Author: Fiona Barclay

Social media and the Christmas party

It’s an unfortunate fact of life for employers that staff can sometimes enjoy themselves not wisely but too well at the Christmas party. While the majority of office functions pass without incident, every year a minority of employers have to consider disciplinary action because their employees behaved inappropriately.

An added dimension for employers in the age of the internet is the fact that people aren’t always circumspect about what they post online – disciplinary action may be necessary in circumstances where an employee posts something stupid for all the world to see and there is a clear link with their workplace.  Christmas parties aren’t immune to this by any measure.

The most notable example of this in recent years is the notorious incident when an employee of Wagamama posted a video of himself snorting cocaine while wearing a T-shirt with the company logo emblazoned across the front.  That is the kind of publicity that employers will want to avoid at all costs.

There are a number of simple precautions that an employer can take, particularly in advance of the office party. First of all, employers should ensure that they start from a position of strength – that they have in place policies addressing the use of social media, email and the Internet in the workplace.  These policies should set out clear and understandable rules on what is, and what is not, permitted. A copy should be provided to all employees at the commencement of employment and as in all other cases, new staff should be required to confirm in writing that they’ve read and understood the policy.

Among other things, the policy should establish what an employer is prepared to allow in practice – and in terms of social media, it should make it crystal–clear that employees should not post material on Facebook, Instagram or any other social media sites that has the potential to bring their employer into disrepute or otherwise damage the company’s image.

Assuming an employer has such a policy in place, a reminder email can be easily circulated in advance of the Christmas party warning staff that while they are expected to enjoy themselves – this is a social occasion after all – they are also expected to behave responsibly and in an adult fashion.

Naturally, an employer has other expectations in relation to staff behaviour at Christmas parties – any kind of unwanted or inappropriate behaviour is prohibited. Employers should always remember that their duty of care to provide a safe place of work during the working day extends to functions associated with the office – and a Christmas party is very much a social occasion that is associated with the workplace.

Because of this, precisely the same standards apply and employers have just as much of a duty to protect their staff from harassment (sexual or otherwise) as they do in the office itself.  Employers should make sure that staff are aware of the appropriate way to behave during the party.

In addition, employers should be vigilant at the party itself – there is no harm in stepping in to nip a problem in the bud. In larger organisations, managers can be informally asked to keep an eye on things. There’s obviously no need to be heavy–handed; all that’s required is a bit of common sense.

In circumstances where pre-emptive action isn’t enough and where an employee, despite being warned not to, goes ahead and post something inappropriate on social media, such as images of drunken behaviour at the Christmas party, an employer isn’t without remedy.

Assuming there’s a policy in place governing use of social media with a connection to the workplace, there’s nothing to prevent an employer from taking disciplinary action.  The courts and tribunals have had to look at the interaction between social media and the workplace with increasing frequency in recent years and a number of principles flow from that.

To begin with, as a general rule the punishment should fit the crime – if an employee posts a drunken video but only a tiny number of people have actually watched it, a lesser sanction will definitely be appropriate.  Putting it another way, if no damage has actually been suffered by the employer, it will be much more difficult to convince the WRC that termination of employment, to take one example, was the appropriate remedy.

If, on the other hand, there is some evidence to believe that the employer’s reputation has been damaged by the conduct in question (the Wagamama case comes to mind here), it may be appropriate to impose a more severe sanction, depending upon the circumstances.

The key thing for employers to do is to maintain a cool head – and act reasonably and objectively.  Employers shouldn’t be afraid to take action in genuine cases – but should always ensure that they’re proportionate in their response.

 

Know your employment rights when returning to live and work in ireland

As published in the Sunday Business Post, Sunday 18th August 2019 The continually improving Irish economy has seen increasing numbers of the Irish diaspora returning to live and work in Ireland.   Some may have been gone for a handful of years.  Others may be returning after decades of working overseas.

But they have one thing in common.  They are returning to a labour market, and a system of employment law, that may be unfamiliar to them.

So what can a returning emigrant expect if they haven’t worked here recently – or ever?  What do they need to know about the employment law regime in Ireland?

