Transfer of Undertakings – LIKELY CLAIM WILL BE UNFAIR DISMISSAL DUE TO REDUNDANCY/OTHER SUBSTANTIAL
REASON
Applicability:
a. There must be a transfer from one person to another – must be a change in the employer, not merely
in ownership.
b. A transfer of an undertaking or a service provision change will be covered by the Regs
c. They do not apply to share sale transfers or where a purchaser buys a majority shareholding in a
company this is because there is no change in employer.
d. They do apply to mergers, sale of part of a going concern, changes of franchise, sale of a sole traders
business/partnership.
e. They do not apply to sale / transfer of business assets only
f. Holis Metal – Regs do apply where ownership of a company is transferred to a company operating
outside EU.
g. Reg 4 does not transfer any liability of any person to be prosecuted for / convicted of an sentenced
for any criminal offence – the liability of employer A will not pass to employer B when the business is
transferred.
h. Reg 7 – dismissals connected to the transfer are automatically unfair unless there is an economic
reason and applies only to employees who satisfy the normal qualifying conditions for unfair dismissal
(2 years continuous employment)
DISMISSALS BEFORE A RELEVANT TRANSFER:
Was there a relevant transfer?
There must have been a relevant transfer for the 2006 Regulations to apply.
There will have been either a business transfer or a service provision change – apply what is relevant.
Business transfers – Reg 3(1)(a):
A business transfer is ‘a transfer of an undertaking, business or part of an undertaking or business situated immediately in
the UK to another person where there is a transfer of an economic entity which retains its identity’.
APPLY:
Whole or part of business/ in the UK? APPLY
Economic entity? (1)
Reg 3(2) defines economic entity ‘an organised grouping of resources which has the objective of pursuing an
economic activity, whether or not that activity is central or ancillary’
Cheesman:
When looking at whether there was an undertaking:
There need to be an economic entity – which is stable and discrete
Have an organised group of employees
Be sufficiently structured and autonomous (but may not have significant assets)
The identity of the entity emerges from the way it works and operates, its workforce, the way its organised…
APPLY.
Has that entity retained its identity and transferred? (2)
Spijkers states that for a transfer to be identified – must question whether the economic entity has retained its
identity post transfer.
Spijkers factors for ET to consider: go through these and apply.
Type of undertaking / business
Transfer or otherwise of tangible assets such as building, equipment and stocks
Value of intangible assets (goodwill) at time of transfer
Whether majority of staff is being taken over by new employer
Degree of similarity in activities before and after transfer.
APPLY
NOTE: Cheeseman – a lack of assets won’t preclude a transfer, nor will a transfer not have occurred if no staff are
transferred
ADDITIONALLY – to qualify as a business transfer – the employer must change.
CONTINUED BELOW…
1
, Transfer of Undertakings – LIKELY CLAIM WILL BE UNFAIR DISMISSAL DUE TO REDUNDANCY/OTHER SUBSTANTIAL
REASON
Service provision changes- Reg s(1)(b):
Reg 3(1)(b) – a service provision change may exist in any one of three possible situations, provided that certain specified
conditions are satisfied.
A service provision change will occur when a client who engages a contractor to do work on its behalf is either:
a) Engages a contractor to do work on their behalf – contracting out the work (client to contractor). Reg 3(1)
(b)(i)
b) Reassigning such a contract – second generation contracting (contractor to new sub-contractor) Reg3(1)(b)
(ii), or
c) Bringing the work ‘in-house’ – insourcing back in-house (contractor to client) Reg 3(1)(b)(iii).
NOTE: not all of the service carried out need to transfer.
APPLY – which one is it on the facts?
The conditions to be satisfied upon one of the situations being present – Reg 3(3):
Immediately before the service provision change
o There is an organised group of employees located in the UK who carry out the main activities for the
client
o The client intends that the activities will be carried out by the transferee other than in connection with a
single specific event or task of short-term duration, and
The activities concerned do not consist wholly or mainly of the supply of goods for the client’s use. If there is a
mix – the service element must be the dominant part.
