Latvia

    1.1 In what circumstances does the employee transfer law apply?

    The employee transfer law applies upon the transfer of an undertaking or part of one based on agreement or on another legal basis.

    The law must be interpreted in light of EU law and, the following should be taken into account when considering whether a transfer occurs:

    • the nature of the undertaking;
    • whether tangible or intangible assets transfer;
    • the value of assets upon transfer;
    • whether the new employer takes over most of the employees;
    • whether clients are following the transfer;
    • the nature of the activity before and after the transfer;
    • the period of time for which operations were interrupted.
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    Author: COBALT Latvia

    Date: July 2016

    1.2 Does the employee transfer law apply to (a) a sale of a business or (b) outsourcing?

    (a) Sale of a business

    Each case must be evaluated on its merits, but in general the rules on transfers apply to the sale of businesses, leases, rentals, mergers and acquisitions. In Latvia it is not common to gift businesses because of the tax disadvantages, but in theory the gift of a business would result in the application of the transfer rules.

    (b) Outsourcing

    Whether the transfer rules apply to outsourcing depends on the type of outsourcing involved. If the entire economic unit is outsourced, the transfer rules would apply. For example, if an undertaking decides to outsource an ancillary activity to another undertaking, such as premises cleaning, this may be regarded as a transfer.

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    Author: COBALT Latvia

    Date: July 2016

    1.3 In outline, what are the implications of the employee transfer law?

    If the employee transfer rules apply:

    • The transferred employees retain the pre-transfer terms of employment.
    • After transfer, the transferee continues to apply the collective agreement agreed at the transferor until its expiry, or until a new collective agreement is concluded.
    • Collective agreements cannot be amended to the detriment of employees within one year of the transfer.
    • Before the transfer, the transferor must inform the employee representatives or the employees (if no representatives have been appointed) about the upcoming changes. If economic, technical, organisational or similar measures are planned, the transferor or transferee must consult with the employee representatives.
    • Any claims relating to employment transfer to the transferee and it is the new employer’s responsibility to solve any employment-related issues.
    • The transfer cannot of itself form the basis for termination. However, dismissal, may take place if it is based on economic, technical, organisational, or similar measures.
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    Author: COBALT Latvia

    Date: July 2016

    2.1 Who transfers?

    Employees of the transferred undertaking or the transferred part of an undertaking are protected. This includes seconded or ‘posted’ employees, as long as they have an employment contract with the initial company.

    An employee is a natural person who performs specific work under the guidance of an employer for an agreed salary on the basis of an employment contract. Protection covers all employees irrespective of whether they are on maternity leave or on vacation, etc. Self-employed persons are not considered to be employees and are therefore not covered by the rules. If a Board member has an employment contract, the same provisions apply as for any other employee, unless the Board member is not appointed as a Board member at the transferee.

    There are no distinct legal provisions in relation to situations where only part of a business is transferred.

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    Author: COBALT Latvia

    Date: July 2016

    2.2 Can employees object to transferring?

    Latvian labour law is silent on the right of employees’ to object to a transfer. Based on ECJ case law and the general aim of protecting employees, the law should not be interpreted so as to oblige employees to continue in an employment relationship with the transferee. However, there has been no case law on this point.

    If an employee objects to the transfer, the transferor can terminate the employment on the basis of the need to reduce the number of employees because certain jobs have ceased to exist. In the case of collective redundancy, special rules would apply.

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    Author: COBALT Latvia

    Date: July 2016

    2.3 What happens to terms of employment contracts?

    The rights and obligations of the transferor arising from the employment relationship applicable at the moment of transfer will fully transfer to the transferee.

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    Author: COBALT Latvia

    Date: July 2016

    2.4 What about other employee benefits?

    Rights and obligations relating to benefits fully transfer to the transferee. If the transferee cannot provide a benefit that the transferor used to provide, this will not release it from the obligation to provide it and so it will have to offer an equivalent benefit or compensation. Amendments to existing employment contracts in order to provide for this can be made only with the consent of each employee.

    The employment with the transferor counts as continuous employment with the transferee and if an employee is later dismissed, he or she will be entitled to benefits based on the combined length of service.

