Transfer of business

Rules

For a transfer of undertaking to take place:

• There must be a change in the person (either an individual or a company) responsible for running the undertaking/business
• The previous economic activity of the undertaking/business must be carried on by the new employer
• The undertaking/business must be transferred as a "going concern".

A transfer under the Regulations does not occur in the case of a compulsory liquidation of the undertaking/business.

Contract of employment

Under the Regulations the new employer is legally obliged to take on the existing employees of the business. The terms and conditions and your employer’s obligations in your contract of employment are automatically transferred to your new employer, except for pensions – see below. If there is a collective agreement your new employer must continue to its terms and conditions until it expires or is replaced.

P45: In some circumstances employees involved in a transfer of business may be given a P45 by their old employer. They should give this to their new employer. For the purposes of redundancy legislation a transfer of business does not break the employees’ continuity of service. Instead it is transferred to their new employment.

Pensions

Employee pension rights, apart from those provided for by social welfare legislation, do not transfer to the new employment. However, where there is a pension scheme in operation in the original employer’s business at the time of the transfer, the legislation provides that:

• If the scheme is an occupational pension scheme covered by the Pension Acts, then the protections given by that legislation apply
• In the case of other pension schemes, the new employer must ensure that rights are protected

Dismissal

The transfer of an undertaking, business or part of a business does not in itself constitute grounds for dismissal. However, nothing in the regulations prohibits dismissal if your employer can justify such dismissal for economic, technical or organisational reasons. Whether there are economic, technical or organisational grounds for dismissal will depend on the facts of each case and you can challenge your employer's contention that such grounds exist by bringing a claim for unfair dismissal - see 'How to apply' below.

Unfair dismissal

If your contract of employment is terminated because a transfer involves a substantial change in working conditions to your detriment, the employer concerned is regarded as having been responsible for the termination of the employment. So, for example, if your new employer cuts your wages because he/she feels you are being paid too much and you resign as a result, your new employer will be regarded as being responsible for the dismissal by failing to honour your contract of employment.

Consultation

The Employees (Provision of Information and Consultation) Act 2006 (pdf) provides a general right to information and consultation for employees from their employer on matters which directly affect them. The legislation requires employers to inform and consult employees on any decisions likely to lead to substantial changes in work organisation or contractual relations – with particular reference to mergers and acquisitions and to collective redundancies. This means that employers are required to consult with employees before major decisions are made, including transfer of business. Since 23 March 2008 it applies to employers with at least 50 employees.

Under the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 employees (including those who are not covered by the Act as they are working for an employer with fewer than 50 employees) must be given details of the transfer as follows:

• If the employees are in a union, not later than 30 days before the transfer, the employer must provide the union with details of the reasons for the transfer; the date or proposed date of the transfer; and the legal, economic and social implications for the employees
• If the employees are not in a union, the employer must give the details already mentioned in writing to each employee not later than 30 days before the transfer

The employer must also consult with the employees’ union or, in the absence of a union, with the chosen representative(s) of the employees.