The employment aspects of a Manx business transfer are substantially less complex than in the United Kingdom or member states of the European Union. This is because the 2006 Transfer of Undertakings (Protection of Employment) Regulations (TUPE) have not been adopted in the Isle of Man.
TUPE has existed in the United Kingdom since 1981, but the Isle of Man has imported only watered-down transfer provisions. Schedule 5(8) of the Employment Act 2006 provides that if a business is transferred from one person or entity to another, then an employee's period of employment at the time of transfer counts as a period of employment with the transferee. Thus the transfer does not break the continuity of employment and often staff automatically transfer when there is a change of employer or owner.
There is further protection for transferring staff in Section 11 of the Redundancy Payments Act 1990. This deals with redundancies where there is a change of employer by an undertaking transfer and the previous employer has terminated the employment contract just prior to the transfer. If the new employer takes on the employee, then certain key redundancy protections, such as the right to a trial period, are maintained in that transfer scenario.
Therefore, the Manx position is that on a business transfer, the Employment Act provisions on unfair dismissal still apply and the new employer cannot simply dispense with the services of existing staff. There must be a fair reason for any dismissal, and if there are redundancies a reasonable procedure must be adopted; in addition, the Section 11 rights set out above can apply.
However, the key difference between Isle of Man transfer provisions and TUPE is that, unlike TUPE, there is no automatic unfairness for a transfer-related dismissal and therefore there is no specific need for the employer to have an economic, technological or organisational reason justifying dismissal.
The Isle of Man has no constitutional obligation to integrate EU directives on labour law into its primary law; thus, the EU Acquired Rights Directives do not apply. The Isle of Man, as a much smaller jurisdiction than the United Kingdom and one where business transfers are far less frequent, is in a position to cherry pick employment protection legislation to suit its needs. A recent government mantra has been 'freedom to flourish' - the island has thus been trying to stimulate business activity, not stifle it with over-burdensome regulations.
The simplicity of the Manx business transfer regulations was illustrated in a recent employment tribunal case. In a pre-hearing review, the tribunal was asked to look at whether a transfer had taken place pursuant to Section 11 of the Redundancy Payments Act, and therefore whether staff made redundant on the transfer were properly entitled to redundancy payments. In a short and clear judgment made without reference to TUPE, the tribunal decided that there was no transfer on the facts of the case, and therefore that the previous employer simply had to pay the departing staff statutory redundancy payments.
In practice, many finance sector businesses in the Isle of Man seek to adopt best practice on business transfers and are, in any event, used to complying with TUPE, since many have head offices in the United Kingdom. Employment disputes arising out of business transfers are thus uncommon in the Isle of Man - a situation simplified by the decision not to embrace TUPE during the past 30 years. In the United Kingdom, on the other hand, the complexity of TUPE and 'gold plating' of the European directive, which occurred in the 2006 TUPE regulations, is now the subject of a review by the coalition government in an effort to reduce employment red tape.
For further information on this topic please contact John T Aycock at M&P Legal by telephone (+44 1624 695800), fax (+44 1624 695801) or email ([email protected]).