The law relating to ‘transfer of undertakings’ derives from a European Directive which was designed to safeguard the rights of employees when organisations are sold or taken over.
The directive has been implemented in Ireland by the Transfer of Undertakings Regulations 2003.
The employees and their rights and obligations under the contract of employment automatically transfer to the new owner.
It will usually be clear who transfers with the business but in some cases there may be some employees in respect of whom it is not so clear. There are obvious uncertainties about the nature of employment where a written contract is not in place or where there are breaks in the employment period.
The contractual rights do not automatically transfer where the original employer is bankrupt or insolvent. It usually follows in these cases that the employees are made redundant.
Employee pension rights do not automatically transfer to the new employment because group pension schemes often have more than one participating employer.
However where there is a pension scheme in place at the time of transfer, the legislation provides that, the new employer must ensure that pension rights are protected.
If the employer dismisses an employee and the reason (or principal reason) for dismissal is to facilitate the transfer (to make is more sale-able or attractive), then the dismissal is automatically unfair.
The employer must also be concerned about introducing substantial changes to terms of employment or conditions of work, such as, a change of location. If the employment is terminated because the transfer involves a substantial change in working conditions, the employee may have a case for claiming constructive dismissal.
25 September 2015
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