Employees’ Rights in Case of a Transfer of Undertaking
There are specific provisions that protect ‘workmen’ in cases of transfer of business undertakings. These however do not extend to non-workmen; in such cases, the terms of the employment contract and/or the internal policies of the company would have to be examined. Where the ownership or management of an undertaking is transferred, whether by agreement or by operation of law, every workman who has been in continuous service with that undertaking for not less than 1 year, would be entitled to one month’s notice, or payment in lieu thereof, and to compensation calculated at the rate of 15 days’ wages for every completed year of service.
Requirements for Predecessor and Successor Parties
The requirements mentioned above relate to the obligations of the old employer (i.e. one whose business undertaking is being transferred). However, if for instance, the services of the employee are not ‘interrupted’ on account of the transfer or alternatively, the employees resign and join the new employer, then the successor entity would have to ensure that the salary and benefits that the employees were entitled to under the old employer (such as provident fund, employee state insurance, gratuity) will continue to be paid. Specifically, the liability of the successor entity will apply, where the predecessor has defaulted in remitting provident fund and state insurance contributions, prior to the date of the transfer of the undertaking.