General Issues

Background to Acquired Rights Legislation

The European Union Acquired Rights Directive 1977 was designed to protect the interests of employees on the transfer of a business.  Regulations were made in 1980 and 2003 to implement Directive. The key protection is that continuity of employment is preserved. The transferee of the business must afford employees the same terms and conditions as they enjoyed with their former employer.

Prior to the Acquired Rights legislation,  the common law effectively allowed a transfer of business without any employee consultation.  The transfer of the business automatically terminated employment.  Laterally, redundancy payment and minimum notice legislation provided some protection, where an employer, who disposed of business assets.

The purpose of the Acquired Rights Directive and the Irish regulations made pursuant to it, is   to provide for uniform EU-wide legislation on consultation and the continuity of employment on the transfer of undertakings. The Acquired Rights Directive was first translated into Irish law by 1980 regulations.

The regulations apply to the transfer of a business as a growing concern.  They provide for the automatic transfer of the employment relationship and for protection against dismissal, other than for economic, technical, organisational reasons, entailing changes in the workplace. They  provide for  consultation with and for the provision of information to representatives of the employees.


Amendments to Original Regulations

The 1980 Irish Regulations were quite basic and were criticised as not giving proper effect to the Directive. They did not give sufficient effect to the principle that the employees’ representatives should be informed and consulted.  There was no provision for employee representatives and inadequate sanctions for non-compliance.

New regulations made in 2000 provided for the possibility of a reference to a Rights Commissioner for breach of the consultation and information provisions.

The original Acquired Rights Directive from 1980 was updated amended and restated in 2001. New Irish regulations were made in 2003 in order to give effect to it.  The 2006 on legislation on workplace information and consultation made some further amendments.

The English regulations, which implement the Acquired Rights Directive are the Transfer of Undertakings Protection of Employment Regulations. They are commonly referred to as the “TUPE” regulations, and the expression is used in case law and legal literature.


Transfer of Employees

The Acquired Rights legislation applies where any business or economic activity is transferred from one entity to another. It applies to transfers of large and small businesses, public and private undertakings. It  applies where there is a transfer of a distinct business with employees. The legislation does not apply to the transfer of shares in a company or to transfer of business assets only.

Where the Acquired Rights legislation applies, the rights and entitlements of the employees will transfer automatically on the transfer of a business.  The rights which employees hold under their employment contract with the transferor/seller will continue to apply when the transferee/ buyer becomes the employer.

Rights arising by reason of continuity of service are preserved.  Periods of service accumulated with the old employer count with the new employer. The buyer takes over responsibility with outstanding disciplinary grievances, tribunal claims and collective agreements. There is no obligation on the new employer to offer transferred employees who are members of an occupational pension scheme, the same pension rights.


Employee’s Rights on Transfer

The dismissal of an employee after a transfer by reason only of the transfer itself or something connected with it, is deemed unfair.

If an employee refuses to transfer, he or she is not regarded as dismissed but is deemed to have resigned. He is therefore not entitled to redundancy and cannot claim unfair dismissal.  An employee who was employed immediately before the transfer who is dismissed may bring a claim for unfair dismissal against the previous or the new employer provided he has at least one continuous year of employment.

If employees’ terms and conditions are changed by reason of the transfer, then this could amount to a breach of contract. If the change is unconnected with the transfer it should be treated like any other change i.e. undertaken by negotiation and by agreement.

A dismissal may be fair if it is genuinely based on economic, technical or organisational reasons entailing changes in the workforce.  If there are such genuine reasons, the dismissal is potentially fair. The dismissing employee must follow fair procedure. There must be a genuine redundancy situation.


Notification to Employees

There is an obligation to give employees details of action that is intended to be taken in order to give effect to the transfer. Employers must inform representatives of the employees affected by the transfer. The appropriate representatives may be either a recognised trade union representative or employee’s representative appointed by the affected employees for the purpose of consultation

An employee representative may be a trade union, staff association or excepted body with which it has been the practice of the employer to conduct collective bargaining negotiations.  In the absence of a trade union, staff association or excepted body, the representative is a person or persons chosen by the employees in accordance with the regulation.

The representatives must be informed of the transfer itself, where and when it will happen, the legal and social economic implications, and the measures the employer envisages will be taken in relation to affected employees (e.g. redundancies, relocation, change of terms or other measures).

The representatives have a right of access to affected employees, to facilities to carry out their duty and to time off in connection with the duty. Affected employees may not necessarily be those who are  transferring and can also include employees who are affected indirectly only.


