What Does Labor Subrogation Entail?

Labor subrogation occurs when the employer who has signed the employment contract transfers the fulfillment of the contract's terms to a third party. This provision is recognized by law and can occur for various reasons, such as employer replacement due to retirement, company sale or merger, or a change in the company’s legal structure.

Situations Where Labor Subrogation Occurs

Succession of a Company

This is the most common form of labor subrogation and is outlined in Article 44 of the Workers' Statute. In this case, one company replaces another, and the new company assumes all obligations previously undertaken by the former company. This means that the new company is responsible for both the company's debts to creditors and the continuation of employment relationships with its workers.

Completion of a Service Contract

This occurs when a company’s contract to provide a service (such as cleaning, security, maintenance, or repairs) comes to an end. The new company that takes over the service assumes the role of employer for the workers previously associated with the outgoing company.

Conditions for Public Contracts

This occurs when an organization is contracted by a public entity. In these cases, the administrative contract terms usually include a clause that obligates the new company to undertake labor subrogation, guaranteeing the continuity of all employees working for the previously contracted company.

Conventional Subrogation

This is a common practice and is typically outlined in collective bargaining agreements, which may include a clause mandating labor subrogation for the employees of the transferring company.

 

Obligations of the Hiring Company

✔️ The company must provide written notification of the subrogation to all its employees.
✔️ A copy of this notification must be sent to the Public Employment Service (SEPE), signed by both the company owner and employee representatives.
✔️ The new company assumes all labor and Social Security obligations that the outgoing company had with the employees.
✔️ If a collective bargaining agreement is in place, the new company must comply with all its clauses for the subrogated workers. This obligation expires when the agreement ends or a new agreement takes effect, in accordance with the European Court of Justice ruling Rec. C-328/2013.

 

Frequently Asked Questions About Labor Subrogation

Can My Working Hours or Salary Be Changed?

When subrogation occurs, your new employer may modify your salary or work schedule for technical or economic reasons. However, any changes must comply with Article 41 of the Workers' Statute and the existing collective bargaining agreement.

✔️ If your salary aligns with what is stipulated in the collective bargaining agreement, it cannot be reduced below that amount.

 

Can I Be Transferred to Another City?

Geographical mobility is one of the employer’s powers. The new employer can decide to:

✔️ Temporarily relocate you (a temporary change of residence).
✔️ Permanently transfer you (a permanent change of residence).

📌 If permanently transferred, you have the right to request termination of your employment with compensation equal to 20 days' pay per year of service.

 

What Happens to My Seniority?

✔️ According to Article 127.2 of the General Social Security Law, the new company is jointly responsible for paying the social benefits earned by workers prior to the business succession.

✔️ The General Collection Regulations establish the new company’s responsibility to contribute to Social Security regimes for employees.

📌 Your seniority will not be affected, as the employment relationship is not terminated—only the employer changes.

 

Am I Entitled to Severance Pay?

📌 Severance pay is only applicable when an employment relationship ends through dismissal or contract expiration.

✔️ Under labor subrogation, you cannot be legally dismissed, as the new company must take on all labor obligations.
✔️ Any outstanding vacation pay, bonuses, or wages must be settled by the outgoing company before subrogation takes place.

Can I Refuse the Subrogation?

📌 No, as an employee, you do not have the authority to oppose the change in employer.

✔️ If you are dissatisfied, your only option is to resign, but this would not entitle you to severance pay or unemployment benefits.

 

What Documents Are Signed During a Subrogation?

✔️ Employees do not sign a new contract during subrogation.
✔️ The only document signed is an informational notice provided by the company.
✔️ No severance agreement is signed, as the employment contract is not terminated.

 

How Is the Subrogation Declared to SEPE?

📌 The company is responsible for handling this procedure through the SEPE’s online portal.

 

Who Pays for Vacation in a Subrogation?

✔️ The outgoing company must reimburse the incoming company for any pending vacation days that workers have not yet taken.

 

What Happens to Extra Pay in a Subrogation?

✔️ According to case law, the new company must honor any extra pay arrangements set by the former employer.
✔️ The new employer cannot modify extra pay agreements in a way that negatively affects the worker.

 

Consequences of Non-Compliance by the Employer

⚠️ If an employer refuses to subrogate employees' rights during a business transfer, workers can:

✔️ Sue for wrongful dismissal.
✔️ Argue that the employment relationship should have continued with the new company.

📌 In such cases, employees retain their right to claim employment continuity with the new employer.

 

Conclusion

If the company you work for is undergoing labor subrogation, you do not need to worry. Legally, your employment rights are protected.

✔️ Your contract will not be terminated.
✔️ The new company is required to maintain all employment relationships.
✔️ Your seniority remains intact.

Understanding your rights can help you navigate the subrogation process with confidence. If you still have questions, consult a labor lawyer or union representative for professional advice.