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Dispute on a transfer of a portion of business as a going concern

Updated: May 14, 2021

By judgment handed down with the court chancery on March 29, 2021, the labor court of Rome, as first instance judge, ruled, once again, on the issue concerning the transfer of business as a going concern (“cessione di azienda” in the Italian parlance).

The dispute involved a group of employees, working at the credit recovery department of the transferor, who, as a consequence of the transfer of a portion of business as a going concern (“cessione di ramo di azienda” in the Italian parlance), were transferred to the transferee.

The transferred employees challenged the transfer claiming that no transfer of a portion of business as a going concerned actually occurred in the circumstance.

Notion of the transfer of a portion of business as a going concern

The court clarified the notion of the portion of business as a going concern specifying that, in order to apply article 2112 of the Italian Civil Code which regulates the transfer of a business, or a portion of business, as a going concern it is necessary that (i) the object of the transfer be an autonomous production unit, i.e., a "micro-company" and (ii) such production unit be preexistent to the transfer. More specifically, the functional autonomy of the transferred business portion implies the capacity of such portion, already at the time of the transfer, to provide for a productive purpose with its own means and therefore to carry out, independently from the transferor and without significant support by the transferee, the activity which was carried as a business portion of the transferor.

In other words, the court reached the conclusion that a business portion made up of personnel who had to and must necessarily refer to what remained at the transferring company in order to continue their work (like in the case of the instant dispute) does not allow the transferred business to be classified as functionally autonomous. All of this is in violation of art. 2112 of the Italian Civil Code.

The court decision

In conclusion, considering that the concerned transfer involved only and exclusively uncoordinated fractions of a business, the court, in accordance with the consolidated position of the Supreme Court, found the transfer unlawful and, as a consequence, ordered the transferor to reinstate the transferred employees in their previous job positions, thus re-establishing the pre-existing employment relationship with the transferor.

Avv. Guido Brocchieri

This article is not a legal advice, but it has an informative function only. For personalized legal advice, contact us by e-mail or by phone +39 06 916505710. © Dong & Partners International Law Firm, All rights reserved

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