Persons Protected by Regulations

The EU Acquired Rights Directive protects employees and other categories of worker who are protected by national employment legislation. The legislation applies to “employees” as defined by national law.  An employee is a person who works under a contract of employment. The legislation  now covers civil servants, officers and employees of the State, local government and most public sector bodies.

The legislation covers many agency workers. Agency workers may or may not be part of the transferring entity’s undertaking, where their employer is the agency.  They are treated as if they were employees and the legislation applies of they are part of the transferor’s undertaking under general principles. However, they continue in the employment of the entity which pays their salaries and wages before transfer.

In some cases, agency workers may fall outside the Directive such as where they the arrangement ceases before the transfer.

The legislation  may also apply, where agency staff are transferred from one agency to another, without a change in their placement, provided that they are part of the relevant undertaking.


Position on Insolvency

In the case of insolvency proceedings, the States may provide that the transferor’s debts and obligations shall not be transferred to a transferee. This may arise in the case of a court approved, or private insolvency practitioner approved write down, transfer or restructuring, without prejudice to the basic Acquired Rights Directive provisions.

In the case of transfers in the course of insolvency, proceedings or process, the Directives allow   states to provide that the transferor’s obligations are not transferred to the transferee, provided that at least, employees are protected under the employer’s insolvency legislation.  States may   provide that the parties and their representatives can agree variations of the terms of employment, in order to protect employment by ensuring the survival of the business or company/undertaking.

The Irish regulations do not apply to transfers of undertakings or businesses where the transferor is the subject of bankruptcy or winding up proceedings.  The regulations do apply if the sole or the main reason for the bankruptcy or insolvency proceedings is the evasion of the employer’s obligations under the regulation.

It is not clear whether the appointment of a receiver is an insolvency process for this purpose.  The Irish Tribunals have taken the view that unless there is an actual winding up or liquidation (as opposed to restructuring and transfer as a going concenr, the regulations are applicable This appears to be the case, even in a court winding up.


Definition of Undertaking

The Regulations and Directive apply to the transfer of an “undertaking” or to part of an undertaking.  An undertaking means a distinct business or economic entity. An entity may be an undertaking if it is involved in the slightest element of economic activity.

There has been a great deal of litigation in the EU, UK and domestically on the meaning of a “transfer” of an “undertaking”.  The concept of an undertaking is dealt with below.  It applies to an ongoing business, rather than a transfer of mere property or assets.

The Regulations do not apply to the mere transfer of assets, without the transfer of an underlying business.  They only apply to the transfer of assets, which together, constitute an active on-going undertaking. There must be a transfer of an economic entity, which retains its identity as a business.

The regulations apply to the transfer of part of an undertaking. Where a particular segment of business hash employees, clients, assets or is otherwise sufficient to constitute an independent economic business, the Regulations will apply.


Atypical Undertakings

The entity which is transferred may have ceased trading, but provided that the infrastructure and employees to carry out its operations, there may be a transfer of an undertaking under the Acquired Rights legislation. There can be a transfer of an undertaking, without a transfer of goodwill, provided that what is transferred retains its identity, post transfer.

A non-profit-making organisation will be undertaking if it engages in an economic activity. The activity may or may not be for profit. It may be central or ancillary to another economic or administrative activity. It may be in the public or private sector.

Outsourcing and contracting commonly constitute a transfer, for the purpose of the legislation, but need not necessarily do so.  If the business retains identity, the legislation may apply.

The transfer of administrative functions (without more) between public authorities and bodies is not a transfer under the Regulations. Where the public authority or body transfers an economic activity to another undertaking, there may be a transfer. An undertaking may be transferred even though the organisation is restructured and varied, provided that there is a functional link between the elements retained, before and afterwards.


Enforcement of Regulations

A complaint may be made to the Workplace Relations Commission in relation to a breach of the regulations.  The WRC may declare whether the complaint is well founded.  It may require payment of compensation as is just and equitable.

In the case of information and consultation, the compensation for breach, must not exceed 4 weeks’ remuneration. In any other case, it may not exceed 2 years’ remuneration.  The decision of the adjudication officer may be appealed to the Labour Court.  The decision is enforceable in most of the same way as other decisions of the rights commissioner namely by application to the Circuit Court for an enforcement order, directing the employer carry out the determination.


