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09. Transfer of Undertakings
Employment Law Overview Philippines

09. Transfer of Undertakings

Employees’ Rights in Case of a Transfer of Undertaking

This would depend on the type of transfer. In cases of share acquisitions, the acquiring company merely buys the shares of the target company and only the ownership or control of the corporation changes, and the underlying employment relationship between the target company and its employees is not affected. The employees remain with their original employer in exactly the same manner as before the transfer.

In an asset acquisition, generally, there is no obligation to absorb the employees because the personal nature of employment contracts cannot be enforced against a buyer in an acquisition transaction. The purchaser in good faith has no obligation to absorb employees of the vendor or to continue employing them.

With regard to mergers, under the Revised Corporation Code, there is an automatic succession of employment rights and obligations from the surviving company to the employees of the absorbed company. The absorbed company is deemed substituted as employer, by operation of law, by the surviving company.

Requirements for Predecessor and Successor Parties

The statutory rule is that because of the automatic succession of employment rights and obligations during a merger, the transferring employees’ terms of employment, from the predecessor to the successor, should at least be the same before the transfer.

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