Protect your rights during small business takeovers and mergers

November 26, 2012 | by | 0 Comments
There is a trend in the UK for mergers and acquisitions due partly to the current economic climate

There is a trend in the UK for mergers and acquisitions due partly to the current economic climate

This week it was reported that Network Rail Infrastructure has completed the takeover of one of the South West’s most innovative rail systems businesses, IAD Rail Systems. IAD is a division of Claverham Limited, which supplies design and manufacturing services to the civil aviation and military aerospace industries.

The news provides further support to statistics that show that the savage economic climate and growing uncertainty over the UK’s ability to return to growth is driving a trend for mergers and acquisitions.

Rights and duties

As an employee you have a right to be consulted about the possibility of a future takeover, either individually of through an employee representative. It is worth noting that you do not have to accept a takeover and transfer of your employment contract, but if you choose to decline your contract will come to an end as you will have effectively resigned. In such circumstances you should take legal advice from an employment lawyer on whether you are entitled to claim redundancy or even unfair dismissal.

If you are dismissed after a takeover this is automatically unfair dismissal and you should consult an employment lawyer. The company taking over your business can choose to dismiss staff for ‘economic, technical or organisational’ (ETO) reasons, but for this they must consider existing staff as well as staff from the new business for redundancy. They must also follow the correct redundancy procedures to avoid unfair dismissal claims.

Protect your interests

One of the main worries for employees of a small company is the news that a larger business is making takeover enquiries. Job security automatically comes under threat, as takeovers often result in the loss of some jobs as separate business functions are merged.

Employees of companies that are taken over are legally protected by TUPE legislation, the Transfer of Undertakings (Protection of Employment) Regulations. TUPE protects employees when their business is taken over by a UK-based company.

TUPE guarantees that your job carries over to the new company, that the terms and conditions of employment transfer over (eve if they are more favourable than those of existing employees) and that your continuity of employment is maintained. This last point means that if you had worked for the old company for five years, you will be considered as working for the new company for five years also.

David and goliath

Often a takeover results in a different working climate. Even if staff don’t change, and the work stays the same, employees often report that something changes within the ethos of the new business.

Just six months after global IT-giant HP bought 2,000 employee UK-software business Autonomy for $10.3bn, almost a quarter of the staff including the CEO and founder Mike Lynch had left. Staff cited a clash of working cultures as a reason for leaving, telling incredible stories of how the HP administrative machine required them to fill in endless forms to get anything done, and left many staff feeling despondent.

These examples show that there are many things to keep in mind if the company you work for is being acquired, so try and stay well informed about your legal rights.

This article was contribute by Nick Branch from Contact Law.

Category: Business

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