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    Author: COBALT Latvia

    Date: July 2016

    2.5 What happens to pension rights?

    If the transferor has been contributing to pension schemes which are supplementary to the state pension schemes, the obligation to make these contributions passes over to the transferee in the same way as any other benefit.

    If the transferee is not able to continue contributing to the existing supplementary scheme, it must offer some equivalent solution or compensation.

    The law does not distinguish between different types of contributions and benefits. The obligation to take over the liabilities in relation to employees applies to all benefits equally.

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    Author: COBALT Latvia

    Date: July 2016

    2.6 What liabilities transfer?

    There are no limitations on the liabilities that pass over to the transferee. Liabilities transfer together with other provisions of the employment contracts. All rights and obligations arising from legal relations in force at the time of the transfer are transferred to the transferee, including any obligations which originated before the transfer took place (remuneration for previous months, etc.). Usually, these issues are covered in the agreement between the transferor and transferee.

    Under Latvian law, an employer as a legal entity cannot be criminally liable towards an employee. If any criminal liability did exist, this would not, in any event, transfer to the transferee.

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    Author: COBALT Latvia

    Date: July 2016

    2.7 Do collective agreements transfer?

    Following the transfer of an undertaking the transferee must continue to comply with the provisions of any collective agreement entered into previously and applicable at the moment of the transfer, up to the expiry of the collective agreement, or until a new collective agreement comes into effect or another collective agreement becomes applicable. The provisions of the collective agreement may not be amended to the detriment of employees for a period of one year from the transfer.

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    Author: COBALT Latvia

    Date: July 2016

    2.8 How does the transferee obtain information on transferring employees?

    The law does not provide for how the transferee should be informed of the number of employees to transfer and their terms and conditions. Nor does it specify any other information that must be communicated to the transferee.

    Nevertheless, there is a general requirement for the transferor to inform the transferee of all rights and obligations transferred to the transferee, as far as they are known or should be known to the transferor at the moment of transfer. However, non-compliance with this provision does not affect either the transfer of rights and obligations to the transferee or any claims of employees against the transferee.

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    Author: COBALT Latvia

    Date: July 2016

    3.1 Can employers make changes to employment contracts?

    The employer cannot unilaterally change employment contracts. After the transfer, the transferee can offer to make any necessary amendments to the employment agreements. If the employees agree, those amendments can be effected. If the employer is making the changes for economic, technical or organisational reasons, refusal to sign agreement to the amendments will result in termination of the employment contract. Termination of this kind cannot be done solely as a result of the transfer itself.

    The transferor has a duty to inform the transferee of all rights and obligations transferring to the transferee of which it knows (or should have known) at the moment of transfer. Therefore, the new employer should be aware of all terms and conditions of employment contracts prior to the transfer.

    If the amendments to the employment contract place the employee in a worse position than that provided by law, they will be void. If employees are pressurised consent to detrimental terms and conditions, the general provisions of Latvian civil law would apply and the terms and conditions may be declared void by a court if the employee proves that he or she was pressurised into agreeing to them.

    If the new employer wishes to harmonise the terms and conditions of employees working in similar positions, it may draft amendments to the employment contracts and as long as the changes can be made within the normal course of business and are not done solely by reason of the transfer itself, the changes can be made.

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    Author: COBALT Latvia

    Date: July 2016

    3.2 When can employers safely dismiss employees before or after a transfer?

    The transfer of an undertaking does not restrict the right of an employer to give notice of termination of an employment contract if the notice is based on economic, technical, organisational or similar measures. These measures may be effected in the undertaking within the course of its normal business, but the law makes it clear that the transfer itself cannot be the reason for dismissal.

    It is entirely within the competence of the employer to determine if an undertaking needs any economic, technical, organisational or similar changes. If changes are needed, the employer may need to dismiss employees. The law does not specify any time period following a transfer after which it is safe to dismiss. Case law provides that all economic, technical, organisational and similar measures are within the competence of the company’s management and not a matter for the court. The courts will therefore not evaluate the merits of these decisions.

    Notice of termination may also be given by the transferor after an employee has objected to the transfer. Again, this must be based on economic, technical, organisational or similar changes.  

    When a legitimate dismissal takes place, the law provides for dismissal compensation. The amount of this depends on the time worked with the company and thus may vary from one month’s salary for employees who have worked up to five years with the employer and four month’s salary for employees who have worked more than 20 years with the employer.

