Transfer of Business

Which transfer scenarios trigger employee protection?

The Transfer of Business (Protection of Employment) Regulations (Subsidiary Legislation 452.85) regulate the status and treatment of employees in the event of a transfer of an undertaking. The scope and extent of employee protection under these Regulations is broad, covering:

1. a transfer of an undertaking, business, or part of, to another employer as a result of a legal transfer or merger, and which retains its identity as an organised group of resources having the objective of pursuing an economic activity; and
2. a service provision change, which means a situation in which:

• • activities cease to be carried out by a person (or “client”), on his own behalf and are carried out instead by another person on the client’s behalf (or “contractor”);
  • activities cease to be carried out by a contractor on a client’s behalf, whether or not those activities had previously been carried out by the client on his own behalf, and are carried out instead by another subsequent contractor on the client’s behalf; or
  • activities cease to be carried out by a contractor or a subsequent contractor on a client’s behalf, whether or not those activities had previously been carried out by the client on his own behalf, and are carried out instead by the client on his own behalf.

What happens to employees upon a transfer?

When a business is transferred or otherwise taken over, or in the event of a service provision change, any employee in the employment of the transferor on the date of transfer or of the service provision change is automatically deemed to be in the employment of the transferee, such that the transferee is required to take on all the rights and obligations which the transferor has towards such employee.

The employment contract of each person employed by the transferor would have effect as if originally made between the person so employed and the transferee. Moreover, on the completion of a transfer or a service provision change, all the transferor’s rights, powers, obligations and liabilities under or in connection with any such employment contract are transferred to the transferee.

Likewise, following the transfer or service provision change, the transferee must continue to observe the terms and conditions agreed in any collective agreement on the same terms applicable to the transferor under that agreement, until the collective agreement expires or terminates, or another collective agreement enters into force.

What level of involvement should be afforded to employees?

If an undertaking or a part of an undertaking being transferred employs more than twenty employees, the transferor and the transferee are required to inform the representatives of their respective employees affected by the transfer with:

• the date or proposed date of the transfer;
• the reasons for the transfer;
• the legal, economic and social implications of the transfer for the employees; and
• the measures envisaged in relation to the employees.

Such information must be given by means of a written statement, which must be delivered to the employees’ representatives at least fifteen working days before the transfer is carried out or before the employees are directly affected by the transfer as regards their conditions of work and employment, whichever is the earlier.

Moreover, a copy of the said written statement should also be forwarded to the Department for Industrial and Employment Relations (or “DIER”) on the same day that this is notified to the employees’ representatives as aforesaid.

In those cases where the transfer includes measures affecting the conditions of employment of the transferred employees, the transferor, the transferee and the employees’ representatives must consult each other within seven working days from the day on which the employees’ representatives have been notified of the intended transfer. Such consultations should cover the impact of the transfer on the employees’ conditions of employment.

What other employee rights should be secured?

A business transfer may not in itself constitute sufficient grounds for dismissal of employees by the transferor or the transferee. Whenever a transfer which involves a substantial change in working conditions to the detriment of the employee results in the termination of the employment contract, the employer shall be regarded as having been responsible for such a termination.

Irrespective of the size of the workforce, the transferor is required to provide to the transferee information about the conditions of employment of every employee, which information must include a copy of the employment contract. The information provided by the transferor to the transferee in respect of a particular employee must also be given to that employee.