Transfer

Transfer of Undertaking

The Acquired Rights legislation applies to the transfer of an undertaking.  This may be the whole of or a part of a business.  In most cases, there will be a transfer of an economic entity which retains its identity. The business / undertaking may retain its identity, but need not necessarily do so.

An economic entity in this context, is an organised group of personnel and other resources, having the object of pursuing an economic activity, whether or not that activity is for profit and whether or not it is central or ancillary to some other economic or administrative entity.  See the article on the scope of the legislation which discusses the nature of an undertaking.

A transfer usually implies a change in the identity of the person or legal corporation which carries on the business and who is an employer or undertakes the obligations of an employer towards the employees.  This may be occurring, regardless of whether the undertaking appears to have been transferred.  It may apply to inter-group transfers, where there is no other apparent change in circumstances.

There must be a change in the employer entity, which carries on the business.  It may occur where this is merger by operation of law, without a transfer as such. This is common under Continental companies law and is now the normal mode of merger under the Companies Act, 2014. The legislation does not apply to a share transfer in itself.


The Concept of a Transfer

The concept of a transfer has been interpreted broadly.  A transfer is not limited to a legal transfer in the strict technical sense.  The method of transfer and the means by which the economic unit passes from one employer entity to another are irrelevant. There may be a transfer, even if one employee only transfers, provided that the relevant function passes.

If an employer seconds an employee from one entity to another within a corporate group, there may be a transfer. The transferor need not be the employer under the contract, in cases of secondment. The transfer can take place inter-group, without any change of management or location.

The transferor is the entity which ceases in substance to be an employer in respect of the undertaking / business or a part of it.  The transferee is the person who by reason of the transfer, becomes the employer in substance, in relation to the undertaking, business or part of the business concerned.

A transfer need not take place at a distinct point in time.  It may take place in a series of steps or stages.


Identity of Entity I

An undertaking implies a minimum level of organisation and independence.  It may exist by itself, or it may be part of a larger undertaking.  It must be a distinct economic unit or business.

The legislation applies to public and private undertakings engaged in economic activities, whether or not for gain.

An economic entity is transferred if it retains its identity, in the sense of being an organised group with resources, with the object of pursuing an economic activity.  A transfer implies that the economic unit or entity is transferred, such that the economic entity or organisation and resources, retain their essential identity.

There must be viable operation or unit which does not lose its identity. There may be continuity, even if there is a closure. There must be a resumption by the new employer.  It is not enough that a similar business is undertaken at the same premises.  There must be some continuity of identity.


Identity of Entity II

The economic entity must be an identifiable stable economic unit. Regard is had to the entirety of the circumstances including

  • the type of business;
  • whether other assets or premises are transferred;
  • whether most employees in the function are transferred;
  • whether the transferred are functionally autonomous;
  • the nature of the workforce;
  • continuity of customers;
  • the way the business is managed; and
  • business methods

Factors in Defining a Transfer

Generally, there must be a legal transfer of the undertaking / business assets. The change of management or change of shareholding in a company which owns or operates the undertaking / business is not a transfer of an undertaking.  A transfer of an undertaking takes place when there is a change in the legal identity of the entity which holds and manages the undertaking.

Whether or not there is a transfer is a matter, which may have to be considered case by case on its own facts. Various factors are considered in the appraisal of whether there has been a transfer.  This will include

  • whether goodwill has been transferred;
  • where plant, machinery and equipment are transferred, whether intangible assets have also been transferred;
  • whether the extent of organisation transferred is such as to enable it to be termed an economic entity;
  • the similarity of activities between those of the transferor and transferee.
  • the transfer of customers and employees.

The transfer is deemed to take place when the obligations and responsibilities of the employer move from transferor to transferee.  While the transfer takes place over a period of time, the Regulations may apply to any employee during that period.  Ultimately, it will be a matter of interpretation, as to when the transfer has taken place.


As a Going Concern

The business must be transferred as a going concern.  The substance of the position is examined.  The transfer is subject to the legislation, if the business retains its identity or carries on the same, or broadly the same activities. There may be a transfer as going concern, even if the business is closed down temporarily and restarted after a short interval.

