Introduction

A transfer of undertakings occurs when a business or part of a business is taken over by another employer because of a merger or transfer. When a transfer takes place, there is a legal obligation on the new employer to take on the existing staff of the business or the part of the business concerned. The employee’s accrued service with his or her original employer is deemed to have been with the new employer.

The European Communities (Protection of Employees on Transfer of Undertakings) Regulations apply to any transfer of an undertaking, business or part of a business from one employer to another employer because of a legal transfer (including the assignment or forfeiture of a lease) or merger.

In general, the Regulations apply to any person

• working under a contract of employment, including apprenticeship
• employed through an employment agency or
• holding office under, or in the service of, the State (including a civil servant within the meaning of the Civil Service Regulation Act, 1956), an officer or servant of a harbour authority, health board or vocational education committee, and a member of the Garda Siochana or of the Defence Forces.

In the case of agency workers, the party who is liable to pay the wages (i.e. either the employment agency or client company) is the employer for the purposes of these Regulations.

The contractual rights of the employees do not transfer where the original employer is subject to proceedings whereby he may be adjudicated bankrupt, or
wound up for reasons of insolvency, by order of the High Court. However, if the sole or main reason for the institution of bankruptcy or insolvency proceedings is the evasion of an employer’s legal obligations under the Regulations, then the Regulations apply to a transfer effected by that employer.

All the rights and obligations of an employer under a contract of employment (including terms inserted by collective agreements) other than pension rights, existing on the date of transfer, are transferred to the new employer on the transfer of the business or part thereof. The new employer must continue to observe the terms and conditions of the collective agreement until it expires or is replaced.

An employee may not be dismissed solely because of the transfer. However, dismissals may take place for economic, technical or organisational reasons
involving changes in the work-force. If an employment is terminated because a transfer involves a substantial deterioration in the working conditions of the employee, the employer concerned is regarded as having been responsible for the termination.

Pension Rights

Employees’ pension rights in relation to old age, invalidity or survivor’s benefits under supplementary company or inter-company pension schemes 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 Regulation provides that

1. if the scheme is an occupational pension scheme within the meaning of the Pensions Act, 1990, then the protections afforded by the Pensions Act apply to any such scheme, and
2. in respect of the pension schemes which do not come within the remit of the Pensions Act, the new employer must ensure that rights conferring immediate or prospective entitlement to old age benefits, including survivor’s benefits, are protected.

Should any complaint arise in relation to a scheme to which the Pensions Act does not apply, it should be referred to the Workplace Relations Commission under the Regulations. It would be advisable for employees to refer any such queries/complaints in the first instance to the trustees of the relevant pension scheme.

Information and Consultation

In a transfer situation, both the original employer and the new employer must inform the representatives of their employees affected by the transfer, of –

1. the date or proposed date of the transfer;
2. the reasons for the transfer;
3. the legal implications of the transfer for the employees and a summary of any relevant economic and social implications of the transfer for them, and any measures envisaged in relation to the employees.

The original employer must give this information to the employees’ representatives, where reasonably practicable, not later than 30 days before the transfer and in any event, in appropriate time before the transfer occurs. The new employer must give the information to the employees’ representatives, where reasonably practicable, not later than 30 days before the transfer occurs and in any event, in appropriate time before the employees are directly affected by the transfer about their conditions of work and employment.

If either employer envisages measures in relation to their employees, the employees’ representatives must be consulted, where reasonably practicable, not later than 30 days before the transfer occurs and, in any event in appropriate time before the transfer about such measures, with a view to reaching agreement. Where there are no employee representatives, the employers must arrange for the employees to choose (including by means of an election) representatives for this purpose.

However, if there are still no employees’ representatives in the undertaking through no fault of the employees, the employees concerned must be notified in writing, where reasonably practicable, not later than 30 days before the transfer and, in any event, in appropriate time before the transfer, with the described at (i), (ii) and (iii) above.

These obligations apply whether the decision resulting in the transfer is taken by the employer or another undertaking controlling the employer. The fact that the information concerned was not provided to the employer by the controlling undertaking will not release the employer from those obligations.

Under the Regulations –
employees’ representatives mean a trade union, staff association or excepted body with which it has been the practice of the employees’ employer to conduct collective bargaining negotiations, or in their absence, a person or persons chosen by such employees (under an arrangement put in place by the employer, including by means of an election) from among their number to represent them in negotiations with the employer.

Protection of Employees’ Representation

Where a business or part thereof preserves its autonomy after the transfer, the status and function of the employees’ representatives affected by the transfer must be preserved on the same terms and subject to the same conditions as existed before the transfer.

In a situation where the business or part thereof does not preserve its autonomy after the transfer, the new employer must arrange (by means of an election or otherwise) for the employees transferred who were represented before the transfer to choose employees to represent them. If those representatives (affected by the transfer) term of office expires because of the transfer, they will continue to enjoy the express protection provided by the Unfair Dismissals Act for such representatives.

Further information

For further information please email Barry Crushell of Aperture Partners Advisory at bcrushell@aperturepartners.ie or call 01-9053503.

Please note that the material contained herein is for general information purposes only and does not constitute legal or other professional advice. Reference accurate at time of publication but subject to change.