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Labor Guide to Doing Business in Argentina: transfer of business in Argentina. Labor liabilities

by | Jul 30, 2020

The transfer of business, by any means, including the merger and acquisition of companies, cause that all labor obligations of the transferor will pass to the acquirer (Contract of Employment Law N° 20,744, Section 225).

Both parties of the transaction shall be jointly and severally liable for the obligations accrued through the time of the transfer, including those arising from the transfer itself, and from labor relationships terminated before the transfer.

The employment contract will continue with the acquirer of the business, keeping the employee his/her seniority, the rights derived thereof, and the employee’s work category, benefits, rights, and salaries held with the prior employer. The consent of the employee is not required.

However, when, as a result of the transfer of the business, the employee suffers damages that, due to their significance, do not allow the relationship to continue (e.g., the core of the business is changed; the functions, position or work duties are altered; there is a separation between different sections, dependencies or branches of the company in such a way that the employer’s liability is reduced), the employee can terminate the employment contract and claim compensation for dismissal.

Apart from the transfer of the business, the employer may also assign individual contracts of employment. Conversely, in this case, the written consent of the employee is required. Once the assignment has been executed, the assignor and the assignee are jointly and severally liable for all the labor obligations accrued through the date of the transfer.

Neither in the case of the transfer of business, nor in the case of assignment of the labor contract, is there any obligation to inform, or require authorization from unions or labor authorities.

Unregistered employees are granted – additionally to the regular severance compensations, two tough special compensations: one of them amounting to 25 percent of all salaries not registered, and the other doubling up the regular compensation due for seniority and lack of notice. Plus another 50 percent of the seniority compensation for the employee because he/she had to resort to the judiciary to be acknowledged as such. Finally, the conflict will also trigger a social security contingency and contributions will also be due over all the payments made to the employee.

Mario E. Castro Sammartino

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Our publications exclusively express the author´s opinion and do not purport to be legal counsel on any case. Should you need it, you must consult with your trusted lawyer.

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