What You Need To Know When Taking Over A Business by David Price, Peninsula Advice Service Consultant

Peninsula Team

October 21 2009

Employment law is frequently complicated and many employers find it difficult to decipher what rights their employees have. This is seen as even more complex when you add into the mix that an employer is taking over another business. Peninsula clients are able to receive a full explanation of all employee rights and guidance through business transfers. Simply call 0844 892 2785 and one of our trained advisors will be able to help. Here, David Price from Peninsula's Advice Service, gives employers a brief run down of some of the rights that employees hold in a business transfer situation. Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) employee rights are protected when you buy a business or sell it on. Most commonly, when employees transfer they do so with the same rights, terms and conditions as with their previous employer. TUPE applies to relevant transfers of large and small businesses, however not all business sales are relevant transfers and in these cases TUPE does not apply. The new employer will automatically inherit the employees of the old employer as they transfer on the date of the transfer. They will also inherit any outstanding employee liabilities incurred by the old employer, and this may include employee disputes and Tribunal claims. They may even be liable for Tribunal awards that have been granted to successful claimants as a result of the old employer's actions. Amendments to the Regulations in 2006 imposed a duty on the old employer to disclose to the new employer specified employee liability information. Under this provision details of disciplinary and grievance procedures taken in relation to each employee must be passed to the new employer. This should add transparency to the transfer process and make the new employer aware of issues that they may otherwise have been unaware of. As well as transferring to the new employer on the same contractual terms and conditions, employees will also have statutory continuity of employment for the purposes of unfair dismissal and redundancy pay etc. There are some quite complicated rules regarding consultation with affected employees in a transfer situation, regardless of the numbers involved. If an individual objects to the transfer (effectively by stating that they refuse to be employed by the new employer), their contract is terminated by operation of law on the date of the transfer and the employee is not classed as being dismissed by the employer. However, where a transfer involves a substantial change in working conditions to the detriment of the employee, the employee will be treated as having been dismissed with notice by the employer, hence allowing such employees to make a claim for unfair dismissal. If the change would amount to a repudiatory breach of contract by the employer, the employee will be entitled to resign and claim constructive dismissal. Whether or not such claims would be upheld by a tribunal would then be determined in accordance with the normal principles of unfair dismissal legislation relating to variation of contract. It is always worth gaining advice with these situations to help minimise the chances of finding Tribunal claims landing on your doorstep. Can the new employer sack the transferring employees? The regulations generally make it automatically unfair for either the new employer or the old employer to dismiss an employee because of the transfer itself or for a reason connected with the transfer that is not an economic, technical or organisational reason entailing changes in the workforce. Again, this is a complex area and specific advice should be sought. Can a new employer reduce rates of pay to harmonise with existing workforce? If you change employees terms and conditions for the worse simply because of the transfer, employees can resign and claim constructive dismissal at employment tribunal (harmonisation changes would normally fall into this category). However, if a proposed change is totally unconnected with the transfer, it can be handled like any other variation of an employee's contract, although it is worth remembering that this, in itself, may be fraught with difficulty.

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