References and Sources

Primary References

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

Legislation

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

Websites

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/


Council Directive No. 2001/23/EC of 12 March 2001

Council Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses

Official Journal L 082 , 22/03/2001 P. 0016 – 0020

Council Directive 2001/23/EC of 12 March 2001

on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 94 thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament(1),

Having regard to the opinion of the Economic and Social Committee(2),

Whereas:

(1) Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses(3) has been substantially amended(4). In the interests of clarity and rationality, it should therefore be codified.

(2) Economic trends are bringing in their wake, at both national and Community level, changes in the structure of undertakings, through transfers of undertakings, businesses or parts of undertakings or businesses to other employers as a result of legal transfers or mergers.

(3) It is necessary to provide for the protection of employees in the event of a change of employer, in particular, to ensure that their rights are safeguarded.

(4) Differences still remain in the Member States as regards the extent of the protection of employees in this respect and these differences should be reduced.

(5) The Community Charter of the Fundamental Social Rights of Workers adopted on 9 December 1989 (“Social Charter”) states, in points 7, 17 and 18 in particular that: “The completion of the internal market must lead to an improvement in the living and working conditions of workers in the European Community. The improvement must cover, where necessary, the development of certain aspects of employment regulations such as procedures for collective redundancies and those regarding bankruptcies. Information, consultation and participation for workers must be developed along appropriate lines, taking account of the practice in force in the various Member States. Such information, consultation and participation must be implemented in due time, particularly in connection with restructuring operations in undertakings or in cases of mergers having an impact on the employment of workers”.

(6) In 1977 the Council adopted Directive 77/187/EEC to promote the harmonisation of the relevant national laws ensuring the safeguarding of the rights of employees and requiring transferors and transferees to inform and consult employees’ representatives in good time.

(7) That Directive was subsequently amended in the light of the impact of the internal market, the legislative tendencies of the Member States with regard to the rescue of undertakings in economic difficulties, the case-law of the Court of Justice of the European Communities, Council Directive 75/129/EEC of 17 February 1975 on the approximation of the laws of the Member States relating to collective redundancies(5) and the legislation already in force in most Member States.

(8) Considerations of legal security and transparency required that the legal concept of transfer be clarified in the light of the case-law of the Court of Justice. Such clarification has not altered the scope of Directive 77/187/EEC as interpreted by the Court of Justice.

(9) The Social Charter recognises the importance of the fight against all forms of discrimination, especially based on sex, colour, race, opinion and creed.

(10) This Directive should be without prejudice to the time limits set out in Annex I Part B within which the Member States are to comply with Directive 77/187/EEC, and the act amending it,

HAS ADOPTED THIS DIRECTIVE:

CHAPTER I


Scope and definitions

Article 1

1. (a) This Directive shall apply to any transfer of an undertaking, business, or part of an undertaking or business to another employer as a result of a legal transfer or merger.

(b) Subject to subparagraph (a) and the following provisions of this Article, there is a transfer within the meaning of this Directive where there is a transfer of an economic entity which retains its identity, meaning an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary.

(c) This Directive shall apply to public and private undertakings engaged in economic activities whether or not they are operating for gain. An administrative reorganisation of public administrative authorities, or the transfer of administrative functions between public administrative authorities, is not a transfer within the meaning of this Directive.

2. This Directive shall apply where and in so far as the undertaking, business or part of the undertaking or business to be transferred is situated within the territorial scope of the Treaty.

3. This Directive shall not apply to seagoing vessels.

Article 2

1. For the purposes of this Directive:

(a) “transferor” shall mean any natural or legal person who, by reason of a transfer within the meaning of Article 1(1), ceases to be the employer in respect of the undertaking, business or part of the undertaking or business;

(b) “transferee” shall mean any natural or legal person who, by reason of a transfer within the meaning of Article 1(1), becomes the employer in respect of the undertaking, business or part of the undertaking or business;

(c) “representatives of employees” and related expressions shall mean the representatives of the employees provided for by the laws or practices of the Member States;

(d) “employee” shall mean any person who, in the Member State concerned, is protected as an employee under national employment law.

2. This Directive shall be without prejudice to national law as regards the definition of contract of employment or employment relationship.

However, Member States shall not exclude from the scope of this Directive contracts of employment or employment relationships solely because:

(a) of the number of working hours performed or to be performed,

(b) they are employment relationships governed by a fixed-duration contract of employment within the meaning of Article 1(1) of Council Directive 91/383/EEC of 25 June 1991 supplementing the measures to encourage improvements in the safety and health at work of workers with a fixed-duration employment relationship or a tempory employment relationship(6), or

(c) they are temporary employment relationships within the meaning of Article 1(2) of Directive 91/383/EEC, and the undertaking, business or part of the undertaking or business transferred is, or is part of, the temporary employment business which is the employer.

