Section 613a BGB: What Happens to Employees in a Business Transfer

Anyone selling a business as a going concern in Germany sells the workforce with it — whether they intend to or not. Section 613a of the Bürgerliches Gesetzbuch (§ 613a BGB, the German Civil Code) transfers contracts of employment to the acquirer automatically, with all rights and obligations attached.

For owners running an actual process, our approach to selling your company sets out how the mandate works.

This is not a formality to be left to the lawyers. The provision helps decide whether a transaction is structured as an asset deal or a share deal, and a poorly drafted employee notification can come back years after closing. What follows covers the German employment-law dimension. It is orientation, not legal advice.

When § 613a applies at all

The provision presupposes a business transfer: a business or part of a business passes to a new owner by legal transaction, and the economic entity retains its identity in the process. What matters is not the wording of the contract but what actually moves across — staff, customers, operating assets, know-how.

That sets the switch. In an asset deal, where the buyer acquires the assets themselves, a business transfer will almost always be present. In a share deal, where only the shares change hands, it will not: the employer remains the same legal person, and only its ownership changes.

This is one reason succession transactions involving corporations are predominantly structured as share sales — the detail is set out under selling a GmbH. Which route fits overall is covered in asset deal or share deal.

What transfers

The acquirer steps into the existing employment relationships exactly as they stand. Length of service, remuneration, holiday entitlement, occupational pension commitments, bonus arrangements — everything continues. The buyer cannot pick and choose employees, nor unilaterally adjust terms.

Collective agreements (Tarifverträge) and works agreements (Betriebsvereinbarungen) follow a special rule. Where they do not already apply at the acquirer in their own right, their provisions become terms of the individual contracts of employment. They may then not be amended to the employees' detriment for one year. This standstill period is why buyers frequently postpone planned restructuring until the first year has run.

A dismissal because of the business transfer is void. Dismissals on other grounds remain possible — although the burden of showing that there were other grounds then sits with the employer.

The duty to inform: where it goes wrong

Before the transfer, the affected employees must be informed in text form — of the date, the reason, the legal, economic and social consequences, and the measures envisaged. Either the outgoing employer or the acquirer may do it; who takes it on is a matter for negotiation, whether it is done correctly is not.

This is where the real risk sits. The case law sets a high bar for this notification: it must be complete, comprehensible and legally accurate. A letter that describes the consequences only superficially, or misstates the legal position, is not a proper notification.

And then the following happens. The one-month objection period does not start to run at all. An employee can still object to the transfer months or years later — and retrospectively lands back with the seller, who has long since had no work to give them. That is precisely why the notification letter is lawyers' work in practice, and not a mail merge out of the HR department.

The right to object and its consequences

Within one month of proper notification, any employee may object in writing to the transfer of their employment relationship. If they do, they remain with the previous employer — where, after the sale of the business, there is frequently no job left.

For the seller this is a twofold risk. If individual key performers object, the buyer loses precisely the substance it paid for, which triggers renegotiation or purchase price adjustments. If many object, obligations remain behind with the seller that it can neither fulfil nor simply bring to an end.

In practice this means communication with the workforce is part of transaction planning, not its aftermath. Let word of the handover spread too early and you unsettle people; prepare it badly and you invite objections. How confidentiality can be managed through a process is described in NDAs and confidentiality in a company sale.

What this means for deal structure

Buyers often prefer the asset deal for depreciation and liability reasons, sellers almost always prefer the share deal for tax reasons. Section 613a shifts that balance: in an asset deal the buyer takes on the workforce together with their entitlements and carries the objection risk, whereas in a share deal the question does not arise.

In labour-intensive businesses — trades, care, logistics, facility services — this is frequently the argument that settles the structure. In a business whose value sits predominantly in machinery and contracts, it weighs less.

The question belongs at the start of the transaction, not in the negotiation of the sale and purchase agreement. It affects price, timetable and the order in which conversations happen at all. What your business is actually worth is established by a company valuation.

And in Austria?

The substance is the same, the statute is a different one: in Austria, the Arbeitsvertragsrechts-Anpassungsgesetz (AVRAG, the Austrian act adapting employment contract law) governs business transfers. There too, the acquirer steps into the employment relationships.

FAQ

Can I still dismiss employees before the sale?

Not because of the transfer — such dismissals are void. Dismissals on operational, personal or conduct-related grounds remain possible, but the proximity in time to the sale creates pressure to justify them. Anyone wanting to adjust the staffing structure should do so long before the process starts.

Does the works council have to be involved?

The works council has no right of veto over the transfer itself. Where an economic committee (Wirtschaftsausschuss) exists, it must be informed; where the transfer results in an operational change, a reconciliation of interests and a social plan are added. This belongs in the timetable, because it can cost weeks.

Does § 613a also apply to the sale of part of a business?

Yes. The transfer of a separable part of a business also triggers the provision, provided the economic entity retains its identity. In carve-outs this is the central question — the detail is set out under carve-out.

Who has to issue the notification, the seller or the buyer?

Either the outgoing employer or the acquirer may do it. Which of them takes it on is a matter for negotiation between the parties; that it is done completely, comprehensibly and accurately is not negotiable.

What happens if the notification is defective?

The one-month objection period never begins. Employees can then still object to the transfer months or years afterwards and revert retrospectively to the seller — which is why the letter is drafted by lawyers rather than assembled in-house.

Does a share deal avoid all of this?

Yes, in the sense that § 613a is not triggered. The employer remains the same legal person and only its ownership changes, so there is no transfer of employment relationships and no right to object.

Can the buyer change terms and conditions after the transfer?

Not unilaterally. The acquirer takes the employment relationships as they stand. Where collective and works agreement provisions have become terms of the individual contracts, they may not be amended to the employees' detriment for one year.

Selling a business is the most important transaction of an entrepreneurial life. Take independent, discreet advice — IGCP Capital Partners. → igcp.at