Transfer of Undertaking in Poland: What Happens to Employees

A transfer of undertaking in Poland occurs when a workplace, business or an organised part of a business is transferred to another employer and retains its identity. In such circumstances, the new employer generally enters into the existing employment relationships by operation of law. The principal legal basis is Article 23¹ of the Polish Labour Code, which reflects the employee-protection objectives of Directive 2001/23/EC.[1][2]

For international businesses, the issue commonly arises in asset deals, outsourcing projects, internal restructurings, mergers of operational units, insourcing and changes of service providers. The legal consequences may be significant: employment contracts, accrued liabilities, collective employment terms and information duties can pass to the buyer or incoming employer.

Lawyersinpoland.com by Kopeć & Zaborowski advises businesses on the employment, compliance and transactional risks connected with business transfers in Poland.

When does Article 23¹ of the Polish Labour Code apply?

Article 23¹ applies where an undertaking or part of an undertaking is transferred to another employer. The assessment is factual. The transaction label is not decisive. A transaction described as outsourcing, sale of assets, operational restructuring or management agreement may still trigger the transfer rules if the transferred activity constitutes an organised economic entity that continues after the transaction.

Polish courts and the Court of Justice of the European Union assess, among other factors, whether tangible assets, intangible assets, employees, customers, operational know-how and the relevant business activity have been transferred or retained. The importance of each factor depends on the industry. In a labour-intensive service business, taking over a substantial part of the workforce may be particularly relevant. In an asset-heavy operation, premises, machinery or other operational assets may carry greater weight.[3][4]

A share deal normally does not constitute a transfer of undertaking for Article 23¹ purposes. The employing company remains the same legal entity, even if its shareholder changes. By contrast, an asset deal structure in Poland may result in a change of employer if the assets and functions transferred form an operational business unit.

Automatic transfer of employment contracts

Where Article 23¹ applies, the new employer becomes a party to the existing employment relationships automatically. Employees do not need to sign new employment contracts or consent individually to the change of employer. The terms of employment, including remuneration, seniority and other contractual rights, continue in principle without interruption.

This does not mean that every employment condition is permanently fixed. Changes to working conditions or remuneration may be possible after the transfer, but they must comply with general Polish employment law rules. Depending on the circumstances, this may require an agreement with the employee or a formal notice changing employment conditions.

The transfer itself cannot be the reason for terminating an employment relationship. Article 23¹ § 6 of the Labour Code expressly prohibits treating the transfer as a justified ground for dismissal. However, a genuine economic, technical or organisational reason entailing workforce changes may, depending on the facts, justify termination. The employer must be able to demonstrate that the reason is not the transfer itself and complies with the applicable dismissal rules.[1][2]

Three exceptions and limits requiring separate analysis

Three points are particularly important when planning a business transfer:

1. Civil-law contractors do not transfer automatically under Article 23¹. The provision concerns employment relationships. Persons engaged under a B2B agreement, mandate contract or contract for specific work are not employees for this purpose. Their contracts require separate contractual analysis.
2. An employee may terminate employment after the transfer. Within two months of the transfer, an employee may terminate the employment relationship with seven days’ prior notice. The legal consequences are generally equivalent to termination by the employer with notice, subject to the statutory rules.[1]
3. Persons employed on a basis other than an employment contract require a new offer of terms. Where individuals perform work under another basis establishing an employment relationship, such as appointment, election or nomination, the incoming employer must propose new terms of work and pay. The statutory procedure and deadlines under Article 23¹ § 5 of the Labour Code apply.[1]

Employee information duty in a business transfer

The employee information duty business transfer is a statutory obligation. Where no company trade union organisation operates at either employer, both the current employer and the new employer must inform their employees in writing at least 30 days before the planned transfer. The information must cover the expected transfer date, reasons for the transfer, legal, economic and social consequences for employees, and planned measures affecting employment conditions, particularly working conditions, pay and retraining.[1]

Where company trade union organisations operate, the information and consultation process is governed primarily by Article 26¹ of the Act on Trade Unions. The employer must provide the required written information to the relevant company trade union organisations at least 30 days before the planned transfer. If measures affecting employees’ employment conditions are planned, the employer must undertake negotiations with those organisations to conclude an agreement; the statutory negotiation period is 30 days from the provision of the information.[5]

Failure to meet these obligations may create labour-law disputes, increase transaction risk and damage employee relations. In practice, the communication process should be coordinated with the transaction timetable, confidentiality arrangements and any anticipated restructuring measures.

