The Acquired Rights legislation provides for the transfer of the rights and obligations of employers and employees in the transfer of an undertaking. The mutual rights and obligations of employer and employee, pass from the transferor to the transferee.
The transfer is effectively mandatory. The employment contract is transferred. The employee cannot claim that he has been dismissed by his former employer or made redundant. The employee is entitled not to be transferred, but cannot claim that his employment with the transferor survives, that there is a redundancy or an unfair dismissal.
The basic principle of the Acquired Rights Directive is that the rights and obligations under the transferring employee’s contracts of employment are preserved. They are transferred to the transferee, who assumes responsibility for them.
The legislation preserves the employee’s continuity of service. Accordingly, all rights accrued under protective legislation, continue as if there had been no transfer, in calculating the required period of service.
The terms of applicable collective agreements are transferred. The transferee must abide by the terms and conditions of the collective agreement on the same terms applicable to the transferor until the date of expiry of the agreement or the entry into force of another collective agreement in respect of the transferred employees. Where there is a collective agreement in place, it must be observed by the transferee even if it has terminated by its terms on the transfer.
The rights of the employee’s representative are preserved on the same terms and conditions as provided by law or collective agreement. Where the undertaking is not preserved in full, the transferee must provide arrangements for the employees to elect or choose another representative.
Collective agreements need not be applied to employees, who are first employed after the transfer. Collective agreements continue in being on the transfer of the business.
The Directive allows states to limit the application of collective agreements, provided that they apply for at least one year. It is not so limited under the Irish legislation.
No Automatic Dismissal
The transfer of an undertaking does not break the continuity of employment required for the acquisition of Unfair Dismissals and Redundancy rights (or for any other purpose). The transfer by itself does not constitute a dismissal. In e circumstances, there may be no dismissal, a fair dismissal (usually on the grounds of redundancy or and unfair dismissal. Potentially, a claim for unfair dismissal may be taken against the transferor and/ or transferee.
There is no dismissal if the employee refuses to transfer. The transfer is automatic. There is no dismissal and re-engagement. The refusal is equivalent to resignation, so that a redundancy claim may not be maintained, even against the transferor. Conversely, if the transferring employer makes a redundancy payment, it does not necessarily mean that there has not been a transfer of undertakings.
If it is found that the dismissal by the transferor is unfair, then the employee transfers to the transferee. He may be ordered to be re-engaged or reinstated.
The termination of a genuine fixed term contract before the transfer which is not renewed, will not generally be a dismissal.
The transfer of an undertaking cannot, of itself, be a justification for dismissal. A dismissal, for this reason, is automatically unfair. This is applicable to a dismissal by the transferor or the transferee.
Under the Directive, a transferor and transferee may be liable jointly or severally. Generally, post-employment unfair dismissal proceedings are brought against the transferee. Transferees will generally have required an indemnity from the transferor, on the acquisition in respect of transfer that are in substance pre-transfer claims.
A constructive dismissal may arise, if there is a very substantial change in working conditions, such as to breach the employment contract. Exceptionally, a change in working conditions may justify the employee in resigning, and claiming constructive dismissal. It is imprudent for an employee to assume that he is entitled to resign. He should refer the matter to the appropriate internal redress and grievance procedures.
Dismissals for economic, technical and organisational reasons, which require changes in the workforce, are not prohibited. However, the reasons must be genuine, and it must be objectively necessary that the employee is dismissed. The concept is similar to that of redundancy.
Either the transferor or the transferee may dismiss an employee if there are economic, technical and organisational reasons for the dismissal. There may be a fine dividing line between this case and the case of a dismissal by reason of the transfer. An ostensible redundancy may be shown to be in fact, an unfair dismissal.
A dismissal is not unfair if it arises by reason of technical, economic or organisational reasons entailing changes in the workforce. This would be in effect, a dismissal by reason of redundancy, which is a valid ground for dismissal. If the employee receives a redundancy payment and accepts it, the employment may be treated as terminated.