EU influence

A lot depends on where the emigrant is coming from.  Members of the diaspora who left Ireland to work in other EU countries will probably be able to adapt more easily than those who have worked outside Europe since leaving Ireland.  There is one very simple reason for this.  The employment law systems in individual countries within the EU have a lot in common.

The EU takes an activist approach to employment law.  Many of our most important employment law rules came from Europe to begin with.  All of our equality law principles originated in Europe, for example, as did our rules governing Working Time and a variety of other laws and legal principles.

Permanent employment

Particularly important is the fact that most EU countries embrace the concept of permanent employment.  This is a hallmark of Irish employment law and possibly the most important element of all.  Once you have 52 weeks of continuous employment, your dismissal is automatically deemed unfair by law and the employer must prove otherwise.

Putting it another way, Irish employment law places an onus upon the employer to justify why the relationship shouldn’t continue.  This is as opposed to there being any duty on the employee to say why it should.  That is a very significant and important principle in Irish employment law and it is mirrored across Europe.

The US system

Employees returning from the United States, however, will have to adjust to quite a different landscape.  The USA does not have any comparable system of employment law to the Irish/European one.  Perhaps the most fundamental point of distinction is the fact that in America, termination “at will” is both entirely legal and very common.

What this means is that, other than in cases of discrimination, an American employer is free to dismiss an employee irrespective of how long they have worked in the organisation.  The employer is under no obligation to give reasons or justify their decision.

In the US, there’s no concept of maternity leave or any of the other benefits that exist as of right in Ireland and in Europe.  The same is true, to one extent or another, with the rest of the world – it is quite rare for an employee to be able to be benefit from an extensive system of rights and safeguards.

Countries like Australia and New Zealand do differ in this regard, but by and large the working experience is more akin to the American one than the European.

Employment rights

Regardless of where they are coming from, a returning Irish emigrant will benefit from a sophisticated set of rights enshrined both in Acts of the Oireachtas and elsewhere.  It is no exaggeration to say that every key aspect of the employment relationship (from hiring to firing, not to mention everything in between) is regulated.

An employer can’t discriminate in hiring  They can’t force employees to work indefinite hours.  They must allow employees to take maternity, paternity other special leaves and must always act objectively fairly when dealing with the workforce.

An employee who has a grievance with their employer can seek redress in the Workplace Relations Commission.  That body will generally always uphold a legitimate claim.  This is another powerful tool in an employee’s arsenal.

 

Philip Lee announced as Law Firm of the Year and Property Law Firm of the Year 2019

Pictured receiving their awards (l-r): Environment and Climate Partner, Alice Whittaker, Managing Partner, Philip Lee, Corporate Associate, Sophie O’Connor and Property Partner, John O’Donoghue 

 

We are pleased to announce that Philip Lee was awarded ‘Law Firm of the Year’ at the Irish Law Awards in June 2019.  Our property team was also recognised as ‘Property Law Firm of the Year’ and ‘Leinster Property Law Firm of the Year’ at the ceremony.

Commenting on the award, Managing Partner Philip Lee said ‘I am immensely proud of our people and the firm we have built.  Winning these awards is a significant acknowledgement of the hard work and dedication I see every day in the office.  Our lawyers are ranked as top tier experts in their fields.  They use their expertise to shape society and make a difference.  By working with some of the most interesting organisations from both the private and public sector, we can attract brilliant people and grow our practice areas.’

The Irish Law Awards identify, honour, and publicise outstanding achievements, while also recognising those who have dedicated their lives to serving in the legal profession.  They showcase the best of Irish law firms, legal practitioners and in-house legal teams throughout the four provinces of Ireland.

The full list of categories and recipients of the 2019 Travelers Irish Law Awards as featured in the Business Post can be found here.

Where Irish and British employment law differs

As published in the Sunday Business Post on June 2nd 2019: Brexit continues to dominate the headlines, and is likely to do so for the foreseeable future.

