The European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003

The European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (“the Regulations”) protect the rights of employees when there is a transfer of the undertaking in which they are employed. The Regulations transpose Council Directive No 77/187 of 14 February 1977 on the approximation of the laws of the Member States relating to the safe-guarding of employees’ rights in the event of transfers of undertakings, businesses or parts of businesses (“the Directive”).This area of law is commonly referred to as “TUPE”.

An ‘undertaking’, for the purposes of the Regulations, is an economic entity. This is an organised grouping of persons and assets facilitating the exercise of an economic activity which pursues a specific objective. The entity must retain its identity in that it is actually continued or resumed.

The transferor’s rights and obligations arising from a contract of employment existing on the date of transfer shall, by reason of such transfer, be transferred to the transferee.

The date of transfer is the date on which responsibility as employer for carrying on the business of the unit transferred moves from the transferor to the transferee.

The existing terms and conditions of the employment contract and the employer’s obligations thereunder are automatically transferred to the new employer. The parties, employer and employee, remain free to agree changes in terms and conditions of employment regardless of whether or not a transfer is or has taken place under TUPE.

The rights of the transferor vis-á-vis its employees also pass to the transferee. Thus the benefit of restrictive covenants and contractual obligations must pass to the transferee.

Employee pension rights, apart from those provided for by social welfare legislation, do not transfer to the new employment. However, where there is a pension scheme in operation in the original employer’s business at the time of the transfer, the legislation provides that:

  • If the scheme is an occupational pension scheme covered by the Pension Acts, then the protections given by that legislation apply;
  • In the case of other pension schemes, the new employer must ensure that rights are protected.

The parties to a transfer have obligations to notify, inform and possibly to consult employees and their representatives before the transfer takes effect.

There are joint obligations on the transferor and transferee to inform employee representatives of the reasons for the transfer, the legal, economic and social implications of the transfer for the employees, and any of the measures envisaged in relation to the employees.

This information is to be given, where reasonably practicable, not later than 30 days before the transfer is carried out and, in any event, before the employees are directly affected by the transfer ‘as regards their conditions of work and employment’.

The Regulations generally prohibit dismissals for reasons connected with the transfer. An employee who is terminated may claim either under the Regulations, or the Unfair Dismissals Acts 1977 – 2015.

The Regulations do allow for dismissals to take place for economic, technical or organisational reasons entailing changes in the workforce (ETO). Only the transferee can make such dismissals.

Irish cases in this area have tended to equate the ETO dismissals with the concept of redundancy.

Economic, technical or organisational reasons must entail ‘changes in the workforce’. This normally requires a change in the numbers of people employed to perform particular functions, not merely a change in their terms and conditions.

European Court of Justice decisions have made it clear that the term “transfer” implies that the transferee actually carries on the activities of the transferor as part of the same business. The decisive criterion for establishing whether there is a transfer for the purposes of the Directive is whether the business in question retains its identity.

Contracts for Services

In relation to contracts for services, where the main/only asset is the workforce, which were previously carried out by one contractor but are now carried out by another contractor (also in circumstances where the contract is brought in house or outsourced), the EAT/WRC decisions have found that it is essentially up to the incoming contractor to decide whether or not to take on the outgoing contractor’s employees.

If the incoming contractor does choose to take on these employees then TUPE may apply, provided the employees can be said to be part of a stable economic entity, i.e. the job that they were doing before the transfer is essentially identical to the job they are doing after the transfer.

If the incoming contractor chooses not to take on the outgoing employees then TUPE will not apply.

The Right of an Employee to Object to a Transfer

The transfer of the employee from transferor to transferee is automatic irrespective of the wishes of either party. This is subject to the right of the employee to object to a transfer of his employment relationship.

The legal effect of the employee’s right to object is a matter for each member state to determine; consequently, differing positions regarding the effect of a refusal have emerged.

The legal effect in Ireland was considered in Symantec Ltd. v Leddy & Lyons where the employees refused to transfer when Symantec sold part of its business to another company. The EAT (Employment Appeals Tribunal) held that in refusing to transfer, the employee remained employed by the transferor. If the transferor had no alternative position to offer the employee, he would be redundant and the transferor would be liable for that redundancy.

However, the High Court overturned the EAT’s decision, holding that the refusal of an employee to transfer does not result in the employee being made redundant. Consequently the employee was not entitled to any severance payment, statutory or otherwise. The High Court appears to have aligned itself with the UK approach, where legislation provides that a refusal to transfer is deemed to be a resignation by the employee.

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