Exemption from direct transfer of surplus employees in the event of bankruptcy of the transferor

Court of Cassation, Order No 24691 of 14 September 2021

«In the hypothesis of transfer of a business, for the purposes of the operation of the effects provided for by Article 47, paragraph 5, of Law No. 428 of 1990 (exclusion of surplus workers from the transfer to the transferee), in case of transfer of undertakings or parts of undertakings whose transferor is subject to bankruptcy proceedings, the requirement of the cessation of the business activity, which is constitutive of it, does not apply, to be referred exclusively to the extraordinary administration proceedings.»
This is the principle of law laid down by the Supreme Court of Cassation in the order no. 24691 of 14 September 2021.
In the present case, the transferor company had been declared bankrupt but the local public service it provided had never been interrupted (the transferor and the transferee had first entered into a business lease agreement and then a transfer of a branch of business between the same parties). On the basis of this assumption, i.e. the lack of interruption of service, the Court of Appeal held that the employees of the transferor should be considered transferred to the transferee company, and that Article 2112 of the Civil Code should be applied, since the requirements of Article 47, paragraph 5, of Law no. 428 of 1990 for derogating from the rules requiring continuity of employment relationships could not be considered to be met. According to the Court of Appeal, Article 47, paragraph 5, should be interpreted as meaning that, even in the event of a declaration of bankruptcy, the activity should not be continued.
The Court of Cassation, in the order under review, set aside the decision of the Court of Appeal.
The Supreme Court points out first of all that the protections afforded to employees in the event of the transfer of an undertaking by Articles 3 and 4 of Directive 2001/23/EC “are inapplicable if three requirements are met, namely: in cases where the transferring undertaking is subject to bankruptcy proceedings or similar insolvency proceedings where the proceedings have been opened in order to liquidate the assets of the transferor, provided that such proceedings are conducted under the supervision of a competent public authority”.
And so, continues the Supreme Courtconsistently with the legislation of Community sources and domestic law, the bankruptcy proceedings concerning the transferring companies fall fully (and indeed primarily) within the scope of L. No. 428 of 1990, art. 47, paragraph 5 (and, correspondingly, in paragraph 1 of art., 5 of Directive 2001/23/EC) since they are ontologically and exclusively preordained to the liquidation of the company declared bankrupt, representing – any segments of the continuation of the entrepreneurial activity, such as the rental or sale of the branch of business – only instruments oriented to a liquidation function, aimed at preserving the goodwill value on the market to increase as much as possible the business compendium for distribution to creditorsIn the context of bankruptcy proceedings, the Court continues, any continuation of the undertaking is aimed at the exclusive liquidation of the assets.
Therefore,in the context of Article 47, paragraph 5, of Law No. 428/90, in the event of transfer of undertakings or parts of undertakings whose transferor is subject to bankruptcy or similar insolvency proceedings opened for the purpose of liquidation of the assets of the transferor, the general principle is (for employees transferred to the assignee’s employment) the exclusion of the protections provided for by Article 2112 of the Civil Code, unless the agreement provides for more favorable conditions (the rule is therefore the inapplicability, subject to exceptions); on the contrary, in the context of insolvency proceedings opened against the transferor which do not have as their purpose the liquidation of assets, paragraph 4-bis provides, as a rule, the application of Article 2112 of the Civil Code, and, therefore, the agreement with the trade unions does not allow to affect the continuity of the employment relationship but may concern only the “working conditions”, in the context of an employment relationship however transferred”.
An essential condition for the exclusion of the scope of application of Article 2112 Civil Code is therefore, according to the Court of Cassation, the absence of continuation of the activity or its limitation to the mere liquidation of assets. 
In the light of the above, the Supreme Court upheld the appeal of the transferee company, stating that it had no obligation to rehire the employees of the transferor company declared bankrupt.