Law guide: Employment

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Staff rights, information & consultation

Staff rights, information & consultation

Contents

Basic staff rights

If you sell the business and there is a new owner, it does not mean that your employee will be obliged to work for the new owner. The employee will have the right to inform you or the new owner that they object to becoming employed by the new owner.

If the employee is prepared to accept employment with the new owner, they are not entitled to anything more than they enjoyed under the previous employer.

However, if they refuse to work for the new employer, they will be considered to have resigned as opposed to being dismissed. This means that they will not be entitled to a statutory redundancy payment. If the employee resigned because the transfer to the new job would have resulted in a substantial and detrimental change to their working conditions, they may have a claim for constructive or wrongful dismissal.

The sale of a business would often be governed by the Transfer of Undertakings (Protection of Employment) Regulations 2006, better known as TUPE. For further information on TUPE please see How is the employee affected?.

Information & consultation

Where you decide to dispose of your business to some other party and TUPE applies, there is a duty on you and the new owner of your business to provide information to, and consult with, your employees or their appropriate representatives if the transfer affects them.

The duty to consult comes from the TUPE regulations but may also be required under any information and consultation (I&C) agreement your business may have in place.

You do not have to consult under both TUPE and any I&C at the same time and you can opt out of the I&C regime provided you consult under TUPE.

You have an obligation to inform all appropriate representatives of the following:

  • The fact that a relevant transfer is to take place
  • When it is to take place (approximately)
  • The reason for it
  • The legal, economic and social implications of the transfer for the affected employees
  • The measures that you expect to take in relation to those employees (or, if no measures are expected, then that fact)
  • If you are the transferor (i.e. the seller), the measures that the new owner expects to take in relation to employees who are to be automatically assigned to them on the transfer (or, if no measures are envisaged, then that fact)

The appropriate representatives who you must inform and consult with are either:

  • representatives of the recognised trade union, if there is one; or
  • employee representatives appointed specifically to be consulted on the transfer or who have already been appointed for a different purpose and are suitable for this purpose too.

Note that businesses with less than 10 employees don't have to appoint employee representatives for transfers.

You must inform the appropriate representatives long enough before the transfer to enable consultation to take place between you and those representatives.

You are also under a duty to consult with the appropriate representatives of the employees in an attempt to seek agreement of the measures to be taken. At all times, consultation should be carried out by all parties in good faith.

Where the employer has invited affected employees to elect representatives, but they fail to do so within a reasonable time, the employer must give necessary information direct to the affected employees.

Failure to consult

If you or a new owner fail to inform and consult with employees' representatives, your employees' representative (or the individual employees if they do not have one) can complain to the Employment Tribunal no later than 3 months after the date of the transfer. If the complaint is upheld, the tribunal must make a declaration in those terms and has discretion to award compensation of up to 13 weeks' pay in respect of each affected employee.

In considering how much compensation to award, the tribunal will have regard to the seriousness of the breach.

The liability for the payment rests on both the seller and new owner of the business.

Employee liability information

The seller must provide certain information - known as 'employee liability information' (ELI) - to the purchaser about the employees and their terms and conditions of employment. If the seller fails to do this, the purchaser can make a claim against the seller, usually for a minimum award of £500 per employee.

The ELI must be provided not less than 28 days before completion or, if special circumstances mean this is not reasonably practicable, as soon as reasonably practicable thereafter.

ELI must include the following information:

  • The identity and age of the employee
  • Information of any disciplinary action taken against an employee and/or grievance invoked by an employee within the last 2 years
  • Information of any court or tribunal case, claim or action brought by an employee against the seller within the last 2 years and whether the seller has reasonable grounds to believe that an employee may bring a claim against it arising out of the employee's employment
  • Information of any collective agreement which will have effect after the transfer
  • The particulars of employment that an employer is obliged to give to an employee under section 1 of the 1996 Act

Further information is available from the Department for Business, Energy & Industrial Strategy guidance 'Employment rights on the transfer of an undertaking'.