Transfer of business and immigration law – Necessary considerations for employers

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published on 11 January 2024 | reading time approx. 3 mintutes

 

There are many legal issues to consider when transferring companies – immigration law is usually not perceived as a major problem. However, employers are well advised to at least consider the issue of "immigration law" in the event of takeovers or changes of name of their company if they employ third-country nationals in Germany, as certain changes may give rise to legal requirements under immigration law.

 


 

Developments in recent years 

For many years, there was a lack of clarity in immigration law as to the extent to which employees whose residence permit was limited to a specific occupation and/or a specific employer could continue to work without prior permission from the immigration authorities in the event of a transfer of business, change of name or change of legal form of the employer. Opinions differed among the immigration authorities and in the literature. There was no clear regulation. 
 
In any case, a large proportion of those involved were of the opinion that, according to the legal situation at the time, employees with a restricted residence permit were only allowed to work for the "new" employer if this was explicitly authorised by the foreigners authority. In practice, this meant that an employee whose rights and obligations had been transferred to the new employer in accordance with Section 613a of the German Civil Code (BGB) could not immediately work for the new employer because his or her residence permit did not allow him or her to do so. 
 

Changes due to the Immigration of Skilled Workers Act in March 2020

Accordingly, Section 4a para. 3 sentence 5 of the Residence Act was included in the Residence Act as part of the (first) Skilled Immigration Act in March 2020. 
 
According to Section 4a (3) sentences 1-4 of the Residence Act, every residence permit must indicate whether the pursuit of gainful employment is permitted and whether it is subject to restrictions. Furthermore, any restrictions imposed by the Federal Employment Agency on the pursuit of gainful employment must be included in the residence permit. An approval is required to change a restriction in the residence permit. If a residence title has been issued for the purpose of exercising a specific occupation, the exercise of other gainful employment is prohibited as long as and to the extent that the competent authority has not approved the exercise of the other gainful employment. However, Section 4a para. 3 sentence 5 of the Residence Act provides for a relaxation in cases where the employer changes as a result of a transfer of business pursuant to Section 613a of the German Civil Code (BGB) or changes its legal form as a result of a change of legal form. Explicit permission to take up employment with the "new" employer is not to be required. This means that the third-country national can now transfer without any problems under labour law and immediately continue the relevant employment.
 

Reporting obligation – yes or no?

While Section 4a para. 3 sentence 5 of the Residence Act provides clarity with regard to the obligation to obtain a permit, the obligation to notify the foreigners authority is not regulated. However, the application notes of the Federal Ministry of the Interior on the Skilled Immigration Act assume that the authorities must be provided with evidence of the transfer of the business. Accordingly, such notifications can be useful, also in terms of legal certainty, especially in the event of changes in the name of the employer or the designation of the job title, if only to avoid confusion in the event of a possible extension of the residence permit.
 

Other pitfalls

Notification obligations may also arise for both the employer and the employee, if the third-country national employee refuses the transfer and the employment relationship is terminated prematurely. This depends on the type of residence permit held by the employee.
 
It should also be noted that changes in working conditions as part of the transfer of the business may also result in the need to take action under residence law.
 
Finally, it should be noted that the practice of different immigration authorities in dealing with immigration issues in the context of business transfers varies considerably. While some authorities already indicate on their websites that they do not consider a notification to be necessary, others expect proof of the transfer of the employer. For example, the letter from the former employer or the new owner informing the foreigner of the transfer of business, merger, demerger or transfer of assets in accordance with Section 613 a (5) of the German Civil Code (BGB) may be regarded as suitable evidence. 
 

Conclusion

Although the provisions of the FEG 2020 have made it easier and clearer for employers to authorise the continued employment of foreign nationals in the event of a transfer of business, it is still advisable to consider residence law issues in the context of takeovers, mergers and spin-offs and, if necessary, to arrange for appropriate notifications and adjustments to be made to the authorities.

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