transfer undertakings

Transfer of Undertakings

What can an employee do if he/shes loses employment terms and conditions when there is a transfer of undertakings ?.

Say Ms. X works in the Grand Hotel and this hotel is bought by another hotel, and Ms. X still works in the newly named hotel etc.

This is a transfer of undertaking situation and the employee has legal rights carried over in this regard.

S.I. No. 131/2003 – European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003

Section 3 of these Regulations states :

(1)  These Regulations shall apply to any transfer of an undertaking, business, or part of an undertaking or business from one employer to another employer as a result of a legal transfer (including the assignment or forfeiture of a lease) or merger.

(2) Subject to this Regulation, in these Regulations –

“transfer” means the transfer of an economic entity which retains its identity;

“economic entity” means an organised grouping of resources which has the objective of pursuing an economic activity whether or not that activity is for profit or whether it is central or ancillary to another economic or administrative entity.

(3)  These Regulations shall apply to public and private undertakings engaged in economic activities whether or not they are operating for gain.

Rights and Obligations

This is laid out in Section 4 which states:

4. (1) The transferor’s rights and obligations arising from a contract of employment existing on the date of a transfer shall, by reason of such transfer, be transferred to the transferee.

(2) Following a transfer, the transferee shall 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 date of termination or expiry of the collective agreement or the entry into force or application of another collective agreement.

Transferee = New Employer.

Transferor = Old Employer.

Therefore, the new employer is obligated to adhere to the contract of employment the employee had with the previous employer regarding the terms and conditions etc.

More Detail on Transfer of Undertakings

If there is a legal transfer from one employer to another ie a business is transferred being an economic entity that retains its identify, then the European Communities Protection of Employees on Transfer of Undertakings Regulations 2003 affords protection for employees arising from the employment contract with the previous employer.

In Case C-305/94 [1996] ECR I-52927, the ECJ held that:

“Article 3(1) of the Directive is to be interpreted as meaning that the contracts of employment and employment relationships existing on the date of the transfer of an undertaking, between the transferor and the workers employed in the undertaking transferred, are automatically transferred from the transferor to the transferee by the mere fact of the transfer of the undertaking, despite the contrary intention of the transferor or transferee and despite the latter’s refusal to fulfil his obligations.”

The new business owner must adhere to the terms of the employment contract with the previous employer, however, if employment disputes happen with the new business owner employer, an issue may arise as to whether the TUPE regulations 2003 apply to the facts of the particular case and if a transfer of undertaking took place in the first instance.

The following are helpful tests to consider for an employee and employer alike when assessing if a transfer of undertaking has taken place, and hence if the employee will then be afforded with the protection of the 2003 regulations.

It can occur whereby an employer is of the view no transfer could have arose because the assets of the business were not transferred, or equipment, for example.

Helpful tests to consider to establish if a transfer took place are :

1.      Was the undertaking a stable undertaking, with an ongoing life of its own ?.

2.      Has the entity retained its identity ?.

3.      Have some or all of the staff been taken over by the new employer ?.

4.      Has the customer base transferred ?.

5.      Are the activities post-transfer similar to those carried out before the transfer ?.

6.      Has there been any interruption of activity ?.

7.      Has there been a transfer of assets ?.

Legal Remedy

If an employee’s terms of employment are not honoured by the new employer, an employee can make a complaint under Regulation 10 of the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (S.I. No. 131 of 2003) to the Workplace Relations Commission.

An Adjudicator ie decision maker at the Workplace Relations Commission will assess what is the term of contract the employee states was breached, assess the facts of what occurred, and make a decision.

Under Section 10 (5) (b) of the Transfer of Undertakings Regulations, an Adjudicator can require an employer to comply with the Regulations and to take a specified course of action. An Adjudicator can award compensation of up to two years salary. 

Disclaimer for this Transfer of Undertakings Article

Please be advised that the above-mentioned material is intended as an overview and as a broad out-line of the topic discussed. It should not be considered as complete and comprehensive legal advice, nor act as an appropriate substitute. Legal advice should be sought from a solicitor prior to relying on anything in this article.

Due care has been taken in the publication of this article and we do not accept legal liability as a result of reliance on any material covered in the above article.