CHAPTER II


Safeguarding of employees’ rights

Article 3

1. The transferor’s rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer shall, by reason of such transfer, be transferred to the transferee.

Member States may provide that, after the date of transfer, the transferor and the transferee shall be jointly and severally liable in respect of obligations which arose before the date of transfer from a contract of employment or an employment relationship existing on the date of the transfer.

2. Member States may adopt appropriate measures to ensure that the transferor notifies the transferee of all the rights and obligations which will be transferred to the transferee under this Article, so far as those rights and obligations are or ought to have been known to the transferor at the time of the transfer. A failure by the transferor to notify the transferee of any such right or obligation shall not affect the transfer of that right or obligation and the rights of any employees against the transferee and/or transferor in respect of that right or obligation.

3. Following the transfer, the transferee shall continue to observe the terms and conditions agreed in any collective agreement on the same terms applicable to the transferor under that agreement, until the date of termination or expiry of the collective agreement or the entry into force or application of another collective agreement.

Member States may limit the period for observing such terms and conditions with the proviso that it shall not be less than one year.

4. (a) Unless Member States provide otherwise, paragraphs 1 and 3 shall not apply in relation to employees’ rights to old-age, invalidity or survivors’ benefits under supplementary company or intercompany pension schemes outside the statutory social security schemes in Member States.

(b) Even where they do not provide in accordance with subparagraph (a) that paragraphs 1 and 3 apply in relation to such rights, Member States shall adopt the measures necessary to protect the interests of employees and of persons no longer employed in the transferor’s business at the time of the transfer in respect of rights conferring on them immediate or prospective entitlement to old age benefits, including survivors’ benefits, under supplementary schemes referred to in subparagraph (a).

Article 4

1. The transfer of the undertaking, business or part of the undertaking or business shall not in itself constitute grounds for dismissal by the transferor or the transferee. This provision shall not stand in the way of dismissals that may take place for economic, technical or organisational reasons entailing changes in the workforce.

Member States may provide that the first subparagraph shall not apply to certain specific categories of employees who are not covered by the laws or practice of the Member States in respect of protection against dismissal.

2. If the contract of employment or the employment relationship is terminated because the transfer involves a substantial change in working conditions to the detriment of the employee, the employer shall be regarded as having been responsible for termination of the contract of employment or of the employment relationship.

Article 5

1. Unless Member States provide otherwise, Articles 3 and 4 shall not apply to any transfer of an undertaking, business or part of an undertaking or business where the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of a competent public authority (which may be an insolvency practioner authorised by a competent public authority).

2. Where Articles 3 and 4 apply to a transfer during insolvency proceedings which have been opened in relation to a transferor (whether or not those proceedings have been instituted with a view to the liquidation of the assets of the transferor) and provided that such proceedings are under the supervision of a competent public authority (which may be an insolvency practioner determined by national law) a Member State may provide that:

(a) notwithstanding Article 3(1), the transferor’s debts arising from any contracts of employment or employment relationships and payable before the transfer or before the opening of the insolvency proceedings shall not be transferred to the transferee, provided that such proceedings give rise, under the law of that Member State, to protection at least equivalent to that provided for in situations covered by Council Directive 80/987/EEC of 20 October 1980 on the approximation of the laws of the Member States relating to the protection of employees in the event of the insolvency of their employer(7), and, or alternatively, that,

(b) the transferee, transferor or person or persons exercising the transferor’s functions, on the one hand, and the representatives of the employees on the other hand may agree alterations, in so far as current law or practice permits, to the employees’ terms and conditions of employment designed to safeguard employment opportunities by ensuring the survival of the undertaking, business or part of the undertaking or business.

3. A Member State may apply paragraph 20(b) to any transfers where the transferor is in a situation of serious economic crisis, as defined by national law, provided that the situation is declared by a competent public authority and open to judicial supervision, on condition that such provisions already existed in national law on 17 July 1998.

The Commission shall present a report on the effects of this provision before 17 July 2003 and shall submit any appropriate proposals to the Council.

4. Member States shall take appropriate measures with a view to preventing misuse of insolvency proceedings in such a way as to deprive employees of the rights provided for in this Directive.

