When a business is sold, merged or leased: who still owes the workers?
An investor buys a going restaurant in Karrada with its staff. Two companies merge. A factory owner leases the plant to someone else for five years. In each of those deals the workers ask the office of lawyer Ali Barakat in Baghdad, al-Yarmouk: have our contracts ended? Who pays the wages already late? And the buyer asks: do I inherit the seller’s debts to the staff? The answer sits in a single article of Labour Law No. 37 of 2015, published in the Official Gazette, issue 4386 of 9/11/2015 — article 50 — read with article 156 on the collective agreement.
Which deals fall under article 50
The text is not limited to a sale. It covers six forms: a merger of the project, a transfer of ownership to the heirs, an assignment to a third party, a sale, a lease, and an investment, of all or any part of the project (art. 50). Leasing a single production line in a factory therefore falls under the rule in the same way as selling the factory as a whole.
A merger joins two projects into one entity. A transfer to heirs follows the employer’s death. Assignment and sale pass ownership to a third party. A lease or an investment places the project, or part of it, in the hands of a new operator without erasing the workers’ connection to the project. In all six forms the worker’s service remains continuous; it is not restarted from zero with the new owner, because what had accrued from the earlier service remains standing.
What lands on the new owner
The new employer becomes responsible for fulfilling the obligations that rested on the previous employer towards the workers under the Labour Law (art. 50). The worker may therefore claim from the new owner delayed wages, leave that has been earned, the end-of-service gratuity where it is due, and what arises from the individual employment contract or a collective agreement. Social-security contributions, where Law No. 18 of 2023 on workers’ pensions and social security applies, fall within the same reading.
What stays with the previous owner
The seller, the lessor or the merged company does not drop out of the picture. For obligations that arose from employment relationships already in place, and that had accrued on the previous employer up to the moment of the transfer, the previous employer and the new one remain liable together, jointly and severally (art. 50). The worker may claim from either of them what had become due before the date of the transfer. An allocation of that burden between buyer and seller takes effect between those two; it cannot be raised against the worker so as to turn the worker away from claiming against either side.
What the transfer itself does not do
The contracts do not end. A transfer is not one of the grounds for ending or terminating a contract in article 43. Anyone who wishes to end a contract after the deal must rest on a statutory ground and follow the procedure, as set out in ending an employment contract.
A project-level collective agreement does not fall away. A collective agreement made at the level of the project continues even when ownership of that project — or of a part of it — passes to someone new (art. 156, second paragraph). It comes to an end only in the cases listed in the first paragraph of the same article, including agreement of the parties, a fixed term running out, termination on ninety days’ notice after three years in the cases the text describes, and the project being shut if the agreement was made at that level. The survival of the collective agreement with the new owner meets the survival of individual obligations in article 50, without either rule replacing the other.
What the office asks a buyer to gather before signing
- A list of the workers, their contracts, their wages, their leave balances and their periods of service, because what accrued from earlier service remains standing after the purchase.
- The establishment’s position with the Workers’ Pension and Social Security Department. Clearance when an establishment is disposed of is a separate rule, explained in the employer’s social-security duties.
- A clause in the sale contract allocating, as between buyer and seller, what accrued before the transfer, knowing that the clause does not stop the worker from claiming against either of them.
For a worker in the transferred business. Keep what proves the date of hiring and the wage before the deal; that is the basis for calculating rights with the new owner.
Two situations that follow a different rule
Entrusting part of the work to a subcontractor under the same working conditions is a different rule, in article 12, set out in wages and social security of subcontractor workers. Moving a worker from one site to another with the same employer is the subject of transfer, secondment, or a change of a worker’s workplace.
The office reads this framework from Baghdad and can be reached on +964 770 848 7526. The file may ask: which of the forms in article 50 occurred, when the transfer took place, what obligations were outstanding up to that date, and whether a collective agreement remained in force.
Legal basis and sources
Frequently asked questions
I bought the business. Must I pay wages the seller had already delayed?
Yes. The worker may claim them from you, and you and the seller remain liable together, jointly and severally, for what accrued up to the transfer (art. 50).
Does the rule cover a lease of the factory, or of part of it?
Yes. The text lists merger, transfer of ownership to heirs, assignment, sale, lease, and investment of all or any part of the project.
Does a collective agreement fall away when the owner changes?
No. A collective agreement made at the level of the project continues (art. 156, second paragraph).
Related topics and articles
- 01When a job ends in Iraq: who ends it, on what ground, and what followsA practical map of ending a private-sector employment contract in Iraq: what ends it automatically, when the employer or the worker may end it, barred grounds, and the challenge deadline.
- 02Wages and social security of subcontractor workers: who bears them?Joint liability of principal and subcontractor for wages and rights under article 12 of the Labour Law, and social-security notice under Law 18/2023.
- 03Transfer, secondment, or a change of a worker’s workplaceWhat organising the project and assigning tasks under article 41 allows, and the contract’s limit in article 37, without inventing a secondment scheme.
- 04End-of-service entitlements under Labour Law No. 37 of 2015The end-of-service gratuity under Labour Law 37/2015: the two-week formula, the statutory exceptions, and how it differs from benefits under Law 18/2023.
- 05Which labour and social-security rules apply in the governorates and in the Kurdistan Region?The reach of Labour Law 37/2015 and Law 18/2023 in the governorates not organised in a region, and how work is organised in the Kurdistan Region.