It is significant for many facets of Irish society, but one interesting question arises in relation to Irish employment law. While exact statistics are obviously unavailable, it definitely appears that increasing numbers of UK businesses are moving operations to Ireland.  There may not – yet – be wholesale movement of individual workers, but there’s enough of a trend to justify English employers enquiring further about Irish employment law – and, in particular, the differences with English law.

Many aspects of employment law both here and in the UK have their roots in EU legislation – one need look no further than our body of equality law and the rules governing working hours and holidays.

As well as that, the basic structure of the employer–employee relationship is very similar in both countries.  At its core, the relationship is typically governed by a written contract of employment into which numerous statutory employment law rights are implied.  In both countries, there is a dedicated workplace tribunal established to deal with employment disputes (and, to an extent, act as a body responsible for enforcing employment law).  Lastly, for historic reasons, Ireland and the UK have very similar legal systems.

All of this means that a UK employer entering the Irish market will see a lot that they recognise.  That said, there are enough distinctions between Irish and British employment law to mean that an employer should not assume that everything is the same.

One of the most fundamental and significant provisions of employment law in this country relates to unfair dismissal.  Employees enjoy very powerful protection in that once they have 52 weeks of continuous employment their dismissal is automatically deemed unfair by law.

The same basic rule applies in the UK – with one critical difference; the qualification period is 104 weeks, or two years. That obviously means that an employer in the UK has twice as much latitude to rid themselves of an employee before that employee acquires their statutory rights – a significant difference.

On top of that, there is the fact that when it comes to compensation, the positions are reversed.  An Irish employee can obtain compensation in the Workplace Relations Commission of up to 2 years’ remuneration.  In Britain it is capped at STG£83,682 or one year’s salary, whichever is less.

When it comes to the area of pensions, we also see a fairly significant difference.  In the UK, there is an obligation on employers to automatically enrolled eligible workers into a pension scheme to which the employer is also obliged to contribute.

No such provision exists in Ireland – while there is nothing to prevent an employer from establishing and/or funding a pension scheme, they can’t be forced to do so.  The height of an employer’s obligations are to facilitate access to a PRSA, which doesn’t involve the employer actually making contributions itself

Another very important distinction between the two jurisdictions relates to working time. In 1997, the EU significantly overhauled working time rules – and consolidated them in the Working Time Directive.

In Ireland, the rules are sacrosanct; an employer has no choice but to follow them (with very limited exceptions applying primarily to senior members of staff).  Perhaps the most significant rule in Ireland is that an employee can’t be forced to work more than a 48-hour working week.

In Britain, on the other hand, an employee can choose to opt out of the statutory maximum working week 48 hours by signing an agreement.  Irish employees cannot be forced to do this – the circumstances in which employees can voluntarily waive their rights are tightly controlled by the law.

Another example relates to sick pay.  Irish employers are under no obligation to pay employees during periods of sick leave where the employee is not available to work.  An employee may, depending upon social insurance contributions, be able to claim a payment from the state – but that is a stand-alone obligation in which the employer is not involved.

By way of contrast, in the UK there is a statutory obligation on employers to pay sick leave for up to 28 weeks to employees who have been off work sick for four more days in a row.

These are just some examples of the differences between UK and Irish employment law.  A British employer setting up shop in Ireland can take some comfort from the fact that the employment regime will be familiar to them – but as always, the devil is in the details.

‘Tis the season to be careful

Year after year, employers have to deal with the fallout from their staff enjoying themselves too much at Christmas. Disciplinary action as a result of inappropriate behaviour is fast becoming as much of a festive tradition as putting up a tree and the Grafton Street Christmas lights.

 

So what is an employer to do?  At a minimum, a few simple precautions can be taken to minimise – or even avoid – problems.

The Christmas party is often the source – and sometimes the scene – of workplace difficulties. Very often, the effect of combining alcohol and people can naturally lead to trouble. Two main types of problem can arise at the Christmas party – unwanted or inappropriate behaviour, particularly of the amorous variety, or violent or aggressive interaction between colleagues. Loosened inhibitions can lead to workmates interacting with each other in a manner most unlike their normal day to day behaviour. That’s fine if the only consequence is mild embarrassment the next morning – but in some cases, the consequences can be much more serious.