Article 6

1. If the undertaking, business or part of an undertaking or business preserves its autonomy, the status and function of the representatives or of the representation of the employees affected by the transfer shall be preserved on the same terms and subject to the same conditions as existed before the date of the transfer by virtue of law, regulation, administrative provision or agreement, provided that the conditions necessary for the constitution of the employee’s representation are fulfilled.

The first subparagraph shall not supply if, under the laws, regulations, administrative provisions or practice in the Member States, or by agreement with the representatives of the employees, the conditions necessary for the reappointment of the representatives of the employees or for the reconstitution of the representation of the employees are fulfilled.

Where the transferor is the subject of bankruptcy proceedings or any analoguous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of a competent public authority (which may be an insolvency practitioner authorised by a competent public authority), Member States may take the necessary measures to ensure that the transferred employees are properly represented until the new election or designation of representatives of the employees.

If the undertaking, business or part of an undertaking or business does not preserve its autonomy, the Member States shall take the necessary measures to ensure that the employees transferred who were represented before the transfer continue to be properly represented during the period necessary for the reconstitution or reappointment of the representation of employees in accordance with national law or practice.

2. If the term of office of the representatives of the employees affected by the transfer expires as a result of the transfer, the representatives shall continue to enjoy the protection provided by the laws, regulations, administrative provisions or practice of the Member States.

CHAPTER III


Information and consultation

Article 7

1. The transferor and transferee shall be required to inform the representatives of their respective employees affected by the transfer of the following:

– the date or proposed date of the transfer,

– the reasons for the transfer,

– the legal, economic and social implications of the transfer for the employees,

– any measures envisaged in relation to the employees.

The transferor must give such information to the representatives of his employees in good time, before the transfer is carried out.

The transferee must give such information to the representatives of his employees in good time, and in any event before his employees are directly affected by the transfer as regards their conditions of work and employment.

2. Where the transferor or the transferee envisages measures in relation to his employees, he shall consult the representatives of this employees in good time on such measures with a view to reaching an agreement.

3. Member States whose laws, regulations or administrative provisions provide that represenatives of the employees may have recourse to an arbitration board to obtain a decision on the measures to be taken in relation to employees may limit the obligations laid down in paragraphs 1 and 2 to cases where the transfer carried out gives rise to a change in the business likely to entail serious disadvantages for a considerable number of the employees.

The information and consultations shall cover at least the measures envisaged in relation to the employees.

The information must be provided and consultations take place in good time before the change in the business as referred to in the first subparagraph is effected.

4. The obligations laid down in this Article shall apply irrespective of whether the decision resulting in the transfer is taken by the employer or an undertaking controlling the employer.

In considering alleged breaches of the information and consultation requirements laid down by this Directive, the argument that such a breach occurred because the information was not provided by an undertaking controlling the employer shall not be accepted as an excuse.

5. Member States may limit the obligations laid down in paragraphs 1, 2 and 3 to undertakings or businesses which, in terms of the number of employees, meet the conditions for the election or nomination of a collegiate body representing the employees.

6. Member States shall provide that, where there are no representatives of the employees in an undertaking or business through no fault of their own, the employees concerned must be informed in advance of:

– the date or proposed date of the transfer,

– the reason for the transfer,

– the legal, economic and social implications of the transfer for the employees,

– any measures envisaged in relation to the employees.

CHAPTER IV


Final provisions

Article 8

This Directive shall not affect the right of Member States to apply or introduce laws, regulations or administrative provisions which are more favourable to employees or to promote or permit collective agreements or agreements between social partners more favourable to employees.

Article 9

Member States shall introduce into their national legal systems such measures as are necessary to enable all employees and representatives of employees who consider themselves wronged by failure to comply with the obligations arising from this Directive to pursue their claims by judicial process after possible recourse to other competent authorities.

Article 10

The Commission shall submit to the Council an analysis of the effect of the provisions of this Directive before 17 July 2006. It shall propose any amendment which may seem necessary.

Article 11

Member States shall communicate to the Commission the texts of the laws, regulations and administrative provisions which they adopt in the field covered by this Directive.

Article 12

Directive 77/187/EEC, as amended by the Directive referred to in Annex I, Part A, is repealed, without prejudice to the obligations of the Member States concerning the time limits for implementation set out in Annex I, Part B.

References to the repealed Directive shall be construed as references to this Directive and shall be read in accordance with the correlation table in Annex II.

Article 13

This Directive shall enter into force on the 20th day following its publication in the Official Journal of the European Communities.

Article 14

This Directive is addressed to the Member States.

Done at Brussels, 12 March 2001.

For the Council

The President

B. Ringholm