A transfer may occur notwithstanding that it takes place in two stages.  For example, where a lease terminates, and the landlord continues the business, there may be sufficient continuity, even if there is a short gap.

In considering whether there is a transfer as a going concern, the following factors are highly relevant;

  • the entire facts surrounding the transaction;
  • the type of business;
  • whether there is continuity in the business premises;
  • the extent of transferred assets;
  • whether or not the majority of employees are transferred; and
  • the similarity between activities before and afterwards.

Further Factors in Finding a Transfer

There may be a transfer in substance from one economic entity to a continuing economic entity. The discontinuation of an activity and sale of its client base would not normally constitute a transfer under the Regulations.

The extent to which the business is dependent on manpower or on manpower plus plant equipment services is relevant. The greater the dependence on manpower, the greater the possibility that there is a continuity of identity in the undertaking.  The European courts have taken varying approaches to the issue.

A transfer of an undertaking may include

  • a transfer in the course of an insolvency realisation e.g. hive down and sale or sell off of assets (subject to the insolvency exclusion);
  • a lease of part of an existing business;
  • the termination of a lease and the re-vesting of business assets in the original lessor, who continues trading;
  • a franchise of an existing business;
  • in some cases, the carrying on of a business in receivership;
  • the transfer of a franchise or dealership

Outsourcing as a Transfer

There may be a transfer of an undertaking where a function is outsourced, subcontracted or transferred to another business. The outsourcing of all or part of a business is potentially subject to legislation.

The key question is whether what is transferred is capable of being a stable economic activity.  It may cover a distinct function within an organisation. Where a function is a standalone entity, and it is contracted out, there may be a transfer of an undertaking.  In some cases, the functions will not be regarded as sufficiently distinct to constitute an undertaking.

There may be a transfer from one external provider to another, notwithstanding the absence of any relationship between them.  This may occur where there a transfer of assets or a considerable proportion of a workforce, on the transfer by a contracting authority from one outsourced provider to another.

Generally, there must be a transfer of organisation and management. There will usually be a group of employees, engaged in a common activity. There must be continuity between the transferor and transferee. there must be both succession and continuity in function.

There may be a transfer on termination of outsourcing and resumption of the function within the organisation.


Atypical Transfers

A transfer may take place in a wide range of circumstances.  The Acquired Rights Directive may apply in instances, where it may not seem immediately apparent that it does apply.  Broadly, where there is any significant continuity between a business and a successor business, the legislation may apply.

A transfer may take place where a business is resumed by a landlord, after termination of the lease.  It may arise on the termination of a sale and lease back, upon enforcement.  It may arise on termination of a lease, where a new lease is granted without interruption to a lessee who continues the business.  It may arise where landlord re-takes possession of a premises upon breach of the terms of a lease.

There may be a transfer under the acquired rights legislation in some cases, where one contractor is substituted by another contractor.  Generally, there would not be a transfer as such in this case, as there is no link between the transferor and transferee.  It is possible, however, that where there is succession by an organised grouping of persons and assets, which together facilitate the exercise of a specific activity, that a transfer may take place.

The fact that the services are provided by a successor contractor is not sufficient to conclude that the economic entity has been transferred.  There must be identity between the workforce management, method of operations and resources.  In most cases involving a new contract, the requisite level of succession will not be present.


Public Bodies

The legislation applies to public and private undertakings engaged in economic activity, whether or not they are operating for economic gain.  A transfer of staff who carry out economic activities in the public sector is subject to the legislation.

Transfers in the nature of outsourcing to new entities are transfers for the purpose of the legislation.  Transfers of staff carrying out activities of an economic nature may also be within the provisions.

An administrative reorganisation of a public authority or the transfer of administrative functions between authorities is exempted. The exemption covers the reorganisation of public administrative bodies or the transfer of functions between public administrative authorities.

The exclusion in relation to the organisation of public administration is limited to activities comprising the exercise of public powers. Many reorganisations within the public sector itself are not covered by the terms of the exemption.


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/