 

The courts and tribunals have had to grapple with the fallout from Christmas parties for many years. It’s now generally accepted – and an employer ignores this principle at their peril – that office functions are merely an extension of the day’s work. In other words, employees are expected to treat their colleagues with the same respect that they would during the day – the fact that they’re at a party doesn’t lower the standard of behaviour normally expected from them.

 

This applies equally to employers – their obligation to provide a safe place of work during the day extends to the Christmas party.  Because it’s a work function, the usual standards apply.  Employers have just as much of a duty to protect their staff from harassment (sexual or otherwise) in the function room as they do in the boardroom. This means that employers have to be vigilant – and they certainly can’t labour under the misapprehension that it’s nothing to do with them if incidents occur at the Christmas party and someone raises a complaint (or, worse, initiates a claim).

 

There are a number of practical steps an employer can take to mitigate the risks.  Firstly, and most importantly, clear markers should be laid down in advance as to what constitutes acceptable behaviour (and, equally, what constitutes unacceptable behaviour).

 

The simplest way to do this is to send a gentle reminder to all staff in advance of the Christmas party noting that while this is a social occasion and everyone is entitled to have a good time, employees should ensure that they behave respectfully to their colleagues. The reminder should make it clear that any misbehaviour won’t be tolerated (and should note – again gently, if necessary – that if problems arise, disciplinary action may well follow).

 

As well as that, an employer should be vigilant at the party itself – very often a problem can be defused quickly if an employer notices it and takes steps to deal with it.  An employer – particularly in a large organisation – may also decide it’s useful to counsel managers of divisions in advance that they should keep an eye on their teams at the party and, if necessary, gently remind employees in advance that regular standards of behaviour are required.  An employer doesn’t need to be heavy-handed (and nothing kills the festive buzz like repeated references to elf and safety) and it should be relatively easy to make the point and then move on.

 

An employer should – of course – maintain appropriate policies that cover employee behaviour throughout the year.  An anti-bullying and harassment policy is particularly important – employees should be aware of what constitutes unacceptable behaviour (and, equally, what to do if they’re the subject of what they perceive to be unacceptable behaviour). Incidents arising at a Christmas party (or at other times during the year) will be dealt with under this policy.

 

The ‘main’ Christmas party is one thing – but very often (particularly in larger organisations) there will be a number of different functions in December. Working groups may have their own outings, for example. The obligations on the employer to ensure employees are safe extends equally to these.

 

As well as that, it’s worth noting that any social function – even if it only has a tenuous link to the workplace and takes place off the premises – may stand a good chance of qualifying as part of work. There have been a number of cases on this subject in recent years and employers shouldn’t assume that merely because they aren’t funding a night out, it has nothing to do with work. A very cautious approach is recommended – and one that should be backed up in writing.

 

Further online coverage of this article can be found here.

 

 

 

 

 

Banking Culture – A Dirty Word?

Those working in the financial sector must be as serious about values as they are about valuation, and just as passionate about culture as they are about capital” – Christine Lagarde, Managing Director, IMF (Dublin, June 2018)

 

Bank misconduct globally has cost $320bn and €580m has been paid to-date in redress by Irish retail banks to customers denied the correct tracker mortgage interest rates. The Edelman Barometer 2018 ranked Ireland as the least trusting of the financial sector out of 28 jurisdictions surveyed.

 

A lot of attention has focused on banking culture and multiple reports have been published since the financial crisis pointed to ‘group think’, ‘governance and control issues’, ‘strategy failures’ and ‘regulatory failures’ as causes of the financial crisis.

 

There is a recognition that banking culture was a critical factor on the crisis and other scandals such as, product misselling, LIBOR rigging, forex manipulation, tax evasion and money laundering, including the tracker mortgage scandal here in Ireland. “Culture” represents an institutions’ norms, attitudes and behaviours related to risk awareness, risk taking and risk management or the institutions risk culture (Financial Stability Board). Culture has been defined as “a system of shared values and norms that shape behaviours and mindsets within an institution”. Derville Rowland, Direct General Financial Conduct Central Bank of Ireland, described it as “the unwritten rules and/or way things are done around here”, “it is from the top down, it is a matter for the boards and senior management, in the first instance, to set an effective culture that places the best interests of their customers first. Banks still have a distance to go to live up to their slogans of putting customers first”.