‘organised group’ – BIS Guidance: a team of employees to carry out the service activities and that team is essentially
dedicated to carry out the activities which will be transferred.
APPLY
When did the dismissal occur?
(Before the transfer – but give some detail if possible)
What is the effect of the relevant transfer?
Under Reg 4, as the dismissal has taken place before the relevant transfer the dismissal is effective, and the employment
contract has terminated. This means that no contract of employment was transferred.
HOWEVER…
Under Reg 4(3) and Reg 7(1), there is the potential for any liability of (‘x’ employer) to have been transferred to (‘y’ / ‘new’
employer)
employee liability information must be told to the transferee no less than 28 days before transfer.
APPLY – What is the potential claim the employee may have and so who has the liability transferred to
NOTE: could be more than one claim.
If there is a potential unfair dismissal claim – is ‘x’ eligible for bringing an unfair dismissal claim?
‘x’ must be an employee – APPLY
‘x’ must not fall within the excluded class – APPLY (excluded: army/police/mariners)
‘x’ must bring their claim within the required time limits (3 months less a day from the EDT) – APPLY
‘x’ must have been employed and have 2 years continuous service – APPLY
‘x’ must have been dismissed (burden of proof on employee) – APPLY
‘x’ must make sure to do Acas Early Conciliation before presenting the claim.
if ‘x’ is not eligible = there is no claim.
If ‘x’ is eligible = go to next box.
NOTE:
Employees whose contracts would not be terminated by the transfer do not come within Reg 4.
Eg – an employee who is retained by the transferor and redeployed to another part of the business
in line with employees’ contract and consent.
Where part of a business is transferred – employees will not be affected by reg 4 if they never
worked in the part transferred.
Employees who perform duties in relation to the part transferred will not be covered by reg 4
unless they are assigned to the organised group of employees.
2
An employee agrees with the transferor not to be transferred – this is sufficient not to be transferred and disapply reg 4.
REASON
Applicability:
a. There must be a transfer from one person to another – must be a change in the employer, not merely
in ownership.
b. A transfer of an undertaking or a service provision change will be covered by the Regs
c. They do not apply to share sale transfers or where a purchaser buys a majority shareholding in a
company this is because there is no change in employer.
d. They do apply to mergers, sale of part of a going concern, changes of franchise, sale of a sole traders
business/partnership.
e. They do not apply to sale / transfer of business assets only
f. Holis Metal – Regs do apply where ownership of a company is transferred to a company operating
outside EU.
g. Reg 4 does not transfer any liability of any person to be prosecuted for / convicted of an sentenced
for any criminal offence – the liability of employer A will not pass to employer B when the business is
transferred.
h. Reg 7 – dismissals connected to the transfer are automatically unfair unless there is an economic
reason and applies only to employees who satisfy the normal qualifying conditions for unfair dismissal
(2 years continuous employment)
DISMISSALS BEFORE A RELEVANT TRANSFER:
Was there a relevant transfer?
There must have been a relevant transfer for the 2006 Regulations to apply.
There will have been either a business transfer or a service provision change – apply what is relevant.
Business transfers – Reg 3(1)(a):
A business transfer is ‘a transfer of an undertaking, business or part of an undertaking or business situated immediately in
the UK to another person where there is a transfer of an economic entity which retains its identity’.
APPLY:
Whole or part of business/ in the UK? APPLY
Economic entity? (1)
Reg 3(2) defines economic entity ‘an organised grouping of resources which has the objective of pursuing an
economic activity, whether or not that activity is central or ancillary’
Cheesman:
When looking at whether there was an undertaking:
There need to be an economic entity – which is stable and discrete
Have an organised group of employees
Be sufficiently structured and autonomous (but may not have significant assets)
The identity of the entity emerges from the way it works and operates, its workforce, the way its organised…
APPLY.
