When a company transfers a contract and the new contractor takes over operations—and the majority of the workforce—it's not appropriate to sever the employment relationship with a rushed redundancy procedure. The transfer doesn't erase what came before. It simply continues it.
The Supreme Court, in its judgment of March 5, 2025 (Rec. 4728/2023), gives a resounding lesson on the limits of collective dismissal when it occurs on the eve of a succession of contracts.
This is no small matter: it affects one of the most emblematic tourist destinations in southern Spain—the Caminito del Rey—but its significance extends far beyond the local area. It sets a precedent for a practice that is becoming increasingly common in sectors where service provision relies heavily on manual labor. Let's see why.
The background: when continuity of service and staff reveals an "economic unity"
Just two days before the new contractor was to take over the concession, the previous company implemented a collective dismissal due to the loss of the contract, agreed upon with its sole employee representative. However, the incoming company not only acquired equipment but also hired most of the staff who had previously been working there.
For the Supreme Court, this combination of facts leaves no room for doubt: we are dealing with a textbook case of business succession, according to the terms of Article 44 of the Workers' Statute and Directive 2001/23/EC. What is being transferred is not just a contract award: it is an economic entity with a maintained identity, structured around the functional, organizational, and human continuity of the service.
The legal key: the collective dismissal procedure does not eliminate the obligation to take over the contract
The ruling reiterates that the rules governing the transfer of businesses are mandatory. They cannot be overridden by the transferor's will, by agreements between the parties, or even by decisions made by employee representatives, if these distort their essential purpose: to protect the worker in the event of a change of employer.
The Supreme Court warns of the fraudulent use of collective dismissals as a barrier to the transfer of employees. If an outgoing company is allowed to terminate contracts just before the handover—citing the loss of the contract as the sole reason—the "effectiveness" of the Directive is neutralized; that is, the continuity of employment guaranteed by law.
In this context, dismissal does not extinguish the employee's right to claim continued employment with the acquiring company. The ruling states that the contrary would open the door for any transferee to circumvent its subrogation obligation through timely dismissal.
Established doctrine
- In sectors where activity is mainly supported by the workforce, if the activity is transferred and an essential core of workers is maintained, there is a transfer of business.
- Collective dismissal cannot be used as an excuse to prevent the transfer of employment. Simply alleging loss of contract is insufficient; it is necessary to prove production-related or technical reasons unrelated to the mere termination of the administrative contract.
- The assignee must bear the consequences of the breach, even if the dismissal was carried out by the assignor. The liability can be direct.
Finally, it should be noted that the Supreme Court annulled the decision of the High Court of Justice of Andalusia (Malaga headquarters), which had acquitted the incoming company, and restored the finality of the resolution of the Social Court of Malaga, which had classified the dismissals as unfair and condemned the new contractor to reinstate or compensate the workers.
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A Àmbit Assessor, SL has 40 years dedicated to the tax, comptable and labor consultancy of the Pime.
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