 

Ireland’s leading five banks recently announced the establishment of an Irish Banking Culture Board (IBCB), modelled on the Banking Standards Board in the UK, to focus on bank behaviour, ethics and culture in tandem with existing bodies such as the Institute of Bankers. The IBCB will be a private sector body funded by member subscriptions with the objective of raising standards of behaviour and competence in organisations.

 

The announcement follows a report (Behaviour and Culture of the Irish Retail Banks July 2018) commissioned by the Minister for Finance pursuant to the Minister’s powers in the Central Bank Act 1942, carried out by the Central Bank of Ireland in collaboration with De Nederlandsche Bank (the Dutch Central Bank), arising from the failures in behaviour and governance identified in the Tracker Mortgage Examination. The Report looked at behaviour and culture, senior leadership teams, how things are done and the attitudes to consumers in AIB, Bank of Ireland, Permanent TSB, Ulster Bank Ireland and KBC Bank Ireland. The Report acknowledged that the banks were at different stages of embedding the consumer in decision making but all had significant work to do, in particular in respect of diversity and inclusion.

 

Following the report the Central Bank has issued a risk mitigation programme to each of the banks requiring each bank to prepare an action plan addressing issues identified. The objective of the Central Bank is to shift a perceived mind set in banks from “Is it legal?” to “Is this right?” to “Is this sustainable in the long term interests of our customers?”

 

Embedding Culture – Can Banks do well while doing good?

The Financial Stability Board in April 2018 identified lack of accountability for misconduct as a key driver of misconduct and noted without strengthened individual accountability profound cultural change in the financial services sector is unlikely.

 

“Better rules can support a better culture but there must be credible sanctioning and rigorous checking by supervisers to ensure banks are meeting these expectations. Each bank needs to define a set of values and guidelines for desired behaviour from the top. Desired behaviour [must be what] earns respect from colleagues and managers and what gets [employees] a bonus or promotion” – Danielle Nouy, Chair of the Supervisory Board ECB 15 October 2018.

 

Banks are already embracing the sustainability agenda but sometimes struggle to see how this translates beyond CSR (Corporate Social Responsibility) initiatives. To drive cultural change an institutions values need to be embedded in all policies, systems from front office to back office, including customer service, marketing, product development, risk management, treasury, compliance, finance, human resources and I.T. Ironically institutions in so called “niche” areas of ethical finance, and in particular Islamic finance being a value based system itself, have advocated and implemented this methodology for many years and a lot can be learned by conventional banking institutions as to how values permeate through all aspects of such institutions in terms of how risk, management, and governance structures and policies are internalised throughout all decision making, conduct and all activities of such institutions. For example, Islamic financial institutions operate a dual layer of oversight with a Shari’ah board and Shari’ah internal audit function which monitor compliance specifically to ensure that matters such as sources of funds, governance, product design, and avoidance of particular activities comply with the institutions values, most importantly the overarching principle to avoid causing harm in society.

 

Regulators – Carrot and Stick?

Directors of financial services providers and persons performing key prescribed control functions (PCF) are already subject to ‘fit and proper’ requirements and a competence examination on appointment and on an ongoing basis but the rules are quite old. The Report’s risk mitigation recommendations and diversity findings have led the CBI to propose fresh requirements in the form of an Individual Accountability Framework, Senior Executive Accountability Regime and a review of the existing fitness and priority requirements (the “Framework”) and this approach is in line with the views of Danielle Nouy, Chair of the Supervisory Board, ECB expressed recently.

 

The Framework will set out codified common standards for all staff of regulated financial services providers, additional standards for senior management and standards for businesses and consequences for deviating from such standards.

