Employee Rights During Employment Contract Transfer in the Philippines

This practical explainer is for private-sector employees in the Philippines. It covers what happens to your job, pay, benefits, and data when your employment is “transferred” because of a sale, merger, outsourcing, or internal reorganization. It summarizes core rules under the Labor Code (as renumbered), related issuances, and typical Supreme Court doctrines—without case citations—so you can quickly understand your rights and next steps. It is not legal advice.

1) First principles

Security of tenure. You can be removed only for just causes (misconduct, etc.) or authorized causes (redundancy, retrenchment, closure, disease), following legal procedure. A change in company ownership by itself is not a valid ground to fire you.
No automatic transfer of employment. Unlike “TUPE” regimes in some countries, PH law does not automatically move your employment contract to a new employer when assets or a business are sold. Whether you stay, separate with pay, or are rehired depends on the type of transaction and the choices of the parties (and you).
Non-diminution of benefits. An employer cannot withdraw or reduce benefits you’ve been regularly enjoying (by contract, policy, or long practice) unless allowed by law.
Consent matters. An employment contract is a personal contract: it cannot be assigned to a different employer without your consent. You may of course agree to be hired by the buyer/contractor on new terms.

2) What kind of “transfer” is happening?

A. Stock sale / change in shareholders

Your employer (the corporation) does not change—only its owners do.
Effect: Your employment continues seamlessly; no separation pay is due just because shares changed hands. Existing policies and CBAs remain binding on the same employer.
The company may still later restructure, but then it must meet the usual legal standards (authorized cause, notice, separation pay, etc.).

B. Asset sale / sale of business (going concern)

The seller may close or cease operations (in whole or part) and sell assets to a buyer.
The buyer is not obliged to absorb employees (unless it contractually agreed to). If the seller closes not due to serious business losses, employees are entitled to separation pay (see §4).
If the buyer chooses to rehire you, that is new employment (fresh contract). Parties may agree to “bridge” prior service for benefits, but that’s by agreement, not by default.

C. Merger or consolidation

The surviving/ resulting corporation becomes the employer. Successor may retain employees or implement authorized-cause terminations (with notice + separation pay). Existing CBAs may continue if the employer entity persists; otherwise, assumption depends on agreements and good-faith continuity.

D. Outsourcing / contracting out

Your employer may outsource a function to a legitimate contractor. If your own employer terminates your role because of redundancy or closure of the department, the usual authorized-cause rules apply (notice + separation pay). If you are offered a role with the contractor, that is new employment; you are free to decline.
Labor-only contracting is prohibited; principal employers can be held liable if the “contractor” is merely supplying labor without substantial capital or control.

E. Secondment to an affiliate

You remain employed by your original employer but are assigned to render services elsewhere. Consent and a clear secondment agreement are best practice. Pay and core benefits must not be diminished.

3) Can your employer “transfer” you without consent?

Intra-company transfer (same employer): Management may transfer you to another role/location if there is no demotion, no pay cut, and no bad faith. You should be qualified and the move should be reasonable.
Inter-company transfer (different employer): No. Your contract cannot be “assigned” to another employer without your express consent. You may be asked to sign a new contract; you can negotiate or refuse.

4) Separation pay when roles are cut because of a transfer

If you are terminated for an authorized cause related to a transfer (e.g., redundancy due to reorganization, or closure/cessation):

Redundancy or installation of labor-saving devices → Separation pay = at least 1 month pay per year of service (or a minimum of 1 month, whichever is higher).
Retrenchment to prevent losses or closure/cessation not due to serious losses → Separation pay = at least 1/2 month pay per year of service (or a minimum of 1 month, whichever is higher).
Disease (not typically transfer-driven, but included for completeness) → Separation pay = at least 1/2 month pay per year of service.

Counting rule: A fraction of 6 months or more counts as one full year.

Serious losses: If the employer proves bona fide closure due to serious financial losses, separation pay may not be legally required, but 30-day prior notice to employees and DOLE is still the standard.

5) Mandatory procedure (authorized-cause terminations)

Written notice to you and to DOLE at least 30 days before the effective date.
Fair selection (for redundancy): objective, reasonable criteria (e.g., efficiency, qualifications, seniority) applied in good faith.
Separation pay released on or before separation; final pay (including prorated 13th month and monetized unused Service Incentive Leave) should be released within 30 days from separation under DOLE guidance.
Certificate of Employment (COE) must be issued within a few days upon request (commonly 3 days under DOLE advisories).
Quitclaims: Often requested upon release of benefits. Valid only if voluntary, for a reasonable amount, and without fraud/coercion. Unconscionable quitclaims may be set aside.

6) If you’re absorbed or rehired by the buyer/contractor

This is a new employment relationship unless explicitly structured otherwise.
The new employer must meet statutory minimums (wage orders, leave, 13th month, SSS/PhilHealth/Pag-IBIG).
Bridging of service (recognizing prior tenure for leave accruals, retirement, etc.) is negotiable, not automatic. Get it in writing.
Existing non-compete/confidentiality obligations to the old employer generally continue; you may also sign new ones.

