Understanding employee's entitlements upon a restructure or sale



The sale of a business usually go ahead in one of two different ways - the purchasing of the company's shares, or of its assets. 

A change in shareholdings doesn't affect the employment agreements of staff, as the entity remains the same.

For the first, when the employers shareholder(s) is selling the shares of the business, there's not likely any reason to consider employment law. This is because the holdings' changing doesn't affect the employment of the staff - the employer is still the same company.

However, this isn't the case with the sale of the business and assets of a business to a new entity. Even if everything else about the business is being kept the same, the entity that's employing the staff changes. Any employment agreements in place with the original company end, and the Purchaser will have to enter into new employment agreements with the employees they wish to retain.

When it comes to restructuring, every employment agreement should contain an 'employee protection provision' clause to protect affected staff. In it, the process that the current employer needs to use in negotiations is set out, including discussion points to bring up with the person buying the company, generally known as the Purchaser, and what information to share with affected employees.

For most employees, however, the option of retention and under what terms, is ultimately the decision of the Purchaser.  

Certain staff can be classified as vulnerable.Employees who work in areas such as cleaning services are given certain protections in the case of restructuring.

If a company has more than 20 staff, the current employer needs to consider the possibility of 'vulnerable' employees who receive extra protection under the law. Protected employees include staff working in areas such as cleaning services or food catering.

Without bargaining power, and working in areas that are often sold, transferred or contracted out, the law says that these employees have a greater risk of losing their jobs, and so receive extra protections from the law when it comes to restructuring. Put simply, it means that they have the right to transfer over to the new employer in the same position they currently occupy, with the same existing terms and conditions in their employment agreement. 

One thing to note is that any existing entitlements for 'vulnerable' workers are treated by the law as continuous when the purchaser takes on protected employees. However, for non-protected staff, this depends on the agreements reached during negotiations. 

If managing employee entitlements correctly in a company restructure scenario concerns you, McDonald Vague can help you handle it professionally and tactfully. We are happy to assist you in navigating this tricky terrain, as we're specialists in restructuring and understand the priorities of employees.

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