Redundancy by Transferee
The dismissal for redundancy must be connected with the transfer. The defence is effectively available to the transferee. The European Court of Justice has taken the view that the defence is not available to the transferor even on the basis that it will make the business more attractive to the transferee.
Therefore, the transferee may take the transfer of the employees and dismiss them post transfer, in the case of a genuine redundancy. The transferee may be able to rely on the defence based on economic and technical and organisational reasons. He may obtain an indemnity from the transferor.
The defence is only applicable to dismissal. It does not apply to variations in the employment contract alleged to be justified by such circumstances.
If the transfer involves a change to the terms of employment of the employee by which the employee’s contract is terminated, then this may be regarded as the cause of the termination of the contract and may amount to a dismissal by the employer, which is potentially unfair.
The Acquired Rights Directive does not require EU Member States to apply the transfer of rights principle to old age pensions, invalidity pensions, survivor’s pensions and other pension schemes outside of statutory social insurance schemes. The Irish legislation does not apply to these pension rights. Seperately, pensions legilsation makes provision for existing accrued benefits.
The exemption applies to pension and long service benefits. These are retirement benefits which arise on termination of employment on reaching a certain age, usually designated the retirement age. It covers “old age” or retirement benefits, payable at the end of the normal working life in accordance with the terms and structure of the employment.
The exemption extends to the employee’s right to old age invalidity or survivor’s benefits under supplementary company or intercompany pension schemes, outside of statutory (State) social security schemes.
The exception is narrowly interpreted. It applies to the above catagories of etirement benefits. Other benefits, such as early retirement benefits may fall outside the exemption, depending on their terms and conditions.
There are separate Pensions Acts provisions which preserve certain pension rights on the transfer of a business. In general terms, they protect accrued rights but do not guarantee the continuation of the existing pension provision and entitlements.
Former employees may have entitlements under pension schemes whether current, future or prospective rights. The accrued rights of existing employee are protected. The interests of such persons are preserved.
Pensions legislation make provision for the protection of those with pension rights but in more modest terms. The transferee is effectively obliged to preserve accrued retirement and survivor benefits.
Existing pensions promises, such as a commitment to contribute to a pension fund are not required to transfer. The pension scheme itself does not transfer.
Transferor / Transferee
The transferor must notify the transferee of all rights and obligations existing under employment contracts at the date of transfer which are to be transferred, which he knows or ought to know. If the transferor fails to do so, then the transferee may have a right of action to recover monies payable to employees in Workplace Relations Commission claims and otherwise.
The transferee must notify the transferor of the obligation which he believes it owes resulting from failure to provide the documentation. The transferor must comply within 21 days with the request made. If the information is not given, a claim may be taken to the Workplace Relations Commission against the transferee.
The transferee may have a right to an indemnity and reimbursement against the transferor under the relevant sale / transfer agreement.
References and Sources
Transfers of undertakings in Ireland: Employment Rights Houston 2011
Transfer of Undertakings Gary Byrne 1998
Employment Law Meenan 2014 Ch. 16
Employment Law Supplement Meenan 2016 Ch.
Employment Law Regan & Murphy 2009 Ch.19 ( 2nd Ed 2017)
Employment Law in Ireland Cox & Ryan 2009 Ch.23
Other Irish Books
Employment Law Forde & Byrne 2009
Principles of Irish Employment Law Daly & Doherty 2010
Council Directive No. 2001/23/EC of 12 March 2001
European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 S.I. No. 131/2003
Periodicals and Reports
Employment Law Yearbook (annual) Arthur Cox
Employment Law Reports
Irish Employment Law Journal
Employment Law Review
Workplace Relations Commission http://www.lrc.ie/en/
Irish Human Rights and Equality Commission https://www.ihrec.ie/
Health and Safety Authority http://www.hsa.ie/eng/