The ownership of a business may change either because it is taken over by another person or company, or because it amalgamates with another organisation.
Following a proposed change of ownership, difficulties often arise regarding the contract of employment that you have with your employees. There is a common law principle of ‘privity of contract’ which means that every contract including employment contracts is a private relationship between two parties and a such of the parties has the right to change the terms of that contract without agreement from the other party to the contract.
Therefore, on selling a business, an employee would technically be redundant unless the party buying the business wants to keep on some or all of the employees. However, if new contracts were formed then the employee would lose their continuity of employment and with that they lose their various employment rights that they have acquired through length and continuity of service, for example, the right not to be unfairly dismissed.
The law considers that it would be unfair on employees to lose these rights and therefore in some circumstances during the purchase of a business the employment rights of an employee are automatically transferred with full continuity of employment by virtue of TUPE or Transfer of Undertakings (Protections of Employment) Regulation 2006.
There are strict procedures that must be followed when transferring employees during the purchase of a business and any dismissal because of a transfer is an automatically unfair dismissal
To arrange an appointment to discuss with our specialist lawyers please contact the Employment Department secretary Viki Summers.
Telephone: 01494 862226