Consult before you act

A company managed 20 hotels in Spain but sold 13 to other companies. The company asked its employees if anyone was interested in being employed by the new company. Nine employees chose to accept this offer. The employees kept their seniority, position and salary in the new company. Two of the company’s other employees resigned a month later.

Later on, nine of the remaining employees were terminated due to restructuring. The question was whether the company should have initiated a mass redundancy procedure - both for the employees who voluntarily transferred to the other company and those who were terminated.

Obligation to consult earlier

The European Court of Justice ruled that the company should have initiated consultations under the rules on mass redundancies when they chose to sell the hotels.

The Court emphasised that the company had to expect to terminate several employees after selling that many hotels. The purpose of the voluntary resignations was to avoid further terminations.

IUNO’s opinion

The case confirms that companies should follow the procedure for mass redundancies as soon as a mass redundancy is likely to occur — not only when they are sure of the number of people to terminate. The right time will always depend on the specific circumstances.

IUNO recommends that companies are aware that the obligation to follow the special process can also arise if there is a risk of terminations. For example, when the company notifies material changes in terms and conditions, where the alternative would be to terminate a large number of employees.

[The European Court of Justice’s ruling of 22 February 2024 in case C-589-22]