminates your consolidated rights during the subrogation process.
• You have a period of 20 business days to challenge any dismissal or substantial modification of your working conditions that occurs after the transfer.

General legal information, not personalised legal advice. For your specific situation, ask your question for free at AbogadoAI — answers grounded in Spanish law (BOE), in English.

This is general information, not legal advice. Verify on the BOE or consult a lawyer for your specific case.