This post is designed as an overview for employees affected by a company takeover and sets out their rights and responsibilities under the new management. It provides links to the relevant regulations in order that you as an employee may combat myths being peddled by management or trade union representatives who may be trying to coerce the employees to accepting negative amendments to their contract of employment. When a company is taken over the employees rights are protected by
The Transfer of Undertakings (Protection of Employment) Regulations. This is commonly referred to as TUPE.
These laws began life as European Union Directive 2001/23/EC. I have provided a link to this document in the sources. If you enjoy reading the the bureaucratic nightmare that is any EU Directive that is a good starting point, however this is genuinely a case of I have read it so you don’t have to. As with all directives passed by the European Union it was then taken back to the Member States Governments to be enacted into their own laws. These are the regulations you need to look at. I am using the United Kingdom Regulations as that is the country where I live. If you live in a different member state the relevant regulations will be a quick Duck Duck Go search away. The regulations will be the same, just written in your native language.
TUPE applies to employees of business in the UK regardless of the size of the business. Their terms and conditions of employment and continuity of employment automatically transfer. The exception to this rule is if an employee is made redundant during or after the takeover process. Any redundancy would be paid at the rate agreed in the original contract of employment.
TUPE applies to both Business’s and Service Providers. For Business transfers the name of the employer must change. For service providers it is when a contract ends and the work is given to a new contractor.
If you work for a company in the supply chain for a business that is being take-over you will not be protected.
Consulting and Informing
Prior to the takeover the employers mist tell the Trade Union or Employees Representatives
That the transfer is happening, when it is happening and why it is happening. They also need to inform the employees how it will affect them individually and if the company will one subject to reorganisation. If the workforce is not unionised properly elected representers have the same legal rights as trade union representatives. If such representatives are not already in place they can be elected for the purpose of consulting and informing prior to the takeover.
Transfers of Employment Contracts
The employees retain all of their previous terms and conditions of employment. They retain their holiday entitlement and their service. The employees start date remains the same as before the transfer so continuous employment is not broken. All collective agreements previously in place are retained.
The employer can not change the contracts prior to a transfer in order to help the sale of their business.
The new employer can change an employee’s terms and conditions if the reason is an ‘economic, technical or organisational reason’ (ETO) involving changes in the workforce or workplace, such as a result of redundancies or a move from a managerial to a non-managerial position.
An employer can’t normally impose changes – they have to be agreed by the employees or their representatives.
Employees’ company pension rights earned up to the time of a transfer are protected, but the new employer doesn’t have to continue an identical pension.
When the transfer is complete the employee should receive a new up to date statement of employment. This should include the name of the new employer and state the employees terms and conditions have not changed.
Employers can renegotiate terms and conditions after 1 year. However they can only do this if they are improving the terms and conditions. For example employers could decide to increase shift premiums to incentivise employees going onto shift work. However they would be disbarred from reducing shift premiums to save money.
This post sets out the key details most employees will need to know about during a transfer. For a more comprehensive explanation (and a document that carries more weight than a blog post !) the first link I am providing in the source’s is the UK Government Guidelines. I have mirrored their format so if you wish to check the information in my Overview section, it will be in the overview section of the government document.
Business transfers, takeovers and TUPE
Directive 2001/23/EC Summary