7) Your money and benefits

Prorated 13th month pay: You’re entitled up to your last day of employment with the old employer; if rehired, the new employer computes separately for your new service.
Service Incentive Leave (SIL): Unused SIL must be paid in cash at separation (if your employer grants SIL under the law/policy).
Tax treatment: Separation pay due to causes beyond your control (redundancy, retrenchment, closure, disease) is generally income tax-exempt under the National Internal Revenue Code. 13th month and other benefits are tax-exempt up to the statutory ceiling (TRAIN rules).
Government benefits: If involuntarily separated for authorized causes, you may qualify for SSS Unemployment Benefit (also called involuntary separation benefit)—subject to eligibility rules (e.g., not for just-cause separations; claim within 1 year; limited frequency).

8) Union and CBA considerations

Stock sale: The employer entity is the same; the CBA remains binding until expiry, and the union’s legal personality continues.
Asset sale: The buyer is a different employer; it is not automatically bound by the seller’s CBA unless it expressly assumes it or continuity doctrines apply (e.g., it hires substantially the same workforce and operations in good faith). Union and recognition issues may need bargaining anew.
Closure: Employees separated due to closure receive separation pay (unless serious losses are proven). The union may still pursue money claims (wages/benefits) against the closing employer.

9) Data privacy and your HR files

Your personal data (201 file, payroll info, health records) are protected by the Data Privacy Act.
When transferring HR data to a different legal entity, the parties should have a Data Sharing Agreement or equivalent safeguards, give privacy notices, and collect/process only what’s necessary.
You have data subject rights (access, correction, objection, portability, etc.). Ask how your data will be handled post-transfer.

10) Successor liability: who pays old claims?

General rule (asset sale): The buyer is not automatically liable for the seller’s past labor obligations unless it expressly assumes them, the law says so, or the transaction is in bad faith (e.g., designed to defeat workers’ claims), in which case courts can impose liability (including piercing the corporate veil).
Stock sale: Same employer; the company remains liable for its obligations regardless of new owners.

11) Special situations and FAQs

Probationary employees: Still entitled to authorized-cause separation pay if affected by redundancy/closure.
Project/seasonal employees: Separation pay rules depend on cause and contract; pure project completion isn’t redundancy.
Maternity/Paternity: Statutory benefits are tied to eligibility/contributions. If separated mid-pregnancy, SSS maternity benefit may still be claimable; employer’s salary differential obligation ends with employment unless otherwise provided.
Refusing a transfer to a new employer: You can decline. If your original role is eliminated, you may be separated with proper pay and notice.
Immediate closure: Employers should give 30-day notice; when operationally impossible, they typically pay in lieu and still file the DOLE termination report.
Relocation to a distant site: Intra-company relocations must be reasonable and in good faith; otherwise they may be constructive dismissal.

12) What to do if your employer is transferring contracts

Ask for clarity in writing. What transaction is happening? Who is the employer on Day 1 after closing?
Check the proposed terms. If being rehired, review title, pay, benefits, bridging of service, seniority, and probation status.
Compute your separation package. Use the formulae in §4; include prorated 13th month and SIL cashout; check tax treatment.
Mind the timelines. Look for the 30-day notice and ensure final pay within 30 days from separation; request your COE promptly.
Protect your data. Ask how your HR records will be shared and safeguarded.
Union/CBA? Engage your union for bargaining/transition issues.
Seek help if needed. Start with DOLE Single-Entry Approach (SEnA) for quick conciliation; pursue NLRC complaints if rights are violated.

13) Employer compliance checklist (quick view)

Identify the transaction type (stock vs asset vs outsourcing).
Decide on absorption vs separation; negotiate assumptions of liabilities if needed.
Serve 30-day written notices to employees and DOLE; file the DOLE termination report.
Apply fair redundancy criteria where applicable.
Compute and release separation pay, final pay, 13th month, SIL within legal timelines.
Issue COEs upon request.
Execute data-sharing arrangements and privacy notices.
For absorptions: provide new contracts, ensure statutory compliance, and clarify bridging of service in writing.
Address union/CBA continuity or new bargaining as needed.

14) Key takeaways

In the Philippines, employment does not automatically transfer to a buyer/contractor.
Stock sale: employment continues, no separation pay just for the sale.
Asset sale/outsourcing: no duty to absorb; if roles are cut, employees get notice + separation pay (except in proven serious losses).
Consent is crucial for any move to a different employer; benefits can’t be arbitrarily reduced.
Always get offers and bridging commitments in writing, and watch the final-pay timeline.

If you want, I can turn this into a one-pager checklist or draft a “bridging of service” clause and a transfer consent letter you can use during negotiations.