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Redundancy and Takeover

Published 03 February 2020

For an employee the takeover of the company they work for can be a time of great uncertainty and spark real fear about what the future holds.

A new owner may have their own ideas about how they wish to run the business, the direction they wish to take it in and what needs to be done to achieve it.

The acquisition may lead to a restructure of departments or operations, which means some employees are considered surplus to requirements.

The key question is: can an employee be made redundant in this situation?

The answer is yes, in some circumstances as part of a reorganisation - but not just because of the takeover. If an employee, who has two years’ service or more, is dismissed solely because of a business transfer then they can make a claim for unfair dismissal. (1)

For a redundancy to be genuine, an employer must demonstrate that the employee’s job will no longer exist. (2)

It may be because the business is: changing what it does; doing things in a different way, for example using new machinery; or changing location or closing down. For those dismissed in such circumstances, they may have the right to a redundancy payment.

When the full ownership of a company changes hands the rights of an employee are protected under the TUPE regulations. (3)

All employment terms and conditions should remain the same. The new business owners cannot force employees to accept a lower salary or other changes to their terms and conditions.

With a takeover if there are plans for a restructure, as with any reorganisation of a business, then redundancy should always be a last resort. It is a process that can be distressing for employees and unsettle any workforce.

The legislation around redundancy is complex, and a new owner of a business needs to conduct a fair procedure if it aims to reduce its workforce. ACAS provide comprehensive advice on conducting a fair redundancy process (4)

Once a takeover is complete, if the employer uses a fair and objective selection criteria to select employees for redundancy then this would be fair.

Sometimes employees will be asked to reapply for their jobs as part of the process of choosing which employees should be made redundant. It is a fairly common method used to help an employer decide who to select for redundancy

There can be situations in which an employer will dismiss an employee and say it is by way of redundancy, when in fact it is not the real reason for dismissal. The reasons for taking such action can vary and it can sometimes simply be that a worker is chosen because they are disliked.

Circumstances that indicate a redundancy is not genuine include: only one person being made redundant, other people are being recruited or there are plans to do so in the near future, or the decision is based on race, age, gender or any other protected characteristic. (5)

An employee can refuse to work for a new employer when it takes over the company they work for. Where an employee chooses to do so they should let their current or prospective employer know that they object to the transfer.

If that person then leaves they will be regarded as having resigned and not be able to submit a claim to an employment tribunal for unfair dismissal and they will not be entitled to redundancy pay.

However, where an employee feels they had no choice but to do so, for example because there has been or will be a ‘substantial change’ for the worse in their working conditions as a result of the transfer, then they have the right to resign and claim unfair dismissal

References:

(1) Dismissal or Unfair Dismissal: [Internet] www.castleassociates.org.uk [Cited 03/02/2020] https://castleassociates.org.uk/support-centre/unfair-dismissal

(2) Genuine Redundancy: [Internet] www.Gov.uk [Cited 03/02/2020] https://www.gov.uk/staff-redundant

(3) TUPE regulations: [Internet] www.gov.uk [Cited 03/02/2020] https://www.gov.uk/transfers-takeovers

(4) Fair Redundancy Process: [Internet] https://www.acas.org.uk [Cited.03.02.2020] https://www.acas.org.uk/manage-staff-redundancies

(5) Unfair Redundancy: [Internet] https://www.equalityhumanrights.com [Cited 03.02.2020] https://www.equalityhumanrights.com/en/equality-act/protected-characteristics

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For free employment law advice or if you are affected or want information and support by any of the issues in this article please give us a call. 0333 772 0611

A reputation built on success

For employment law advice or if you are affected or want information and support by any of the issues in this article please give us a call. 

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