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Obligations in Respect of Transfers or Outsourcing

Obligations in Respect of Transfer or Outsourcing

Acquisition of Transferor's Employee Obligations

In the event of the transfer of a business under the Regulations (or the contracting-out to a contractor of a function previously carried out by the company or change of a contractor), the party acquiring the business takes over the transferor's obligations towards the affected employees except in relation to occupational pensions. Employees hitherto employed by the transferred business will therefore be deemed to have continuous employment before and after the transfer.

Continuity of Collective Agreements

A collective agreement stated to be legally binding or incorporated into individual employment contracts will continue in force after the transfer. It will not continue to apply if the transferred business or function loses its separate identity.

Consultation Obligations 

The transferor has obligations to inform and consult with trade union representatives or elected representatives of the affected employees as to any proposed transfer of an undertaking under the Regulations. There are specific requirements for electing employee representatives where no union is recognised.

There are detailed provisions as to the information required which must be provided at a sufficient time before the transfer to enable the consultation to take place. The information that the transferor is obliged to provide includes information on the total number of agency workers engaged, the type of business in which they are utilised, and the type of work they are contracted to undertake. The transferee may well be required or requested by the transferor to participate in the consultation between the transferor and his employees including advising the transferor of his intentions as to the relevant employees.

Post-Transfer Differentials

The transferee will need to consider whether different terms between transferred and existing employees may give rise to problems under equality laws. It is not possible to validly change transferring employees' terms in connection with the transfer.

Transfers and Dismissal, Redundancy and Variation

Dismissal in connection with the transfer or outsourcing will be considered automatically unfair. However, there is an exception where an economic, technical or organisational reason entails changes to the workforce.

Variations to employment contracts of transferred employees in connection with the transfer are void. It is possible however to validly change employees' terms (subject to their consent) for a reason other than associated with the transfer.

Due Diligence

The transferee and his lawyers will carry out due diligence checks on the business to be transferred so that all obligations under the transfer of undertaking regulations can be ascertained before the transaction and can be taken into account in the negotiations.

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