Employees’ Rights in Case of a Transfer of Undertaking
No statute governs the employment relationship when a business transfers to new ownership. As most employees are employed “at-will,” a “new employer” is free to offer employment to the employees of the seller/transferor employer or alter the terms and conditions of employment at the employment site.
If a transfer of undertaking will result in a plant closing or mass layoff, as defined under the WARN Act, employees are entitled to 60 days’ advance notice by the seller/old employer. If a union represents the employees of the seller, the new employer may be under a duty to bargain with the labor union and cannot change any terms and conditions of employment without first bargaining with the labor union.
Requirements for Predecessor and Successor Parties
There is no obligation for a party acquiring a business (an asset sale) to retain any of the seller’s employees. However, if the new employer reorganises the workforce after the transfer, which results in a covered plant closing or mass layoff, the new employer or “take over party” must provide the employees with 60 days’ advance notice. In addition, an employer who acquires a workforce consisting of unionised employees is required to bargain with the union in good faith regarding the effect of the layoff on unionised employees and, in certain situations, may be required to honor the terms and conditions of employment articulated in an existing collective bargaining agreement.