 

Revisions to the current enforcement process would mean the CBI would be able to pursue individuals directly for their misconduct rather than only where they were proven to have participated in a firm’s wrongdoing (as is presently the case) on the basis of failing to adhere to their individual “Statement of Responsibilities”.

 

The implementation of these changes are subject to legislative amendment and the CBI has formally  recommended that the Minister for Finance consider the adoption of such an individual accountability framework. In the meantime the CBI is committed to “more intrusive, targeted conduct supervision of those firms that pose the greatest potential harm to consumers including robust challenge of board and executive management” (Derville Rowland DG Financial Conduct, Central Bank of Ireland 19 October 2018)

 

For more information please contact banking and finance partner Simon O’Neill.

A guide to the Irish corporate tax regime

Over the last thirty years Ireland has become one of the preferred jurisdictions for multinational companies to base their main operating companies or other key functions. The activities carried out in Ireland by these companies include finance, intellectual property, research and holding companies. Indeed Ireland has regularly been the largest recipient of foreign direct investment from key jurisdictions such as the US.

 

Read our overview of the Irish corporate tax regime.

Transgender rights in the workplace

As published in the Sunday Business Post, Sunday 4th November 2018. The topic of transgender rights and equality has come to prominence in recent years and the latest decision of the Workplace Relations Commission on the subject, handed down in last month, is the perfect example of this.

 

This case involved an equality claim in which a transgender man visited a barbershop for a haircut, only to be told by an employee barber that they “don’t cut ladies hair”.  The comments were made in front of a number of customers, causing distress to the complainant who left the premises.  He subsequently initiated an equality claim in the WRC resulting in an award of €5,000.  The WRC adjudicator commented that “the complainant was treated differently, because he was transgender when he was refused a haircut by the respondent.  This amounts to discrimination on the grounds of gender.”

 

The case is a classic example of how careless, if not discriminatory, treatment can result in financial loss and, perhaps more significantly, negative publicity for a business.  It’s a clear demonstration of what not to do in a situation like this one and there are valuable lessons to be learned for employers.

 

While we haven’t yet seen a significant number of claims involving members of the transgender community in the workplace, there is no doubt at all that the same principles will apply.

 

According to the Transgender Equality Network Ireland an estimated 1% of the population will experience some form of gender variance.  This equates to roughly 45,000 people in Ireland.  A survey by the Transgender Equality Network Ireland in 2017 found that almost half of all transgender employees in Ireland conceal their identity from employers and co-workers, as they anticipate that they will experience discrimination.

 

The issue of transgender discrimination has been considered by the courts and tribunals sporadically.  The first such claim was heard in 2011 and it remains the most significant decision to date.  In that case, a transgender woman was awarded €35,000 and, again, the case appears to be a textbook demonstration of how not to deal with these issues: the employee was asked to conduct certain work on behalf of the company in her former male identity, was prohibited from using the female restrooms and eventually was required to work from home due to a “lack of office space”.  The manner in which she had been treatment clearly influenced the size of the award.

 

Irish employment law does not deal with the question of gender identity specifically – there is no piece of legislation, for example, addressing the rights of individuals in transition.  However, remedies are still available for a transgender employee who is the subject of adverse treatment in the workplace as a consequence of a change in gender identity.

 

Most importantly, equality law allows an employee to seek redress from the Workplace Relations Commission in circumstances where they are the subject of discrimination under one of the protected grounds.

 

A transitioning employee, to take one example, could argue that they had been discriminated against under the gender ground and could certainly bring a claim.  This is the approach taken in the most recent case, involving a barbershop.  Equally, discrimination on the basis of sexuality is prohibited.

 

There is therefore probably no need to explicitly mention transgendered individuals in legislation – the protections already available likely encompass them (something that is demonstrated in both of the cases referred to above).

 

Separately, an employee has an unquestioned right to a safe place of work – and that definition is broad enough to encompass a workplace that is safe from harassment.  Therefore an employee who is the subject of derogatory treatment as a consequence of expressing his or her preferred gender can complain to their employer and seek remedial action.  If a stubborn employer either refuses to engage (or, perhaps more likely, takes a laissez-faire approach to these issues), that employee could in theory commence proceedings.

