Transfer of Undertakings – An Overview

Transfer of Undertakings Legislation

The key relevant legislation in Ireland includes:

  • European Council Directive 2001/23/EC, introduced into Ireland as the European Communities (Protection of Employees on Transfer of Undertakings) Regulations SI 131/2003
  • Employees (Provision of Information and Consultation) Act, 2006

Principal Aims of the TUPE Regulations

The Protection of Employees on Transfer of Undertakings Regulations are designed to safeguard employees’ rights in the event of a transfer and to establish the responsibilities of both the previous and new owners of the business.

The conditions of employment and contracts of employment of individual employees involved in a transfer are protected and, ordinarily, the dismissal of an employee by reason of a transfer of undertakings is prohibited.

Employees of a business being transferred should move to the new employer with their accrued years of service, existing terms and conditions of employment and collective agreements to which they may already be subject (excluding occupational pensions).

The new employer must continue to observe the terms and conditions of any collective agreement in place until it expires or is replaced.

The new employer is under no obligation to provide a new or similar occupational pension benefit to employees who have transferred to the new business, however the new employer must ensure that any scheme in place is properly maintained in order to protect any accrued entitlement when the Protection of Employees on Transfer of Undertaking Regulations apply.

Transfer of Undertakings – when does it apply?

A transfer of undertakings occurs when a business, or part of a business, is taken over by another employer as a result of a merger or transfer.
For a transfer of undertaking to take place:

  • There must be a change in the person (either an individual or a company) responsible for running the undertaking/business
  • The previous economic activity of the undertaking/business must be carried on by the new employer
  • The undertaking/business must be transferred as a “going concern”.

There are no hard and fast rules governing what is, and is not, a transfer of undertakings. It is a technical issue which is affected by new case law on an ongoing basis

It is important to establish whether a transfer of undertakings has taken place and therefore prudent to take legal advice in the event of a possible transfer and when the Protection of Employees on Transfer of Undertaking Regulations DO NOT apply.

A transfer under the (Protection of Employees on Transfer of Undertakings) Regulations does not occur in the case of a compulsory liquidation, or insolvency, of the undertaking/business.

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 Transfer Regulations, then the (Protection of Employees on Transfer of Undertakings) Regulations apply to a transfer affected by that employer.

Protection of Employees

In general, the Protection of Employees on Transfer of Undertaking Regulations apply to any person

  • working under a contract of employment, including apprenticeship
  • employed through an employment agency
  • holding office under or in the service of the State, 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.

The Protection of Employees on Transfer of Undertaking Regulations apply to public and private undertakings engaged in economic activities whether or not they are operated for gain.

They do not apply to sea-going vessels.

In the case of agency workers, the party who is liable to pay the wages (employment agency or client company) is the employer for the purposes of these Protection of Employees on Transfer of Undertaking Regulations.

TUPE Consultation

The Employees (Provision of Information and Consultation) Act 2006 provides a general right to information and consultation for employees from their employer on matters which directly affect them.

In addition to this, under the Protection of Employees on Transfer of Undertaking Regulations, the employer must consult with the employees’ union or, in the absence of a union, with the chosen representative(s) of the employees.

Both the original employer and the new employer must inform the representatives of the employees affected by the transfer, of:

  • The date, or proposed date, of the transfer;
  • The reasons for the transfer;
  • 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 good 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 good time before the employees are directly affected by the transfer as regards their conditions of work and employment.

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, with the details described above, where reasonably practicable, not later than 30 days before the transfer and, in any event, in good time before the transfer.

The consultation 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.

Dismissal as a result of a Transfer of Undertakings

The transfer of an undertaking, business or part of a business does not constitute grounds for dismissal.

However, there is nothing in the Protection of Employees on Transfer of Undertaking Regulations that prohibits dismissals if the employer can show justification for such dismissals for economic, technical or organisational reasons involving changes in the work-force.

However, a company must have clear, factual grounds for dismissals in these circumstances.

Termination of employment arising out of changes to working conditions to the detriment of the employee is regarded as the responsibility of the employer imposing the changes and would be considered to be a possible constructive dismissal.

Although the UK transfer regulations provide for a right of refusal to transfer to another employer, in Ireland the (Protection of Employees on Transfer of Undertakings) Regulations are silent on the consequences for an employee who refuses to transfer.

An employee cannot be forced to work for the new employer.

However, equally, an employee cannot insist on continuing to work with the old employer if the whole business, or the part of the business in which they have been employed, transfers.

Where an employee refuses to transfer, no liability ensues for the new employer – save where an employee sues for constructive dismissal.

In a recent EAT judgement, an employee who refused to transfer to the new employer was entitled to statutory redundancy pay from their old employer (UD470/2007). However, this decision was over-turned by the High Court settling (the fact that there is no automatic right to redundancy when an employee refuses to transfer where his/her work and conditions are transferring.

Any employee who transfers to the new business/undertaking and is subsequently dismissed must have all entitlements calculated on continuous service with both the transferor and transferee.

If a dismissal results solely from a transfer of undertaking, and the employee considers it to be unfair, they may refer a complaint under the Unfair Dismissals Act 1977 to 2001 (if they have 12 months continuous service) or under the Transfer of Undertakings Regulations, 2003 (whether or not they have 12 months continuous service). They cannot claim under both.

A maximum of 2 years remuneration could be awarded.

If an employer fails to consult with employees or their representatives a complaint may be brought to the Rights Commissioner under the Transfer of Undertaking Regulations and appealed to the Employment Appeals Tribunal.

A maximum of 4 weeks remuneration could be awarded.

Complaints about pensions that are covered by the Pensions Acts should be referred to the Pensions Board.