EMP8
Transfer of Undertakings
General
Main statute law: Transfer of Undertaking (Protection of Employment) Regulations 2006 (the ‘2006
Regulations’)
BiS Guide, Employment Rights on the Transfer of an Undertaking (January 2012) summarises the effect of
the Regulations as:
- Preserve the continuity of employment and terms and conditions of any employees who are
transferred to a new employer when a relevant transfer takes place
- So, employees employed by the previous employer (the ‘transferor’) when the transfer takes effect
automatically become employees of the new employer (the ‘transferee’) on the same terms and
conditions.
At common law, transfer of an undertaking by one employer to another automatically terminates the
employee’s contract of emp. Usually reason for dismissal will be redundancy
2006 Regulations altered position, so it allowed for a ‘relevant transfer’ between employers so no
termination from Job 1 when move to Job 2 Employee transfers to new job under the transfer of
undertaking
When do the 2006 Regulations apply?
Applicability 1) Transfer from one person to another; so a change in employer, not merely in the
ownership
o Regulations apply to mergers, sale of part of a going concern, change of
franchise, sale of a sole trader’s business or partnership,
o Do not apply to transfers of assets or when shareholdings change in a
company (as this is not a change in the employer)
2) Regs. apply where the ownership of a company is transferred to a company operating
outside the EU
3) Where bankruptcy/insolvency proceedings exist, contracts of employment will not be
transferred automatically
4) Reg 4 (Automatic transfer of contract of employment together with ALL of the rights
and liabilities) does not apply to rights under or in connection with any occupational
pension scheme (Reg 10)
5) Reg 4 does not transfer any liability of any person to be prosecuted for/convicted
of/sentenced for a criminal offence
o So e.g. if the transferor is liable to be prosecuted for breach of the Health and Safety
at Work Act - HSWA 1974, that liability cannot pass to the transferee on the transfer
of a business (Reg 4(6))
6) Reg 7 (Dismissals connected to the transfer are automatically unfair unless economic
etc reason) applies only to employees who satisfy the usual qualifying conditions for
unfair dismissal protection (e.g. 2 years continuous emp)
7) 2006 Regulations apply to England, Wales, Scotland and N. Ireland
o 2014 Regulations do not apply to N.I
8) Currently unclear if the 2006 Regulations apply to ‘workers’ (not employees)
Reg 3 also clear up some areas, which was uncertain before:
a) 2006 Regulations applies to public and private undertakings engaged in economic activities, whether
or not acting for gain
b) Regs apply to a transfer/service provision charge regardless of:
The transfer being from outside the UK, now being transferred to UK
c) Regs apply to a transfer/service provision charge where persons employed in work outside the UK,
but undertaking is situated in the UK immediately before the transfer
d) Regs do not apply to administrative reorganisation of public administrative authorities or the transfer
of administrative functions between public administrative authorities (reg 3(5))
Transfer of Undertakings
General
Main statute law: Transfer of Undertaking (Protection of Employment) Regulations 2006 (the ‘2006
Regulations’)
BiS Guide, Employment Rights on the Transfer of an Undertaking (January 2012) summarises the effect of
the Regulations as:
- Preserve the continuity of employment and terms and conditions of any employees who are
transferred to a new employer when a relevant transfer takes place
- So, employees employed by the previous employer (the ‘transferor’) when the transfer takes effect
automatically become employees of the new employer (the ‘transferee’) on the same terms and
conditions.
At common law, transfer of an undertaking by one employer to another automatically terminates the
employee’s contract of emp. Usually reason for dismissal will be redundancy
2006 Regulations altered position, so it allowed for a ‘relevant transfer’ between employers so no
termination from Job 1 when move to Job 2 Employee transfers to new job under the transfer of
undertaking
When do the 2006 Regulations apply?
Applicability 1) Transfer from one person to another; so a change in employer, not merely in the
ownership
o Regulations apply to mergers, sale of part of a going concern, change of
franchise, sale of a sole trader’s business or partnership,
o Do not apply to transfers of assets or when shareholdings change in a
company (as this is not a change in the employer)
2) Regs. apply where the ownership of a company is transferred to a company operating
outside the EU
3) Where bankruptcy/insolvency proceedings exist, contracts of employment will not be
transferred automatically
4) Reg 4 (Automatic transfer of contract of employment together with ALL of the rights
and liabilities) does not apply to rights under or in connection with any occupational
pension scheme (Reg 10)
5) Reg 4 does not transfer any liability of any person to be prosecuted for/convicted
of/sentenced for a criminal offence
o So e.g. if the transferor is liable to be prosecuted for breach of the Health and Safety
at Work Act - HSWA 1974, that liability cannot pass to the transferee on the transfer
of a business (Reg 4(6))
6) Reg 7 (Dismissals connected to the transfer are automatically unfair unless economic
etc reason) applies only to employees who satisfy the usual qualifying conditions for
unfair dismissal protection (e.g. 2 years continuous emp)
7) 2006 Regulations apply to England, Wales, Scotland and N. Ireland
o 2014 Regulations do not apply to N.I
8) Currently unclear if the 2006 Regulations apply to ‘workers’ (not employees)
Reg 3 also clear up some areas, which was uncertain before:
a) 2006 Regulations applies to public and private undertakings engaged in economic activities, whether
or not acting for gain
b) Regs apply to a transfer/service provision charge regardless of:
The transfer being from outside the UK, now being transferred to UK
c) Regs apply to a transfer/service provision charge where persons employed in work outside the UK,
but undertaking is situated in the UK immediately before the transfer
d) Regs do not apply to administrative reorganisation of public administrative authorities or the transfer
of administrative functions between public administrative authorities (reg 3(5))
