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Employment Law Services Ltd

Transfer of Undertakings

A set of regulations called the Transfer of Undertakings (Protection of Employment) 2006 protect the employment of employees when the business, or part of the business, in which they work is “transferred” to a new employer.

  1. What is a Transfer?

    A relevant transfer can happen through the:-

    a) Change of a particular service provision, or
    b) Transfer of a particular “undertaking” or business from one owner to another.

    a) Service Provision Changes

    This can include:-
    i) A first contracting out, or outsourcing of an activity,
    ii) A subsequent change of contractor to control on activity, e.g. a change of contractor after a tendering exercise, or
    iii) Taking an activity back into the main business from having been done by a contractor, i.e. Insourcing, or contracting in.

    In all these cases there will be a “relevant transfer” of the particular activity if there was an organised group of employees which had the principal purpose of carrying out the particular activity in question, which is a purpose that is intended to continue after the change of organisation responsible for the provision of the service.

    b) Transfer of an Undertaking or Business

    The Regulations apply when the whole, or any distinct part of an undertaking or business is transferred. This includes non-profit making, and charitable organisations (or part of them) as well as a traditional business. In order to determine if such a transfer has occurred the employment tribunals will examine the whole circumstances such as:-

    i) Whether tangible assets are transferred, e.g. buildings, machinery, equipment etc
    ii) Whether the majority of employees are taken on by the new employer,
    iii) Whether the customers or clients are transferred, and
    iv) How similar the activities and work is before and after the transfer.
  2. Does the number of staff have any impact on determining if there is a transfer or not?

    The Regulations apply irrespective of the number of staff involved. So the transfer may affect one or thousands of employees. The important thing is that there is an organised group of employees carrying out a particular task, not the actual number of employees involved.
  3. Are subsidiary and parent companies affected by these Regulations?

    The Regulations do apply to transfers between subsidiary businesses within the same group of businesses, so long as each is a distinct company.
  4. Can a “transfer” occur in more than one stage?

    A transfer can occur over a number of stages, or just one.
  5.  Are share transfers affected by the Regulations?

    As the sale of the shares in a company, or take over through the sale of the majority of a company’s shares does not technically change the legal status of the company. The employees remain employed by the same employer even though the personal identity of the shareholders has changed.
  6. How do the Regulations affect the employment of the employees that are transferred?

    The employment of the employees that were employed immediately before the transfer have their employment automatically transferred to the new employer when the transfer occurs. This means their employment is continued on the same terms and conditions with the new employer- so same hours of work, rates of pay, same holiday entitlement etc. Any employee that is on maternity, adoption, or paternity, or sick leave at the time of the transfer is also transferred to the new employers.
  7. Can an employee object to the transfer of his/her employment?

    An individual may choose not to have his/her employment transferred to the new owner or employer. If an individual wishes not to be transferred that decision should be confirmed in writing. The consequences for the individual in opting not to be transferred are significant, as the individual is NOT regarded as having been made redundant (so will NOT be entitled to a redundancy payment, nor is he/she treated as having been dismissed.
  8. What rights and liabilities are transferred to the new employer?

    The new owner (known as the “transferee”) effectively inherits all rights and liabilities associated with the contracts of employment of the transferred employees. This means that any arrears of pay can be pursued against the new employer. Any liability for claims of discrimination against any of the employees transfers to the new employer.
  9. What information must be given to the employees about the transfer?

    The employer of the employees affected by the transfer must inform all the appropriate representatives of the affected staff long enough before the transfer to enable consultations to take place between the employer and the representatives of matters including :-

    (a) The fact that a relevant transfer is to take place,
    (b) When it is expected to take place,
    (c) The reasons behind it,
    (d) The legal, economic and social implications of the transfer for the affected staff,
    (e) If any measures are to be taken or not in relation to the transferred staff.
  10. Who are the staff representatives in the consultation process?

    In the first place if there is a recognised trade union the information must be provide to, and consultation conducted with that union.

    If there is no recognised union the representatives will be elected employee representatives. If no such employee representatives have been identified previously, then a process of election of representatives must take place. There is a complex procedure established to elect the representatives.
     
  11. Does the first employer have to provide information about the staff to the proposed new employer?

    Information has to be provided about the staff, including:-

    (a) Details of the identity and age of the staff,
    (b) Details of the disciplinary action and grievances that have been associated with them,
    (c) Information relating to actual or potential claims against the employer.

    If this information is not provided by the deadline under the Regulations the new employer (transferee) can apply for compensation through the Employment Tribunal.
  12. Can employers agree not to be bound by, or avoid the transfer regulations?

    If there is a relevant transfer the transfer regulations will apply, and any attempt to opt out of them or avoid them is void, and unenforceable.

The Regulations and case law concerning transfers are very complicated, and specific advice should be sought at the earliest opportunity.

 

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