Public and Commercial Services Union

The regulations do not apply to the following:

• transfers by share take-over because, when a company's shares are sold to new shareholders, there is no transfer of the business - the same company continues to be the employer;
• transfers of assets only (for example, the sale of equipment alone would not be covered, but the sale of a going concern including equipment would be covered);
• transfers of a contract to provide goods or services where this does not involve the transfer of a business or part of a business;
• transfers of undertakings situated outside the United Kingdom.

Those provisions of the regulations which relate to dismissal of employees because of the transfer, the duty to inform and consult representatives/unions and the failure to inform and consult them as required, do not apply to employees who, under their contracts of employment, normally work outside the United Kingdom.

Employer's position in a transfer

Under the regulations, when an undertaking is transferred the position of the previous employer and the new employer is as follows:

The new employer takes over the contracts of employment of all employees who were employed in the undertaking immediately before the transfer, or who would have been so employed if they had not been unfairly dismissed for a reason connected with the transfer. An employer cannot just pick and choose which employees to take on.

The new employer takes over all rights and obligations arising from those contracts of employment, except criminal liabilities and rights and obligations relating to provisions about benefits for old age, invalidity or survivors in employees' occupational pension schemes.

The new employer takes over any collective agreements made on behalf of the employees and in force immediately before the transfer

Neither the new employer nor the previous one may dismiss an employee because of the transfer or a reason connected with it, unless the reason for the dismissal is an economic, technical or organisational reason entailing changes in the workforce.

If there is no such reason, the dismissal will be unfair. If there is such a reason, and it is the cause or main cause of the dismissal, the dismissal will be fair provided an employment tribunal decides that the employer acted reasonably in the circumstances in treating that reason as sufficient to justify dismissal.

If, in this case, there is a redundancy situation, the usual redundancy procedures will apply. The new employer may not unless the contract of employment so provides worsen the terms and conditions of employment of any transferred employee.

The previous and new employers must inform and consult unions.

Employee's position in a transfer

When an undertaking is transferred the position of the employees of the previous or new employers is as follows:

• An employee claiming to have been unfairly dismissed because of a transfer has the right to complain to an employment tribunal.
• Transferred employees who find that there has been a fundamental change for the worse in their terms and conditions of employment as a result of the transfer have the right to terminate their contract and claim unfair dismissal before an employment tribunal, on the grounds that actions of the employer have forced them to resign.

Employees may not make this type of claim solely on the grounds that the identity of their employer has changed unless the circumstances of an individual case change and that change is significant and to the employee's detriment.

In both the above cases dismissal because of a relevant transfer will be unfair unless an employment tribunal decides that an economic, technical or organisational reason entailing changes in the workforce was the main cause of the dismissal and that the employer acted reasonably in the circumstances in treating that reason as sufficient to justify dismissal. Even if the dismissal is considered fair, employees may still be entitled to a redundancy payment

Employees employed in the undertaking immediately before the transfer automatically become employees of the new employer, unless they inform either the new or the previous employer that they object to being transferred. In this case the contract of employment with the previous employer is terminated by the transfer of undertaking but the employee is not dismissed. The previous employer may re-engage the employee.

An employee's period of continuous employment is not broken by a transfer, and, for the purposes of calculating entitlement to statutory employment rights, the date on which the period of continuous employment started is the date on which the employee started work with the old employer.

This should be stated in the employee's written statement of terms and conditions; if it is not, or if there is a dispute over the date on which the period of continuous employment started, the matter can be referred to an employment tribunal.

Transferred employees retain all the rights and obligations existing under their contracts of employment with the previous employer and these are transferred to the new employer, with the exception that the previous employer's rights and obligations relating to benefits for old age, invalidity or survivors under any employees' occupational pension schemes are not transferred.

If the new employer does not provide comparable overall terms and conditions, including pension arrangements, it is possible that an employee may have a claim for unfair dismissal, although this has never been tested in the courts.

Occupational pension rights earned up to the time of the transfer are protected by social security legislation and pension trust arrangements.

Redundancy

Dismissed employees may be entitled to redundancy payments. Employers must also ensure that the required period for consultation with employees' representatives is allowed.

Entitlement to redundancy payments will not be affected by the failure of any claim which an employee may make for unfair dismissal compensation.

Where there are redundancies and it is unclear whether the regulations apply, it will also be unclear whether the previous or the new employer is responsible for making redundancy payments. In such cases employees should consider whether to make any claims against both employers.

Trade union recognition

It is essential that a high-level of trade union membership is  maintained to avoid de-recognition from the new employer. Discuss organising and recruiting strategies with your local PCS negotiating officer and regional or group organiser. They will advise you about specific organising/recruiting tactics, and will liaise with the Campaigns and Communications Unit at HQ as necessary to produce useful material.

Does PCS automatically represent transferring employees?

If there is a recognised union in the workforce, the union automatically represents all employees, whether or not they are union members.

The one exception is where employees fall outside the bargaining unit. This is sometimes the case where PCS represents members in the private sector who may be involved in a second round transfer. In this circumstance, the employer may opt to ask these staff to elect their representatives. If this happens, remember:

• Only staff outside the bargaining unit can opt to elect a representative. All employees whose pay is negotiated by PCS are represented by PCS regardless of whether they are members;
• The PCS staff representatives can run for the elected post. The only requirement to run in an election is that the candidate must be an employee of the organisation, The lay representative can run on a pledge to represent all affected employees.

Pensions