Meaning
European Union legislation preserves worker entitlements during a change of ownership. An acquired rights directive employee transfer governs the automatic shift of staff from one legal entity to another when a functional business unit is traded. This protection applies to the maintenance of salary and seniority.
It ceases to apply when a transaction is structured as a share sale because the legal identity of the employer does not change.
Legal Continuity
Protection for employees is maintained by forcing the new owner to step into the shoes of the previous employer. The buyer must honor the existing terms of the employment contract exactly as they were written before the deal. This prevents the use of a business sale to reduce wages or remove benefits.
Operational Bound
Corporate buyers must identify which workers are part of the specific unit being sold. If a person spends only a small portion of their time on the transferred activity, they might not move to the new company. This distinction requires a detailed audit of time sheets and job descriptions.
The transfer is limited to those who are truly assigned to the economic entity being traded.
Consent Limit
Workers must be informed about the move but they generally cannot block the transfer through a simple veto. If an employee refuses to move to the buyer, their contract may be terminated without the right to a redundancy payment. This ensures that the buyer receives the workforce needed to operate the business.
The individual right to object exists but carries the risk of losing employment entirely.
