Transfer of business

What it is

A transfer of business is a change of employer in which staff move with the business, or part of it, on their existing terms. In Malta it is governed by the Transfer of Business (Protection of Employment) Regulations (S.L. 452.85), which implement the EU directive on transfers of undertakings.

When it applies

It applies when an economic entity that keeps its identity passes from one employer to another: a sale of a business or part of one, a merger, and often outsourcing a function or bringing it back in-house, or a change of contractor.

It does not usually apply to a share sale. There, the employer stays the same company and only its owner changes. See change of control.

What happens to the staff

• Their contracts pass to the new employer automatically, with their existing terms and length of service.
• The new employer is bound by the collective agreement that applied, for a period and on the conditions the regulations set.
• The transfer itself is not a lawful reason for dismissal. Dismissals for economic, technical or organisational reasons entailing changes in the workforce may still be possible.

The duty to inform and consult

Both the old and the new employer must inform the workers’ representatives, in good time, of the date and reasons for the transfer, its legal, economic and social implications for the staff, and any measures planned. Where measures are planned, they must consult with a view to reaching agreement.

Common mistakes

• treating a transfer as a redundancy, and dismissing staff who should have moved;
• changing terms on transfer and calling it harmonisation;
• leaving consultation until the deal has closed.