In a timely piece, Adam Bernstein considers the rights of employees when transferring between companies
Businesses are bought, sold or transferred all of the time. While many think of the body corporate moving from one owner to another, not everyone gives thought as to what happens to the employees. Where do they stand? What are their rights, and do they transfer to the new employer? And what are the rules that employers must observe?
Legal protections
The law has had a view on the subject for more than 40 years through the Transfer of Undertakings (Protection of Employment) regulations – TUPE. First introduced in 1981, TUPE implemented an EU directive relating to the safeguarding of employee rights in the event of transfers of businesses. TUPE was updated in 2006 to reflect developments in case law and to extend the protections to include service provision changes (in broad terms, when a service is outsourced or taken back in-house).
In brief, and as Lucy Gordon, a director at Walker Morris explains, “TUPE provides protection for employees when the business in which they are employed is sold or there is a change in the service provider to a client.”
As Gordon details, if there is a sale of the shares in a business, TUPE does not apply, as there is no change in the identity of the employer of the employees. However, she says that “if a business, or part of a business, is sold then TUPE will apply” and will protect the employment rights of those employees employed in the business, or part of the business, being sold to the new owner.
In essence, in this situation, employees transfer to the new employer automatically under law. The employees, Gordon explains, “are entitled to transfer on their current terms and conditions of employment, apart from some terms in relation to pension rights, and their continuity of service is maintained.” This means that, for example, employees retain any protection they have against unfair dismissal; if they are dismissed because of the transfer, they may have a claim for automatic unfair dismissal.
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