Has that entity retained its identity and transferred? (2)
Spijkers states that for a transfer to be identified – must question whether the economic entity has retained its
identity post transfer.
Spijkers factors for ET to consider: go through these and apply.
Type of undertaking / business
Transfer or otherwise of tangible assets such as building, equipment and stocks
Value of intangible assets (goodwill) at time of transfer
Whether majority of staff is being taken over by new employer
Degree of similarity in activities before and after transfer.
APPLY
NOTE: Cheeseman – a lack of assets won’t preclude a transfer, nor will a transfer not have occurred if no staff are
transferred
ADDITIONALLY – to qualify as a business transfer – the employer must change.
CONTINUED BELOW…
1
, Transfer of Undertakings – LIKELY CLAIM WILL BE UNFAIR DISMISSAL DUE TO REDUNDANCY/OTHER SUBSTANTIAL
REASON
Service provision changes- Reg s(1)(b):
Reg 3(1)(b) – a service provision change may exist in any one of three possible situations, provided that certain specified
conditions are satisfied.
A service provision change will occur when a client who engages a contractor to do work on its behalf is either:
a) Engages a contractor to do work on their behalf – contracting out the work (client to contractor). Reg 3(1)
(b)(i)
b) Reassigning such a contract – second generation contracting (contractor to new sub-contractor) Reg3(1)(b)
(ii), or
c) Bringing the work ‘in-house’ – insourcing back in-house (contractor to client) Reg 3(1)(b)(iii).
NOTE: not all of the service carried out need to transfer.
APPLY – which one is it on the facts?
The conditions to be satisfied upon one of the situations being present – Reg 3(3):
Immediately before the service provision change
o There is an organised group of employees located in the UK who carry out the main activities for the
client
o The client intends that the activities will be carried out by the transferee other than in connection with a
single specific event or task of short-term duration, and
The activities concerned do not consist wholly or mainly of the supply of goods for the client’s use. If there is a
mix – the service element must be the dominant part.
‘organised group’ – BIS Guidance: a team of employees to carry out the service activities and that team is essentially
dedicated to carry out the activities which will be transferred.
APPLY
When did the dismissal occur?
(Before the transfer – but give some detail if possible)
What is the effect of the relevant transfer?
Under Reg 4, as the dismissal has taken place before the relevant transfer the dismissal is effective, and the employment
contract has terminated. This means that no contract of employment was transferred.
HOWEVER…
Under Reg 4(3) and Reg 7(1), there is the potential for any liability of (‘x’ employer) to have been transferred to (‘y’ / ‘new’
employer)
employee liability information must be told to the transferee no less than 28 days before transfer.
APPLY – What is the potential claim the employee may have and so who has the liability transferred to
NOTE: could be more than one claim.
If there is a potential unfair dismissal claim – is ‘x’ eligible for bringing an unfair dismissal claim?
‘x’ must be an employee – APPLY
‘x’ must not fall within the excluded class – APPLY (excluded: army/police/mariners)
‘x’ must bring their claim within the required time limits (3 months less a day from the EDT) – APPLY
‘x’ must have been employed and have 2 years continuous service – APPLY
‘x’ must have been dismissed (burden of proof on employee) – APPLY
‘x’ must make sure to do Acas Early Conciliation before presenting the claim.
if ‘x’ is not eligible = there is no claim.
If ‘x’ is eligible = go to next box.
NOTE:
Employees whose contracts would not be terminated by the transfer do not come within Reg 4.
Eg – an employee who is retained by the transferor and redeployed to another part of the business
in line with employees’ contract and consent.
Where part of a business is transferred – employees will not be affected by reg 4 if they never
worked in the part transferred.
Employees who perform duties in relation to the part transferred will not be covered by reg 4
unless they are assigned to the organised group of employees.
2
An employee agrees with the transferor not to be transferred – this is sufficient not to be transferred and disapply reg 4.