Joint liability of the old and new employer

The joint liability old and new employer rule protects transferred employees. Under Article 23¹ § 2 of the Labour Code, the former and new employer are jointly and severally liable for obligations arising from the employment relationship before the transfer date. This may include unpaid salary, overtime, holiday pay or other employment-related claims that arose before the transfer.[1]

For buyers, due diligence should therefore include payroll records, holiday balances, bonus arrangements, pending disputes, social security matters, internal policies and potential discrimination or harassment claims. A contractual indemnity in the transaction documents may allocate financial responsibility between seller and buyer, but it does not remove employees’ statutory rights against the employers.

Collective agreement after transfer in Poland

If transferred employees were covered by a collective bargaining agreement, the provisions of that agreement generally continue to apply for one year from the transfer date, unless separate provisions provide otherwise. After that period, employment terms resulting from the agreement continue to apply until they are changed in accordance with the applicable employment-law rules. This protection follows Article 241⁸ of the Labour Code.[1]

The incoming employer should identify all collective agreements, remuneration regulations, bonus schemes and workplace customs before closing. The practical impact can be material, especially where the acquired workforce benefits from terms more favourable than those used by the buyer.

Managing transfer of undertaking risk in Poland

Early legal analysis is essential. The parties should determine whether the planned transaction transfers an organised business function, identify affected employees, review liabilities and prepare a compliant information process. A defensible approach also requires alignment between transaction documents, HR communications and post-closing operational plans.

This is informational material, not legal advice. For support in assessing a planned transfer, transaction documents or employee communications, businesses may contact us before the transaction timetable is finalised.

FAQ – Transfer of Undertaking in Poland

Does every asset sale trigger Article 23¹ of the Labour Code?

No. Article 23¹ applies only if an undertaking or an organised part of it is transferred and retains its identity. A sale of individual assets without transfer of an operational business function may not meet this test.

Can employees refuse to transfer to the new employer?

Employees do not have a general right to prevent the automatic transfer of their employment relationship. They may, however, terminate employment within two months of the transfer with seven days’ prior notice.

Must employees sign new employment contracts after a transfer?

Normally, no. Employment contracts transfer automatically, and their existing terms continue. New contracts may create unnecessary risks unless there is a lawful and justified reason for amendments.

How much notice must employers give employees before a transfer?

Where no company trade union organisation operates at either employer, written information must be provided at least 30 days before the expected transfer date. Different information and consultation requirements apply where company trade union organisations operate.

Is the buyer liable for unpaid wages from before the transfer?

Yes. The former and new employer are jointly and severally liable for employment-related obligations arising before the transfer.

Does a change of shareholder amount to a transfer of undertaking?

Usually not. In a share deal, the employing company remains unchanged. Article 23¹ may become relevant only if the transaction is accompanied by a separate transfer of a workplace or part of a workplace to another employer.

Bibliography

[1] Act of 26 June 1974 – Labour Code, in particular Articles 23¹ and 241⁸, consolidated text available through the Polish Legal Acts Database (ISAP).

[2] Council Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses.

[3] Judgment of the Court of Justice of the European Union of 18 March 1986, C-24/85, Spijkers v Gebroeders Benedik Abattoir CV.

[4] Judgment of the Court of Justice of the European Union of 11 March 1997, C-13/95, Süzen v Zehnacker Gebäudereinigung GmbH Krankenhausservice.

[5] Act of 23 May 1991 on Trade Unions, Article 26¹, consolidated text available through the Polish Legal Acts Database (ISAP).