Staff rights, information & consultation

Contents
1. Basic staff rights 2. Information & consultation 3. Failure to consult 4. Employee Liability Information

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/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 reading material on TUPE please click here.

Where you elect 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 to consult with your employees or their appropriate representatives should the transfer affect them.

The duty to consult comes from the TUPE regulations but may also be required under any information and consultation (I&C) agreement you 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 which you envisage taking in relation to those employees (and if no measures are envisaged, then that fact)
• If you are the transferor (i.e. the seller), the measures which the new owner envisages that they will take in relation to those 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
• 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

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 enter into consultation 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.

Should you or a new owner fail to inform and consult with employees' representatives, the remedy is for your employee's representative (or the individual employees if they do not have one) to make a complaint (not later than three months after the date of the transfer) to the employment tribunal. 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.

The seller must provide certain information (known as 'Employee Liability Information' ('ELI')) to the purchaser about the employees and their terms and condition of employment. A failure to provide this information can entitle the purchaser to make a claim against the seller, usually for a minimum award of £500 per employee.

Notification of the ELI must be given not less than 14 days before completion or, if special circumstances make this 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 two years
• Information of any court or tribunal case, claim or action brought by an employee against the seller within the last two 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 pursuant to section 1 of the 1996 Act

Further information is available from the Department for Business Innovation and Skills guidance 'Employment rights on the transfer of an undertaking' (opens a pdf).