Transfer of undertakings
What are the main legal impacts of a Transfer of Undertakings (TUPE) in your jurisdiction?
England
On a transfer of business, or a change of service provider, TUPE will transfer the employment of employees working in that business on the same terms, other than pension entitlement (although the new employer is obliged to provide a minimum terms pension entitlement). There is additional protection against unfair dismissal, and obligations to inform and consult with employee representatives. Employees have the right to opt out of the transfer, which will be treated as a resignation. Changes in terms for a reason connected with the transfer are void unless for a permissible reason.
France
Given that transfers of undertakings are essentially governed by EC law, the requirements mentioned for Germany are mostly applicable to transfers under French law. However, please note that (i) there is a legal requirement to inform and consult the works council (if any) before the transfer, (ii) there is no legal requirement to inform each employee before the transfer although, as a practical matter, such information is usually given, (iii) the employee is not entitled to object to the transfer of his/her employment contract (i.e. if he/she does not want the employment relationship to be carried over with the new employer, his/her only option is to resign), and (iv) terminations by the transferor in breach of the legal provisions on transfer of undertakings are null and void.
Belgium
The rights and obligations arising from an employment contract or relationship existing on the date of the transfer are transferred by operation of law (all rights and obligations under or in connection with the contract are transferred). Any existing or potential liabilities arising out of the contract will also be transferred, e.g., claims for discrimination on the basis of sex or race. However, old age, invalidity and survivor's benefits under supplementary schemes are not automatically transferred. The transferee is, in principle, not obliged to take over any old age, invalidity or survivor's benefits under supplementary schemes, unless such schemes are embedded in a collective bargaining agreement entered into at company level. The transfer of an undertaking, business or part of an undertaking or business does not in itself constitute grounds for dismissal by the transferor or the transferee. However, dismissals may take place for economic, technical or organisational reasons entailing changes in the workforce.
If the employment contract or relationship is terminated because the transfer involves a substantial change in working conditions to the detriment of the employee, the transferee shall be considered responsible for the termination. After the transfer, the transferor and the transferee shall be jointly and severally liable for obligations that arose prior thereto out of an employment contract or relationship existing on the date of the transfer. Following the transfer, the transferee must also continue to observe the terms and conditions of any collective bargaining agreement applicable to the transferor until the date of termination or expiry of that agreement or the entry into force of a new agreement. If a company is involved in negotiations relating to a transfer of undertakings, it must inform the works council (in the absence of a works council, the trade union delegation must be informed) in good time and prior to any public announcement of the transfer.
The information provided to the works council must relate to
- the economic, financial and technical reasons for the transfer and
- the transfer's economic, financial and social implications. In addition, the company must consult with the employee representatives in good time on envisaged measures in relation to the employees. Even when a company involved in negotiations relating to a transfer of undertakings does not have any employee representatives, the affected employees must be informed prior to the transfer of
- the (envisaged) date of the transfer by way of agreement;
- in the event of bankruptcy, the (envisaged) date of the transfer of assets;
- the reasons for the transfer,
- the legal, economic and social consequences of the transfer for the employees; and
- the envisaged measures vis-à-vis the employees.
Portugal
If there is a transfer of a business or part of a business, the Acquired Rights Directive has imposed the same requirements as apply in other EU countries. Therefore, there are obligations to inform and consult, and the employment will transfer automatically. Employers must inform their employees in advance about a transfer of undertakings. Such information must inter alia contain a statement indicating the new employer's intentions concerning the future organisation and any planned or likely changes in employment. The employees have a right of contradiction with regard to the transfer, the result of which is that a transfer of the employment will not happen. In such cases the employment relationship is often terminated by the employer for operational reasons. Otherwise the mere fact is that there are other employees with other contractual terms is no reason to change the contractual terms of employment concerning the employees of the transferor. A notice of termination based on the Transfer of Undertakings is illegal.
Germany
If there is a transfer of a business or part of a business, the Acquired Rights Directive has imposed the same requirements as apply in other EU countries. Therefore, there are obligations to inform and consult, and the employment will transfer automatically. Employers must inform their employees in advance about a transfer of undertakings. Such information must inter alia contain a statement indicating the new employer's intentions concerning the future organisation and any planned or likely changes in employment. The employees have a right of contradiction with regard to the transfer, the result of which is that a transfer of the employment will not happen. In such cases the employment relationship is often terminated by the employer for operational reasons. Otherwise the mere fact is that there are other employees with other contractual terms is no reason to change the contractual terms of employment concerning the employees of the transferor. A notice of termination based on the Transfer of Undertakings is illegal.
Ireland
If there is a transfer of a business or part of a business, the Acquired Rights Directive has imposed the same requirements as apply in other EU countries. Therefore, there are obligations to inform in relation to certain implications and consult in relation to measures, e.g. the new employer's intentions concerning the future organisation and any planned or likely changes in employment. Employees are automatically transferred to the new entity. An employee may not be dismissed solely by reason of a transfer. However, dismissals may take place for economic, technical or organisational reasons involving changes in the work force. If employment is terminated because a transfer involves a substantial deterioration in the working conditions of the employee, the employer concerned is regarded as having been responsible for the termination. The employees have a right to object to transferring, the result of which is that a transfer of the employment will not happen. In such cases the employment relationship is often terminated by the employer on grounds of redundancy.
Spain
The Acquired Rights Directive has imposed the same requirements in case of transfer of undertakings for every EU countries. Therefore, there are obligations to inform and consult, and the employment will transfer automatically. If the transfer of undertakings implies changes in the employment conditions, the employer must consult the employee representatives. As mentioned above, the main effect of the transfer of undertakings is that the transferee of the undertaking becomes the employer of the transferred employees by operation of law, under the same terms and conditions as they had with the transferor (including pension rights). Thus, the affected employees do not have a right of contradiction. Besides, termination cannot be based on the transfer; otherwise termination will be considered unfair.
Italy
If there is a transfer of a business or part of a business, the Acquired Rights Directive has imposed the same requirements as apply in other EU countries. Therefore, there are obligations to inform and consult the trade unions and the works councils, and the employment relationship will transfer automatically. Pursuant to section 2112 of the Civil Code, whenever a transfer of undertaking takes place the employment agreements of the personnel employed by the seller continue with the purchaser by operation of Law, i.e. regardless of the contracting parties' intentions. Moreover, the seller and the purchaser are deemed to be jointly liable for the employees' rights existing on the date of the transfer. In addition, the purchaser is required to maintain the same economic and legal treatment which was in force at the time of the transfer.
The Netherlands
If a decision is taken to transfer an enterprise or a part thereof, as is often the case when is a restructuring or reorganisation within a company, the Transfer of Enterprise Act must be taken into account. The transfer of an enterprise or part thereof is understood to mean the transfer of an undertaking or a part thereof pursuant to a contract. However, whether a transfer of an enterprise or a part thereof falls within the definition set forth in the Transfer of Enterprise Act is not always clear-cut. The decisive factor is whether the identity of the transferred enterprise is retained, which must be determined with due regard to the actual circumstances. In the case of a transfer of an enterprise as referred to in the Transfer of Enterprise Act, the transferor's rights against and obligations towards employees working in the enterprise at the time of the transfer pass by operation of law to the transferee. These employees thus enter into the transferee's employ at the time of the transfer without an agreement to that effect being required.
These pages may contain information of general interest about current legal issues, but do not give legal advice.
