Transfers of undertakings

The sale of a business has redundancy implications where the purchaser requires fewer employees. However, even where the employees are retained, their existing contracts will be terminated and replaced by a new one and cessation of employment falls within the definition of redundancy.

The regulations do not cover a take over effected by a transfer of shares, since the identity of the employer remains the same because the company is a separate legal person from the shareholders.

In the case of a transfer of a business or undertaking, continuity of employment is preserved.

The definition of 'undertaking' has been extended to cover non-commercial ventures. Regulation 5(2) provides for the transfer of the transferor's 'rights, powers, duties and liabilities under or in connection with any such contract'. This will cover breach of contract claims, statutory duties such as breach of the Wages Act 1986, maternity rights, equal pay, unfair dismissal and redundancy discrimination claims, and perhaps even protective awards. It will also cover claims for injuries at work.

To prevent the transferor making the employees redundant in collusion with the transferee just before the transfer, there is a provision that the employee shall be treated as unfairly dismissed if the transfer or a reason connected with it is the reason for his dismissal, except with regard to an 'economic, technical or organisational reason entailing changes in the workforce'. In Lister v. Forth Dry Dock and Engineering Co. Ltd [1989], FDDE was in receivership and its business was to be taken over by a company set up for the purpose. The transferee did not want to take over the workforce of FDDE and, by an agreement between the transferor and the transferee, the employees were made redundant an hour before the transfer. In this case the dismissal was clearly linked to the transfer and there was collusion between the transferor and transferee.

Notice

Employees are entitled to notice unless they have agreed to waive it. If the contract is for an indeterminate period, there must be a term relating to notice and if there is no express term, one will be implied by the courts. This will be a 'reasonable' period of notice and in the case of very senior managers could be expected to be six months, with other managers being due three months. A senior clerical worker could expect one month.

After four weeks' continuous employment the minimum period of notice is one week. The period rises to two weeks after two years of continuous employment and thereafter increases by one week for each additional year up to a maximum of 12 weeks.

Sick pay.

Since April 1983 employers have been obliged to provide statutory sick pay. The rates of pay are established by statute.

Fixed Term and Performance Contracts

Although associated with contracts for the employment of company directors, these can relate to an employee at any level employed for a defined period, as with ‘This contract will terminate on 31 March 1996’ or ‘This contract will run for three years from 1 April 1995’. A variant is the performance or task contract where the parties agree that the contract will terminate on completion of a task or on the occurrence of specific circumstances even though the termination date cannot be fixed in advance: ‘The contract will terminate on the date on which the project completion certificate is signed' or ‘The contract is for the duration of the programme and will end automatically when the budgeted funds for the programme are exhausted.’ In both cases, wrongful termination during the period of the contract incurs liability for damages for breach of contract.

Questions.

1. What is the difference between the contract for service and the contract for services?

2. How is it possible to distinguish between employees and independent contractors?

3. When is an employer vicariously liable for the tortious acts of employees?

4. What form is required for the contract of employment?

5. What are the duties of employees according to the common law?

6. What are the duties of employers according to the common law?

7. What terms are implied into contract of employment by statute?

8. In what cases is dismissal automatically unfair?

9. What are remedies for unfair dismissal?

10. What are damages for breach of a contract of employment?