June 09, 2021

Hello

I am the HR Advisor for a company that has just finalised an agreement to purchase another business. We will be announcing this merger to staff next week and I will commence activities to transition staff contracts under our new entity.

I had a couple of questions in regard to meeting our requirements –
– we will maintain a majority of the workforce of the company acquired, however we want to change their pay structure (not rates, and its more in their favor) and update their contracts. I will be issuing their contracts of employment. If they do not sign, what is our recourse to ensure we can get them onto the same structure? Can we enforce the contract as we are a new entity

– do I need to let them bring a representative to the meeting, or as it is an acquisition, can this be skipped

– if employees do not accept their new employment, or role under the company, what can we do? Can we terminate them without paying redundancy?

Thanks

Hi Rachel

It is beyond the scope of the Help Desk to provide you with legal advice.  However, I am happy to provide you with some general comments that will hopefully clarify the law in this area.

As a preliminary point, I make these comments on the basis there has been a transfer of business, which appears to be the case on the facts that you have provided.  The significance of there being a transfer of business is that there is a change in legal identity of the employer.  In other words, the pre-existing employment relationship terminates and a new one is to be created.  In circumstances where the new employer wishes to amend or update the existing terms of the employees’ contracts, a new employment contract will be necessary.  An employee who does not accept their new contract is not bound by it, and therefore, the new employer has no right or ability to enforce this new contract on the employee.

In the scenario where the employee does not accept the new contract, the new employer would not be terminating any employment relationship.  This is because the employment relationship that existed was that between the employee and the previous employer (i.e. the acquired entity), which has already terminated.  As for redundancy pay, an employee will not be entitled to this if:

·       they reject the new employer’s job offer on terms similar to those of their old job;

·       the offer of employment recognises the employee’s service with the old employer for redundancy pay; and

·       there would have been a transfer of employment if the employee had taken the job.

Finally, an employee may wish to seek the assistance of a representative in the course of entering into this new employment relationship.  It is best practice to allow this notwithstanding the circumstance of an acquisition.

Kind regards

Matthew Gough

Copied