News & Events

QUESTION 1 In the case of a share transfer, what is the new employer’s obligation to contracted services and its employees if they wish to change contractors?

ANSWER If there is a share transfer there is no transfer of an undertaking so the Transfer Regulations do not apply. The employees of the company the shares of which are being acquired simply carry on under their existing employment contracts. There is no change of employer.

If the company has contracted out services to a contractor and the new owners of the share capital wish to change contractors this may or may not involve a transfer of an undertaking between outgoing contractor and incoming contractor. Whether there is a transfer depends on the test in Ayse Süzen namely is there is a concomitant transfer of significant tangible or intangible assets between contractors or, alternatively, failing that, is there a taking over by the new contractor of a major part of the workforce in terms of numbers and skills between outgoing contractor and incoming contractor. One of these two conditions (whichever is relevant) must be satisfied in order for there to be a transfer of an undertaking between outgoing contractor and incoming contractor.

QUESTION 2 Second generation transfers: Will Ireland take a more purposive approach to second generation transfers as the UK have (e.g. ECM or VAG)? Ireland seems to over rely and strictly apply the Suzen case to detriment of employees.

ANSWER UK Courts and Tribunals were never happy with the Ayse Süzen case, the thrust of which is that there is no automatic transfer of undertaking on second generation contracting (contractor changeovers). Whether there is a transfer depends on whether there is a concomitant transfer of significant tangible or intangible assets or a taking over by the new contractor of a major part of the workforce in terms of numbers and skills of the outgoing contractor.

Theoretically, the strict application of Süzen means that an incoming contractor can decide to take neither assets nor employees and defeat the regulations. The questioner though rightly points out that the UK Employment Appeal Tribunals developed a rule that it was possible to look at the intention of the incoming contractor in not taking over the employees, of the outgoing contractor. Therefore, if the intention in not taking on the employees was purely to get round the TUPE Regulations, there would be a transfer nonetheless. This “purposive” approach to Süzen has never, however, been taken up by the European Court and, thus far, appears to be a purely British invention. Ireland would seem to be correct, in terms of European law, to apply the conditions in Süzen.

QUESTION 3 Can it be said that for a labour intensive business, an employer can avoid the regulations by not taking on any employees?

ANSWER In a labour intensive business, where assets are not transferred from transferor to transferee and the key question is whether there is a taking over of a major part of the old employer’s workforce in terms of numbers and skills so, theoretically, an employer can avoid the regulations by not taking on any employees.

QUESTION 4 What is the best approach for a service receiver when purchasing services - e.g. security guards - on face of it there is no transfer of assets/people – is it best to put indemnity into the contract?

ANSWER It is not clear what the questioner means by “service receiver” but I assume this means a client who is purchasing services from a contractor. As stated above, whether there is a transfer of undertaking depends on whether there is a concomitant transfer of significant tangible or intangible assets or, failing that, a taking over by the new employer of a major part of the workforce in terms of numbers and skills.

If a client is engaging a contractor for the first time he may of course desire to transfer the employees to the contractor in any event, in which case he can simply stipulate in the contract that the contractor behaves as if the regulations apply and take the employees on. In this case and indeed all others an indemnity in the contract is the best possible protection for your client.

QUESTION 5 In an asset-reliant case where there is a change of service provider (and transfer of use of client assets) must the new service provider take on the employees or if there is a costs plus contract with client can client be responsible for redundancy costs?

ANSWER In the question posed the function is asset reliant and there is a transfer of use of client assets. The Regulations should therefore apply and the employees must therefore be taken on. The consequences of this can always be regulated by contract between the parties (although the contract cannot defeat employees’ rights under the Regulations). But the commercial parties can regulate the financial consequences of the regulations upon them as between themselves by agreement.

B. Employee Rights

QUESTION 6 Is there any obligation on employee to prove eligibility to transfer?

ANSWER There is no specific obligation imposed on the employee in the Regulations. However, if the scenario arises where both the transferor and the transferee adopt the position that an employee is, for example, not attached to the business and therefore not eligible to transfer, or that an individual is a consultant and not an employee, on a practical level it does fall to the employee to take proactive steps to assert otherwise. This would include, for example, taking a claim to a Rights Commissioner under the Regulations, claiming that his or her rights under the Regulations are not being observed by virtue of the fact that it is not intended to transfer him or her.

