Employer transfer or dismissal during a merger or corporate restructuring

Recession often sees companies resorting to corporate restructuring or merger to adapt to challenging economic conditions.  Whilst the businesses are strategically planning for cost effectiveness and gearing towards financial stability, they should remember that employees are their crucial operative component and fundamental asset and therefore, recognising the importance of its employees’ well-being in a business direction change.

In the UK, implementation of EU governance through the Transfer of Undertakings (Protection of Employment) Regulations 2006 (more popular as TUPE) covers employees rights when a business (whole of part) experiences a change in ownership, or a service is assigned to a new contractor, but excludes dramatic changes in service provisions, including significant remodelling.  This is known as “relevant transfer”. 

When the transfer is relevant, subject to the following conditions where an employee:

• Remains employed on the date of the transfer,

• Has been onboarded/employed or should have been employed immediately before the transfer,

• Has been assigned to the organised grouping of resources or employees that is subject to the relevant transfer.

• Not objected to the transfer,

• Current contract of employment would otherwise be terminated as a result of the transfer,

the new employer is bound by the existing terms and conditions of the employment between the employee and the original employer.  Each situation should, however, be subject to a fact-finding process, and employers must ensure that all affected employees, or their representatives are appropriately and adequately consulted in a timely manner so that they have an opportunity to discuss their views with the employers.

We appreciate that sometimes, unfortunately, some employees are dismissed because of the change in business needs in the process of a business transfer.  Care should be exercised as an employee cannot be dismissed merely because a business transfer has taken place, unless the employer can justify dismissal genuinely arising from an economic, technical or organisational reason (ETO reason), resulting in a change of needs of the business workforce.  Legal issues and implications evolving dismissals when a business transfer is anticipated can be complex, giving rise to liabilities for employment claims.

Whether you are merging, acquiring or undergoing a corporate restructuring, we would like to hear from you.  Write to us at info@lyint.co.uk to explore options of accommodating or replacing your current employee(s).  We believe everyone and everything is worth the effort.