The transfer of businesses will leave many employees across the City wondering what protection they have and what their rights are if their employer decides to transfer part of their business to another employer. For example, it has been reported that over the next few weeks Deutsche Bank will be transferring over 800 staff from its prime brokerage unit in London and New York to rival BNP Paribas as part of a restructuring.

As an employee, you are protected by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) when the part of a business you are assigned to is transferred and that entity retains its identity.   If your employment is going to be transferred, you will often hear the words “transferor” (outgoing employer) and “transferee” (incoming employer) being used. The basic rule is that your employment, apart from pension benefits, will automatically transfer across to the transferee and it will be as if your employment had always been between you and the transferee. The effect of this is that the transferee will be stepping into your old employer’s shoes. As an employee, this provides significant protection to you as it means that your employment rights are protected.

You are also entitled to certain information before your employment transfers and you could have a claim in the employment tribunal if this is not given. Prior to the transfer, the following should take place:

  • If you don’t have a recognised trade union, you should have the opportunity to elect employee representatives.
  • Your representatives should be informed about certain things to do with the proposed transfer. For example, the fact that it is taking place, “measures” which the transferor envisages the transferee will take in relation to any affected employees, or any “measures” the transferor envisages it will take. “Measures” is a broad term and covers any action, step or arrangement taken in connection with the transfer.
  • Your employee representatives should be “consulted” if your employer envisages taking any “measures” in relation to your employment.

If employee representatives should have been elected but are not elected and the required “information” is not provided or “consultation” does not take place, you could have a claim for up to 13 weeks’ actual pay. This could end up being very costly for an employer.

When your employment is transferred, there are specific rules that govern changes to your contract of employment and in order to protect you, there are some restrictions in place on the transferee’s ability to change the terms and conditions of your employment. The nature of a transfer means that employees with different terms often end up working alongside each other and employers are naturally tempted to harmonise terms and conditions, for example, having the same amount of annual leave for all their employees. The key point to note is that changes to your terms and conditions will be void if the sole or principal reason for the variation is the transfer.

You also have certain protections against being dismissed by the transferee and you could have a claim for automatic unfair dismissal if you are dismissed where the sole or principal reason for your dismissal is the transfer, which is not an economic, technical or organisational reason entailing changes in the workforce (commonly referred to as an “ETO”). You must have at least two years’ qualifying service before you can make a claim of unfair dismissal for a TUPE-related dismissal. Your dismissal can be actual or constructive i.e. your employer can dismiss you, or you might be able to resign in response to the way that you have been treated, (but it is vital to take legal advice before doing so). TUPE also provides that if the transfer “involves or would involve a substantial change in working conditions” to your “material detriment”, you can resign and claim that you have been dismissed. Whether there has been a “substantial change in working conditions” is very fact specific and a tribunal would look at the nature and degree of the change. The advantage of this claim is that even if the transferor and transferee have complied with their contractual obligations, you could still have a claim.

The content of this article is not legal advice and is not intended to provide more than general commentary on the subject matter. Specialist employment law or partnership law advice should always be sought about your specific circumstances.

About the author – Shiv Raja:

Shiv is an Associate at Fox & Partners, which is a specialist employment and partnership disputes firm based in the City of London. If you require further information, please contact us on 020 7618 2400 or visit us at www.foxlawyers.com

Shiv Raja

Associate

sraja@foxlawyers.com
DDI: +44 20 7618 2406
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