There would also be the option (although practically unattractive) for the employee to issue Court proceedings and seek injunctive relief from the Court requiring that he or she be transferred on the basis that the Regulations apply to the transfer and that he or she is, an employee attached to the transferring business.

QUESTION 7 From dismissed employee’s perspective (either pre or post transfer), should both the transferee and transferor company be claimed against?

ANSWER The Regulations contain a provision confirming that liability (if any) to the dismissed employee transfers to the transferee. However, very often the employee will choose to sue both parties, sometimes as a “belt and braces” approach and sometimes on the basis that there may be more interest in the transferor and transferee settling the claim if they are both going to have to spend time and money defending it. An employee may also sue a transferor employer is he/she believes he/she has been constructively dismissed prior to the transfer by the transferor’s employer in the context of the transfer.

QUESTION 8 If contractor goes to Rights Commissioner to ascertain whether he is in fact an employee, would that be under the TUPE regulations or claim under Industrial Relations Act?

ANSWER The Regulations do not specifically refer to the scenario whereby a contractor would wish to argue that he or she is in fact an employee. However, the contractor would be in a position to take a claim to a Rights Commissioner under the Regulations asserting that he is an employee and that the failure of the parties to arrange his transfer to the transferee is non-compliance with the Regulations.

Whilst it would be open for a contractor to refer a complaint under the Industrial Relations Act on the basis of a trade dispute, it would generally be advisable for the employee to instead proceed under the Regulations.

An alternative option would be for the contractor, if dismissed as a result of the transfer, to maintain a claim to the Employment Appeals Tribunal asserting that he or she is in fact an employee and that the dismissal was therefore unfair. However, again, the most straightforward course of action would be the claim to the Rights Commissioner under the Regulations.

QUESTION 9 Can an employee who transfers be forced to sign the new employer’s contract? If so, does the former contract still over-rule the terms of the new contract?

ANSWER No, there is nothing in law which entitles the new employer to force the employee to sign the new employer’s contract. If the employee does sign the new employer’s contract and there are provisions in that contract which are less favourable than the terms and conditions which the employee enjoyed with the former employer, then the employee has the option of claiming under the Regulations that he is not bound by those less favourable provisions as the Regulations protect his or her rights with the former employer.

QUESTION 10 In a TUPE situation do casual or temporary staff have to transfer or can you just end their contracts if there is no work available?

ANSWER In a TUPE situation, casual or temporary staff enjoy the same protection as “permanent” employees. If the dismissal is related to the transfer, then it is in breach of the Regulations. If the dismissal can be justified by economic, technical or organisational (ETO) reasons, then it is justifiable. An employer may therefore be able to justify the dismissal of the casual or temporary staff member if they can show that the dismissal would have arisen at the same time regardless of the transfer (perhaps for example, if the casual work is seasonal in nature and the relevant season was coming to an end at that time). The employer should be aware of the risk that the employee may endeavour to make a claim to the effect that the real reason for the dismissal arose from the transfer.

C. Pension Entitlements

QUESTION 11 Is there an obligation under the Transfer Regs to match their previous pension entitlements or offer the statutory pension provision, or match to the new company’s pension scheme?

ANSWER There is no obligation under the Regulations to match the employee’s previous pension entitlements. Pensions are excluded in this way from the general requirement for the transferee to observe the same terms and conditions which the employee enjoyed with the transferor. The transferee is not under an obligation to offer the transferring employees the same pension scheme made available to the transferee’s existing employees.

The transferee employer would be obliged, as a matter of law, to ensure that, as a minimum, transferring staff have access to a PRSA, in the normal way.

D. Data Protection

QUESTION 12 How is disclosure of information pre-transfer, affected by Data Protection restrictions?

ANSWER Pre-transfer (such as in the due diligence phase) information regarding the staff should be exchanged between the transferor and the transferee on a fully anonymised basis only. This way, the employees’ entitlements, terms and conditions can be identified to the transferee, but not in a way which allows any particular person’s individual terms and conditions to be linked to them.

E. Consultation and Redundancy Requirements

QUESTION 13 What if only some employees were members of a trade union but the trade union wasn’t recognised by old employer - would there still be an obligation on either old/new employer to consult with the Trade Union?

