In this month's First Tuesday Q&A, Ciarán Lyng, Solicitor, A&L Goodbody, takes a closer look at some of the practical and legal considerations for employers regarding transferring employees under the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003 (the TUPE Regulations). A recent Labour Court decision in particular focuses on the legal implications of an employee's refusal to transfer to a new employer.

1. Where did the TUPE Regulations come from?
2. What is the effect of a TUPE transfer situation on affected employees' rights?
3. Is an employee allowed to object to a transfer of his/her employment under the TUPE Regulations?
4. How has the recent Labour Court decision in Adina Predut v Rapier Contract Services Limited UDD185 affected the Irish position?
5. What if the transfer under the TUPE Regulations involves a change to the employee's terms and conditions of employment?
6. Should employers inform employees of their right to object?

Q. Where did the TUPE Regulations come from?

When selling a business, or part of a business as a "share sale" , the buyer steps into the shoes of the seller from an employment contract point of view. The affected employees stay on their existing contracts of employment with their terms and conditions, as well as continuity of service, preserved.

Prior to the introduction of the TUPE Regulations, when the assets of a business were being sold, a buyer could pick and choose assets from the target company and leave behind certain perceived liabilities. This could include the incumbent employees. To address this situation, from an employment law perspective, the European Acquired Rights Directive was introduced in 1977 and transposed by way of the TUPE Regulations into Irish law. The aim of the Directive and Regulations is to provide protection for employees where the assets (rather than the shares) of a business are being sold.

Q. What is the effect of a TUPE transfer situation on affected employees' rights?

TUPE won't apply to every kind of asset transfer situation. A detailed legal analysis needs to be carried out to determine whether the "organised grouping of resources" (i.e. the assets that are to transfer) constitute an "economic entity" that will retain its identity post-transfer. If the answer to all of that is "yes" then we have a TUPE transfer situation.

If TUPE does apply to a particular transfer situation the net effect is that the employees of the seller will transfer their employment automatically to the buyer. Significantly, they will retain their terms and conditions of employment (with certain pension exceptions) and maintain their existing service. The TUPE Regulations also protect employees from being dismissed in connection with the transfer, unless, post-transfer, there are "economic, technical or organisational reasons" justifying such a dismissal. The TUPE Regulations also place certain information and consultation obligations on both the seller and buyer.

Q. Is an employee allowed to object to a transfer of his/her employment under the TUPE Regulations?

The European Court of Justice (CJEU) has previously confirmed that employees may refuse to transfer to the new employer (the buyer) under TUPE. The CJEU left it to individual Member States to determine the effect of such an objection on their contract of employment and/or the employment relationship. There are different approaches in different EU Member States when an employee refuses to transfer. For instance, in Germany an employee may object to the transfer of his employment under TUPE and that objecting employee will remain employed by the seller company. In contrast, in the UK there is a statutory right of objection so if an employee refuses to transfer to the buyer their employment with the seller is treated as terminated but there is deemed to be no dismissal. From a timing perspective, the termination is deemed to take effect on the transfer date.

In Ireland, there is no statutory right of objection. In fact, the position of objecting employees was very unclear until the High Court decision in Symantec Limited v Leddy and Symantec Limited v Lyons (Symantec). In Symantec, the High Court held that employees who refuse to transfer under the TUPE Regulations should be considered to have resigned from their existing employer. The net effect for employees was that, by objecting to the transfer to their new role they could not claim an entitlement to a redundancy payment. In short, there was no redundancy situation where an identical job remained on offer. The High Court held that if the legislature had wished for the employment relationship with the buyer to continue so as to facilitate the employee in making a claim for redundancy it could have enacted legislation to that effect.

Q. How has the recent Labour Court decision in Adina Predut v Rapier Contract Services Limited UDD185 affected the Irish position?

This case has confirmed the position adopted by the High Court in Symantec. In the Rapier case, the complainant was initially employed as a concierge at the respondent company. In 2015, the respondent decided that concierge staff should be trained to enable them to obtain security licences. It was decided to transfer the respondent's concierge business to a sister company, Synergy Security Limited. This was because they had responsibility for providing security services at the same apartment block in which the complainant worked. After being notified of the transfer, the complainant refused to transfer. The respondent company informed the complainant that this would be considered to be a resignation and that her employment would cease with the respondent on the last day before the transfer. The Complainant took a claim for unfair dismissal. After being unsuccessful in the WRC, the complainant appealed to the Labour Court. The Labour Court relied on the decision in Symantec and held that the same principle applies to a claim for unfair dismissal as to a claim for redundancy. The Court held that the complainant objected to the transfer and therefore resigned her employment and had no claim for unfair dismissal.

Q. What if the transfer under the TUPE Regulations involves a change to the employee's terms and conditions of employment?

The Labour Court noted in Rapier that the complainant's terms and conditions of employment would be the same with the buyer as they were with the seller. It is clear under the TUPE Regulations that employees must transfer on the same terms and conditions as they had with their previous employer. If the terms and conditions of employment were to be different post-transfer and the employee objected to the transfer on that basis potentially that may not be considered to be a resignation, but rather a transfer-related dismissal. This demonstrates the difficulty with the lack of Irish legislation in relation to employee objections to a transfer under the TUPE Regulations and we may need to wait on further case law to determine this point definitively.

Q. Should employers inform employees of their right to object?

Although there is no statutory obligation to do so, prudent employers may wish to inform "in scope" employees of their right to object to a transfer under the TUPE Regulations and the legal consequences of doing so. As well as ensuring full transparency as part of the information and consultation exercise, European Union case law has confirmed that employees have a fundamental right to choose their employer.