Employees' position in a transfer

When an undertaking is transferred the position of the employees of the previous or new employers is as follows:

• An employee claiming to have been unfairly dismissed because of a transfer has the right to complain to an employment tribunal.
• Transferred employees who find that there has been a fundamental change for the worse in their terms and conditions of employment as a result of the transfer generally have the right to terminate their contract and claim unfair dismissal before an employment tribunal, on the grounds that actions of the employer have forced them to resign. Employees may not make this type of claim solely on the grounds that the identity of their employer has changed unless the circumstances of an individual case change and that change is significant and to the employee's detriment.

In both the above cases dismissal because of a relevant transfer will be unfair unless an employment tribunal decides that an economic, technical or organisational reason entailing changes in the workforce was the main cause of the dismissal and that the employer acted reasonably in the circumstances in treating that reason as sufficient to justify dismissal. Even if the dismissal is considered fair, employees may still be entitled to a redundancy payment (see Redundancy).

For details of how to complain to an employment tribunal see Complaining to an employment tribunal.

Employees employed in the undertaking immediately before the transfer (or who would have been so employed had they not been unfairly dismissed) for a reason connected with the transfer 1 automatically become employees of the new employer, unless they inform either the new or the previous employer that they object to being transferred. In this case the contract of employment with the previous employer is terminated by the transfer of undertaking but the employee is not dismissed. The previous employer may re-engage the employee.

An employee's period of continuous employment is not broken by a transfer, and, for the purposes of calculating entitlement to statutory employment rights, the date on which the period of continuous employment started is the date on which the employee started work with the old employer. This should be stated in the employee's written statement of terms and conditions; if it is not, or if there is a dispute over the date on which the period of continuous employment started, the matter can be referred to an employment tribunal. (For further details, see Written statement of employment particulars (PL700)).

Transferred employees retain all the rights and obligations existing under their contracts of employment with the previous employer and these are transferred to the new employer, with the exception that the previous employer's rights and obligations relating to benefits for old age, invalidity or survivors under any employees' occupational pension schemes are not transferred. If the new employer does not provide comparable overall terms and conditions, including pension arrangements, it is possible that an employee may have a claim for unfair dismissal, although this has never been tested in the courts.

Occupational pension rights earned up to the time of the transfer are protected by social security legislation and pension trust arrangements.