Renegotiation of employment contract on sale of business

Question

My employer has sold its business. The new owner wishes to negotiate new employment contracts with former staff, including me. The new contracts being offered provide for less pay. Other benefits have also been reduced. Am I entitled to redundancy compensation from my old employer? Is my new employer entitled to offer me a new employment contract with reduced terms and conditions of employment?

Answer

The answer to both questions depends on whether, as a result of the sale, you have been made redundant. This in turn depends on how the sale and purchase was structured.

If your former employer was a company, then it is treated in law as being its own "legal person" and quite independent of its owners and shareholders. If the new owner purchased your former employer's business by buying its shares, then you are not redundant because your former employer still exists.

Take for example, Telecom. As a public company Telecom shares are brought and sold on the share market almost every day. This means that Telecom has new shareholders almost everyday. But, this change in ownership or shareholding does not affect the employment of Telecom employees. Telecom remains their employer through out.

If the new owner has purchased your former employer's business by buying out its shares, then you are not redundant and your employment is continuous. Consequently, the new owner cannot change your terms and conditions of employment without your consent.

If the new owner purchased your former employer's business by buying out its assets (regardless of whether your former employer was a company or a sole trader), then you are redundant because your former employer will cease trading and your position will no longer be required.

Your former employer is required to pay you redundancy compensation only if your employment contract specifically provides for it.

Whether the new owner can offer you new employment on reduced pay and conditions will depend on the terms of the sale and purchase agreement. Sometimes the vendor will protect staff by adding a clause to the agreement requiring the purchaser to re-employ staff on the same terms and conditions as they previously enjoyed. If there is no such clause in the agreement, then the new owner can offer you re-employment on reduced pay and conditions.

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Expired contracts continue with same terms and conditions

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