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    Author: COBALT Latvia

    Date: July 2016

    4.1 Who must employers consult?

    Both the transferor and transferee must consult employee representatives. Consultations must be performed with the trade union(s) and/or with elected employee representatives. If employees are not represented by any trade union and employee representatives have not been elected, there is no obligation to consult with individual employees. However, in order to avoid disputes, it is advisable to do so.

    Employee representatives may be elected if the organisation employs five or more employees. Representatives are elected for a specified term by a simple majority vote at a meeting in which at least half the employees employed by the organisation participate.

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    Author: COBALT Latvia

    Date: July 2016

    4.2	What information must they provide?

    Information must be provided regarding:

    • the date of transfer or expected date of transfer;
    • the reasons for the transfer;
    • the legal, economic and social consequences of the transfer;
    • measures which will be taken with respect to employees.

    The transferor must provide the information to the employee representatives at least one month before the transfer. The transferee must provide the information to the employee representatives at least one month before the transfer starts to directly affect employment conditions. If there are no employee representatives, the information must be provided to each individual employee.

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    Author: COBALT Latvia

    Date: July 2016

    4.3	What does consultation involve?

    The duty to consult arises only if the employer envisages taking measures in relation to employees. If no measures are envisaged, the obligation is merely to provide information.

    There is no guidance about consultations. Normally, they involve discussion with the employees of the measures to be taken. Usually, minutes of meetings would be kept. The aim is to reach agreement on the measures and their implementation.

    The law is silent about what happens if there is no agreement. However, we would not expect any consequences to flow from this, as employees have no legal right to object to the transfer.

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    Author: COBALT Latvia

    Date: July 2016

    4.4	How long does consultation last?

    The transferor or transferee, whichever intends to take measures with respect to employees, must begin consultation on these measures with employee representatives at least three weeks before the transfer takes place in order to reach agreement on the measures and their implementation. The information and consultation period is normally one month.

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    Author: COBALT Latvia

    Date: July 2016

    4.5	What happens if an employer fails properly to inform or consult?

    A collective agreement may contain consequences for breaches of the information and consultation obligations and may provide employees with grounds to file claims with the court.

    Employees would probably be able to claim compensation from the transferor. In the case of implementation of organisational, technological or social measures without proper consultation, the measures might be declared void by the court. The amount of compensation would vary in each case.

    The State Labour Inspection may investigate alleged breaches and impose an administrative fine of EUR 70 to 1,100 on the employer. There is no criminal liability for such failures.

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    Author: COBALT Latvia

    Date: July 2016

    5.1	Identify up to three issues in this country of which employers should be aware?

    Latvian law requires an employment contract to be executed in writing, but under ECJ case law, no written agreement between the transferee and employee is required when a transfer takes place.

    Nevertheless, in the absence of case law, the prevailing practice is to execute a three-party document by which the transferor assigns all rights and obligations under the employment contract to the transferee and the employee accepts the transferee as the new employer. The primary reason for this approach is the novelty of transfers and the concern of those involved that the transfer may create ambiguity about the employment relationship.

    Until the public becomes familiar with the concept and case law appears, it will be unclear whether transfers made without novation will cause problems (e.g. how the tax authorities and State Labour Inspection would treat situations where there is no contract between the transferee and employee to demonstrate an employment relationship).

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    Author: COBALT Latvia

    Date: July 2016

    5.2	Would the employee transfer law apply on a cross-border transfer into or out of this country?

    The law does not contain any specific provisions regarding cases where undertakings are transferred into or out of Latvia. However, there are no provisions that would restrict its applicability in the case of a cross-border transfer.

    Presumably, in cases of transfer into Latvia the Labour Law would apply in relation to the transferee, and in cases of transfer out of Latvia, it would apply to the transferor. Of course this presents a number of practical problems, e.g. the need for Latvian employees to make any claims against a foreign company and vice versa. However, there is no case law on these issues, and so it is not possible to know how they might be treated.

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    Author: COBALT Latvia

    Date: July 2016

    6.1	What are the main national laws protecting employees upon transfers of businesses?

    The main national law, which sets forth provisions in relation to transfers of undertakings, is the Labour Law, effective as of 1 June 2002.

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    Author: COBALT Latvia

    Date: July 2016

     

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