 

All in all, it’s in an employer’s interest to be aware of these principles and ensure that their business is flexible enough to accommodate transgender employees in an understanding way.  We need to see more reported decisions to flesh out the core principles but it’s highly likely that a transgendered employee who has been the subject of discriminatory treatment will receive a sympathetic response from the WRC and the courts.

 

 

Takeover on the horizon? Here’s how it will impact your staff

As published in www.fora.ie on 4th November 2018. Mergers and acquisitions are a fact of life in Ireland – and a welcome reminder that the travails of the recent recession are largely behind us.  In 2018, we have seen a number of acquisitions of companies with the most prominent recent example being the takeover of the Irish Examiner by the Irish Times.

 

What are the implications for employees where their employer is acquired by a new owner?

 

Employment law is prevalent in this space and there are a number of protections in place for employees.  Generally speaking, there are two main ways in which a company can be acquired: either (a) the entirety of the shareholding is bought by a new owner or (b) the assets of the employer are acquired by a new owner.  It’s interesting to look at each of these in more detail.

 

The first point to note is that where the shares in a company are acquired by a new owner, the employer does not actually change – the company’s identity is exactly the same.  In this scenario, the implications are pretty straightforward – employee terms and conditions of employment (including any accrued benefits and length of service) are completely preserved.  The employees are still working for the same employer.

 

The new owner of the shares in the employer company is not entitled to tinker with terms and conditions any more than the previous owner of the shareholder was: the employees’ contracts of employment are wholly unaffected.  Of course, the new owner may seek to operate the business in a different way – but it has no enhanced powers to do so and restructuring of the operation will still have to follow accepted fair procedures (consulting with employees, considering alternatives to restructuring etc).

 

As well as that, if restructuring results in the elimination of roles, the employees have the same entitlement to redundancy payments and fair procedures as they did before the acquisition happened.

 

The second scenario is more complex.  This is where you aren’t dealing with the acquisition of shares (either because the business isn’t a limited company or the purchaser doesn’t actually try to acquire the shareholding).  In this scenario, there’s no change in share ownership but key assets of the company (plant/premises/customer lists/goodwill etc) are bought by a third party.

 

A particular piece of legislation derived from the EU – the Transfer of Undertakings Regulations – are likely to apply in this situation.  These Regulations, generally referred to informally as “TUPE”, act to prevent asset stripping.  Without TUPE, the old owner of the assets could dispose of the workforce without consequences and so could the new owner.  The new owner can say that he has no contract with the workers and the old owner can say the business is nothing to do with him any more – he has sold it.

 

TUPE steps in and prevents this.  If the assets of a company are sold as a going concern, the employees automatically travel with them and the purchaser of the assets will be forced to take on the workers.  Deciding whether TUPE applies can be tricky – but generally speaking, if there is no significant difference between the operation of the business the day before the sale and after, TUPE will apply.

 

With limited exceptions (mainly relating to pensions) TUPE is quite a powerful tool in the employee’s armoury.  This is because TUPE acts to preserve terms and conditions and continuity of employment very effectively – if TUPE applies, the purchaser will have to take on the employees on exactly the same terms and conditions that they enjoyed previously.

 

Again, the new employer can take steps to restructure the business but, crucially, the same fair procedures apply and among other things employees cannot be summarily dismissed merely because the new employer wants to do things in a different way.

 

In either scenario – acquisition of shares or acquisition of assets – a new owner does not have carte blanche to unilaterally introduce changes to terms and conditions of employment – the new owner/purchaser cannot for example insist that employees sign up to new contracts, sign up to reduced salaries or otherwise sign up to changes that are to their detriment.

 

It’s quite common when businesses change hands in this way for high level employees to depart but inevitably money changes hands in these situations and there is usually a significant chance that the employees have only agreed to waive their accumulated employment law rights because they received a hefty pay out.

 

In summary, employment law is pretty vigilant when it comes to the sale of businesses – and new owners/new employers ignore this at their peril.