Taking Over A Second Business

Peninsula Team

July 30 2010

What do you do if you are taking over a second business and want to change the terms and conditions of the staff working there?

When a company is taken over (subject to particular details) the employees involved are given specific protection by legislation called the Transfer of Undertaking (Protection of Employment) Regulations.

These regulations were introduced to, upon a transfer from old employer to new one, protect the rights of employees, maintain continuity of employment, and enable them to enjoy the same terms and condition under the new employer as under the old one. The regulations allow changes to terms and conditions, however, only in certain circumstances and you must be sure that the changes you want to make fit the criteria.

The regulations are complex, but generally, they ensure that the terms and conditions that the transferred employees were employed under at the old company are protected and cannot be changed. They can be changed however if the reason for the change is an economic, technical or organisational (ETO) reason entailing changes in the workforce. This means reasons relating to the profitability, equipment and processes, or management structure requiring changes in job functions or numbers of the workforce. Changing the terms and conditions merely to harmonise them with your existing staff is therefore not permitted. If you nevertheless went ahead and changed the terms and conditions for harmonisation purposes, the changes would be ineffective and unenforceable. This is true regardless of whether or not you had obtained agreement from the relevant staff.

However, it is permitted for an employer to make changes that are connected with the transfer that meet the ETO criteria, or changes that are not connected with the transfer.

Provided the reason for the change is one that is permitted by the regulations, you need to obtain the agreement of the affected employees. The lawfulness of the change now depends on the variations to the contract that would apply even if there were no transfer involved. Prior consultation should be undertaken where you should inform the employees of the proposed variation, and they should be given time to consider their position.

In circumstances where your proposed variation may appear to be because of the transfer and is therefore questionable under the regulations, it may work in your favour if the new terms offered to the employees are not detrimental when compared with their existing transferred terms. Although there is no defined period after which a variation will no longer be deemed to be because of the transfer, the greater the delay between transfer and contract variation, the greater the possibility of there being no link found. Demonstration that the variations to the terms and conditions would have been required in any event even if there had been no transfer may also help an employer’s defence.

The rules relating to TUPE and ETO reasons are extremely complex and advice specific to your individual situation should also be sought from the 24 Hour Advice Service by calling 0844 892 2772.

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