ANSWER There is still an obligation on the transferor and transferee to consult with staff representatives regarding an impending transfer, regardless of the issue of trade union recognition. However, the obligation to consult with a trade union only arises if there was a practice of the transferor dealing with the trade union. If there was not, then the Regulations allow for the transferor and transferee to adopt the position that they will consult only with representatives elected by the employees from their number.

However, one will frequently find a trade union strongly testing the resolve of the transferor and transferee if they adopt that position.

QUESTION 14 The obligation to consult: If the transferee plans to make some of the transferred employees redundant, presumably it would be the obligation of the transferee to consult in relation to the redundancy, even if the transferor is aware of the transferee’s intention. Is there any obligation on transferor in relation to the same?

ANSWER It is correct that the transferee has an obligation to consult on the proposed redundancies.

The timing of the redundancies in the post transfer period is a crucial consideration. If it is anticipated that redundancies will take effect immediately on transfer, the transferor should notify the affected staff of those measures envisaged for the affected staff, immediately post-transfer.

As good practice we would encourage a transferor employer to give the transferee employer (managed) access to the transferor’s staff so that the information and consultation process regarding redundancies can be commenced in advance of the transfer, especially if timing is a crucial consideration. As a minimum, the transferor employer would need to inform and consult its transferring staff or their representatives that a redundancy programme is envisaged as a measure by the transferee employer post transfer.

QUESTION 15 When do you consult - prior to transfer or as part of redundancy process?

ANSWER The obligation according to the Regulations is to consult where reasonably practicable at least 30 days before the transfer and in any event in good time before the transfer.

QUESTION 16 Where you acquire a business knowing that you will be overstaffed and will have to undergo a redundancy process, is there a minimum time period before you can commence process?

ANSWER No, there is no stipulated minimum time period. Obviously, the closer to the transfer date at which the redundancy process begins, the more the affected employees will suggest that the redundancies arise as a result of the transfer. Nonetheless, if the transferee can justify the redundancies for ETO reasons, then that timing would not cause a difficulty.

QUESTION 17 Does information required to be given under Section 21 of the Information and Consultation Act 2006 have to be given prior to the transfer or at what point?

ANSWER The 2006 Act does not specifically state whether the information must be given before or after the transfer. However, from the transferee’s perspective it would be important to request that information prior to the transfer so that the transferee has the necessary information about the employees and so that the transferee is immediately at the date of transfer in a position to comply with its obligation to afford the transferring employees the same terms and conditions as they enjoyed prior to their transfer.

Equally, from the transferor’s perspective, it would be prudent to have given that information to the transferee prior to the transfer. This is so that the transferor will be in a position to show that, if for some reason the transferee allows a liability to a transferring employee to arise by not having honoured the terms and conditions of the transferring employees, it was not due to any default on the part of the transferor.

F. Conditions of Employment and Other Matters. What Transfers?

QUESTION 18 John McMullen stated that two contractors (cleaning) in a second generation transfer are covered. How does he marry this with Irish practise which is that the Regs do not automatically apply? Is there an obligation to transfer personal records?

ANSWER In a second generation outsourcing (changeover of contractors) it is perfectly possible for the Irish Regulations to apply. However, Irish law is governed by Ayse Süzen and the Regulations will not automatically apply simply by virtue of the contract changeover. If the Regulations do apply, employees transfer.

There is no obligation, as such, to transfer personnel records. A far-seeing client could usefully provide in the contract with the first contractor that the outgoing contractor co-operates with the contractor to deliver up data (subject to data protection laws) in order to enable the transferee to carry out its employment obligations.

QUESTION 19 John McMullen said that collaboration can warrant a transfer – can you provide examples? Which geographical jurisdiction applies in various situations?

ANSWER The European Court case law stipulates that a legal connection or a contract is not strictly necessary between transferor and transferee. A transfer of an undertaking between an outgoing contractor and an incoming contractor would be an example of this. When the European Court refers to “collaboration” it is trying to de-emphasise the word “legal” in “legal transfers”, a phrase which appears in the Directive.

An example of collaboration of transferor and transferee where there was no contract between them may be found in the Juuri case, where the transferor basically allowed the transferee to carry on the business in succession to it. As to which geographical jurisdiction applies, if the business is situated in Ireland, Irish law applies and if in Britain, British law and so forth. Cross border transfers are more difficult and case law is in its infancy on this subject.