The European Communities (Protection of Employees on a Transfer of Undertaking) Regulations 2003 (“Regulations”) provide that where a business is transferred, within the meaning of the Regulations, its employees are entitled to transfer to the recipient of the business or “transferee”. While the European Court of Justice has stated that employees are entitled to refuse to transfer to the transferee, the legal consequences of an objection on the contract of employment is a matter for each Member State to determine.

In Ireland there has been considerable uncertainty as to the legal consequences of an objection, as this situation is not dealt with by the Regulations. It was, for example, considered that where an employee refused to transfer, the employee remained employed by the transferor, who would then be required to make the employee redundant and possibly pay a redundancy package. However in the recent case of Symantec Ltd v Leddy & Lyons the High Court has disagreed with this approach, as a consequence of which employers in such situations may now not be liable to make redundancy payments, depending on the circumstances surrounding the refusal to transfer.

In the case in question, two employees who declined to transfer to a new employer were not to be considered as having subsequently been made redundant by the transferor, and so were not entitled to severance lump sums, according to the High Court. The Court, in the process, overturned rulings by the Employment Appeals Tribunal in favour of the employees and upheld appeals by the transferor company, Symantec, against both decisions.

According to Judge Edwards: “If the Irish legislature had wished the employment relationship with the transferor to continue so as to facilitate the employee in making a claim for redundancy, it could have enacted legislation to that effect.”

The judgment is hugely significant to any clients who are, or become, involved in a transfer to which the Regulations apply, as it finally clarifies how employees who object to a transfer should be treated by the transferor (i.e. the original employer). Effectively, a refusal to transfer may now, depending on the circumstances, be analogous to a resignation.

On a note of caution, there may still be a remedy open to employees in situations where the refusal to transfer is due to a substantial change in working conditions to the detriment of the employee. In such situations, the Regulations provide that the contract is deemed to be terminated by the employer.

The possibility remains that this decision may be appealed to the Supreme Court and/or the position may be regulated by legislation. For now, at least, practitioners can rely on the fact that an employee’s refusal to transfer does not automatically create a redundancy situation for the transferor, and can be examined on the particular facts surrounding it.