When a new owner takes over the business where you work, there will be a lot of employee speculation in the air.
You might be asking, what does this mean for my job, or for my colleagues’ jobs?
This will be a period of change and upheaval, so it’s important to know your legal rights and protections during a company takeover,
In this article, we’ll help UK employees understand how their rights are affected when another business takes over under Transfer of Undertakings (Protection of Employment) (TUPE).
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My Company Has Been Taken Over: Employee Concerns and Considerations
When the business that you are employed by is taken over by a new owner, you’re bound to have concerns.
This can be an incredibly tough and stressful time for employees. You’ll be wondering, will I keep my job? Will my role and responsibilities change? Could I be moved department? Who is my new boss? All these questions and undoubtedly countless more will be flying around your head.
If you hadn’t been informed of the prospect of the sale before it was completed, you’ll be feeling overlooked and undervalued.
Role in company takeovers
As an employee, you should have a crucial part to play in the company takeover, and your new employer must listen to your concerns.
You have the right to refuse a transfer to a new employer - this typically means you have no right to:
Redundancy pay
Unfair dismissal claims
You don’t have to give notice if you choose not to continue your employment under the new owner; simply inform them you wish to end your contract before the transfer happens and your employment will end at the time of the transfer.
In terms of your continuing employment, if you decide to stay with the new employer, your role will depend on the type of takeover your company was purchased in.
Share purchase vs asset acquisition
The two main types of common takeover are share purchase takeovers and asset acquisition takeovers.
A share purchase takeover is a type of company takeover where the acquiring company buys a controlling stake in the target company, purchasing the majority of shares from its shareholders.
Employee’s job conditions including their job roles and responsibilities will continue as before in this type of takeover. Despite there being new owners of the company, it’s identity will stay the same – its’ name, branding, products and services – and an employees’ role will continue as normal.
An asset purchase occurs when a buyer and seller agree on the purchase of a company’s assets, including:
Facilities
Vehicles
Equipment
Stock
Inventory
The buyer only acquires the assets that have been agreed with the seller. However, the employment contracts automatically transfer to the purchaser - this is governed by the Transfer of Undertakings (Protection of Employment) 2006 (TUPE) regulations.
Takeovers and TUPE Regulations Explained
TUPE regulations essentially protect employee rights when you transfer to a new employer.
A TUPE transfer will happen when:
A company, in full or part, is transferred to another
A service is transferred to a new business and is outsourced to a contractor, such as catering, cleaning, security, waste disposal and machinery maintenance.
A TUPE transfer can mean your employment is transferred to a new employer, or your colleagues might transfer to a new employer while you remain with your existing employer. Conversely, employees from a target company might be transferred to the business that you already work for if they acquired the other company.
To transfer employment as a part of a service transfer, you must also be part of an organised grouping of employees. This means you undertake the work for the client – that is the company benefiting from the services.
A group in this sense can be only one employee, and when only part of your role is transferred, TUPE applies when the client remains the same. The work may be outsourced to a contractor for instance, but you’re still doing the same work for the same client.
Your employer will be able to tell you if you’re transferring under TUPE. If you and they don’t agree on this issue, you might want to consider seeking legal advice.
Employee rights
If you’re a legally classified as a worker, don’t despair yet, TUPE may protect you if you are a worker as per your employment contract. This area of the law is developing in the current climate, so if you are a worker rather than an employee that hasn’t been transferred to a new employer when you think you should have been, please get in touch with us.
Have a read of our guide to learn more about your rights as an employee and at work.
Applicability and protections for employees
Under TUPE, your rights are automatically protected as long as:
Your employment status is ‘employee’
The company or part transferring is based in the UK
The regulations apply to both the public and private sectors.
TUPE can apply if you work abroad but your employer is UK based, or the purpose of the transfer is to move the organisation. This can also be considered a redundancy process.
What are my rights and protections under TUPE?
There are rules employers must follow when transferring ownership under TUPE otherwise they can face penalties.
These include:
Employees’ jobs automatically transfer to the new company unless roles are made redundant
Employee terms and conditions are transferred
Employment continues as usual when the new owner takes charge
The buyer guarantees the employees' rights, liabilities and obligations
Employees are protected from unfair dismissal
Employees must be informed before the transfer date
Continuity of employment and terms
You will continue to be employed under the same conditions and terms of employment when ownership is transferred and TUPE applies.
This is because under this legislation the new employer takes over employee’s contracts, including:
Terms and conditions of the previous employment
Failures of the previous employer to uphold employees’ rights – this means you can make a claim for discrimination against your new employer, despite the events taking place under the seller
Holiday entitlement and rest breaks – if your employer does not respect your statutory rights
Continuous employment – your employment start date is taken from when you were first employed, not when the transfer occurred
Collective agreements
When your new employer doesn’t meet a term of your employment laid out in your contract, they will have committed a breach of contract.
You should be aware that your new employer cannot change your contract or working conditions to match those of their current staff, it doesn’t matter if you agree, the terms and conditions of employment must remain the same as under your original employer.
Yet, the new employer can change your terms of employment and conditions, or dismiss you if they have an economic, technical or organisational reason (ETO) to do so.
ETO reasons can include changes in the workplace and workforce for instance redundancies or a shift to and from a managerial position. These changes do need to be agreed by the employee.
‘Economic’ relates to how the company is performing financially – an employer could dismiss you if the business has become unstable for instance in a recession or demand has fallen, for example in the pandemic
‘Technical’ relates to the equipment and processes of the company – imagine the new company leans heavily on AI writing tools and a writer has little experience in them, they could be made redundant in this case
‘Organisational’ relates to how a company is structured – if the business is moving to a different location there can be a legitimate reason to let employees go, or if someone was hired in the pandemic remotely and now a business is instituting a mandatory hybrid model, the employee’s contract could be changed to mandate that they must work from the office on a set number of days per week
Consultation and information
If you have a trade union, your employer must inform your union before the transfer of ownership takes place.
They must inform your union or employee rep that:
The transfer is happening, why and at what date
How the transfer will impact you
If the company will be reorganised
If the new company uses agency workers
They can be penalised if they fail to inform trade unions of this information.
Additionally, employers need to consult employee representatives about any issues that will impact the employees.
Potential claims and remedies under TUPE
Under TUPE, employees can make claims for compensation against their employer if they fail to meet their responsibilities and protect employees’ rights under the legislation.
Unfair dismissal
We’ve mentioned that if you don’t want to work for the new employer after a transfer, that you lose your ability to claim unfair dismissal. If your working conditions significantly worsen because of a transfer, you can object to the transfer of employment or resign and claim unfair dismissal.
Failure to consult
When an employer fails to inform and consult with employees and or their trade union representatives before a TUPE transfer, they can be taken to an employment tribunal by affected employees, or a recognised trade union.
There are serious penalties for failure to consult. Employers can be fined 12 weeks’ gross pay for every affected employee. When an employee’s or trade union’s claim at tribunal is successful either the previous or new employer could be forced to pay a penalty irrespective of which failed to consult.
Protecting against detrimental changes
Changes to employees’ contracts cannot be made that put them at a detriment. This basically means makes their working life and conditions worsen. In practice, this means changes to contracts cannot be made because of the transfer itself - this prevents acquiring businesses making changes to contracts which could reduce employees’ rights and the employers’ obligations and liabilities
Guidance on company takeover and TUPE
At Lawhive, our employment solicitors are here to help you understand your rights as an employee during business transfers, takeovers, and TUPE. Contact us today for a free case assessment to find out more.