Legal Article - Employment Law

Unfair Dismissal Rights

Under new regulations, employers are obligated to inform and consult Trade Union representatives of the employees affected by the transfer. The employee’s continuity of employment will remain intact, thus maintaining any relevant unfair dismissal rights.

Any dismissals prior to transfer will become the liability of both the new and existing employers. The employee would have been part of the undertaking had they not been unfairly dismissed regardless of whether the dismissal was connected to the transfer or not.

If an employee refuses to transfer, they will resign of their own accord and not have a claim to unfair dismissal as no dismissal has occurred.
 
Any dismissals, whether by the transferee or transferor, related to the transfer are automatically unfair, unless the dismissal is necessary for an economic, technical or organisational reason entailing changes to the work force (the ETO defence).

Dismissals are automatically unfair where

• The transferor dismisses in order to facilitate the transfer rather than because the state of the business requires dismissals

• The transferee “makes” the transferor dismiss employees prior to the transfer, whether for redundancy or otherwise (e.g. the new employer says they will charge less for providing a service if the old employer agrees to dismiss the existing work force

• The transferee refuses to honour fundamental terms of the contract of employment that transfers

• The transferee after the transfer tries to change the fundamental terms of the contracts without the employees consent.

The ETO defence has been interpreted narrowly by the courts, but may be fair where

• Demand for an employees’ output has fallen to such an extent that profitability could not be sustained unless staff are made redundant (an economic reason)

• An employer wishes to use new technology and the employees of the previous employer do not have the necessary skills (technical reason)

• The new employer operates at a different location from the previous employer and it is not practical to relocate the staff (organisational reason).

In such cases, for the dismissal to be fair the employer must apply normal fair dismissal rules i.e. act reasonably in all the circumstances. In such situations, the employee concerned may be eligible for a redundancy payment.

The old employer will be liable for redundancy payments if the redundancy takes effect before the transfer. If the redundancy takes effect after the transfer, the new employer will be liable for redundancy payments including payments in respect of any continuous service with the previous employer.

If they are not subsequently renegotiated, those payments must be on the same contractual terms as those in force before the transfer.

Published: 27 May 2011

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