Employment Relations Law Reform Bill - Examples

Fact sheet: Protections for employees in transfer of employment situations

The amendment to the ERA in change of employer situations provides a balance between employee's interests in such situations with the legitimate business decisions of employers. The changes recognise that these situations can be particularly uncertain and unsettling and seek to provide some certainty for all concerned.

The general situation

From now on in most industries the requirements about what happens to existing employees if the company they work for is sold or their work is contracted out will be set out in their employment agreement and is a matter between them and their current employer. The agreement must address what steps the employer will take for employees affected by any sale, transfer or contracting out of the business. Those agreements could range from spelling out explicitly the employees transfer and redundancy rights through to simply saying how these issues will be addressed at the time.

Vulnerable workers

For vulnerable workers (i.e. industries that have been subject to frequent contracting out or restructuring and workers terms and conditions have been undermined by this – such as the cleaning sector) the new provisions will guarantee them a right to transfer to the new employer on their current terms and conditions.

For these workers, the following examples address some situations that might arise.

(a) A contract for cleaning a large building comes up for renewal and after a tender process a new company wins the tender. What happens to the staff currently doing the work?

They will transfer to the new contractor on their existing terms and conditions provided the work is the same or substantially similar . If they are made redundant by the new contractor as a result of the transfer they will be entitled to whatever redundancy provisions are set out in their employment agreement. If they have no provisions they will be entitled to go to the Authority if they cannot reach agreement.

(b) A hospital decides to contract out its cleaning services to a private company. The company wants to take on the staff but not on their existing terms and conditions.

The new amendment guarantees that the cleaning staff will transfer over to the new employer on their existing terms and conditions. The new employer cannot unilaterally undercut the worker's conditions or make them a take-it-or-leave-it offer.

(c) A potential buyer of a catering service is keen on taking over an existing firm but now will drop its price because it has to meet the cost of making the existing staff redundant.

The cost of redundancy compensation may be an additional cost to purchasing organisations as a result of the changes. However, up until now this cost has been borne solely by the employee who can lose their job or have their pay cut because of a sale or transfer that they have no control over.

Currently when a business is sold as a going concern any potential buyer has to factor into their offer the costs of stock, leases, other service contracts etc. The new regulations will now mean a potential buyer where there are vulnerable workers will also have to factor in the cost of making existing staff redundant if they decide not to continue to employ those staff. In many cases new owners will wish to continue employing existing staff to make use of their knowledge and experience.

The final price will reflect a number of things and as always will be a matter of negotiation.

(d) A cleaning company takes over another company and has to take on the existing staff who are on superior terms and conditions than the new owner's staff. In the end the employer may be forced to up everyone's terms and conditions to that of the new staff just to avoid disruption.

Within any workforce there is a range of terms and conditions based on job content, qualifications, length of service, experience etc. Every day employees work alongside other employees who are paid more or have different terms and conditions. The fact that people have different terms and conditions within the same workplace is not in itself a reason for disharmony or disruption.

The settlement of any future terms and conditions is obviously a matter of negotiation and agreement and a range of factors will influence the outcomes.

ENDS

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