Employment Act change set to ease redundancy pain

What you need to know:

Our labour or employment laws have been unerringly silent on the automatic transfer or assumption of employment contracts during the transfer of an undertaking.
This is arguably so, because employment contracts in connection with Mergers and Acquisition transactions are considered as personal contracts incapable of transfer without the consent of the employee.
The new amendment would, therefore, ensure that employment contracts will automatically transfer to the proposed merged entity, making such contracts to gain effect after the transfer, as though originally made between the employee and the transferee.

They say that “He who passes the sentence must swing the sword”. This could very well be just a favourite quote from the TV show Game of Thrones and not an easy give-away that I am an avid watcher or an ardent follower of its undoubtedly gluing scripts.

Anyway, the quote simply means that before one takes a drastic measure against another person, he or she should at least have the courage to look them in the eyes and hear their final words.

In doing so, it’s an honour they say, perhaps an application of the natural law—Thou should not be ‘’killed” or condemned unheard.

This is the honour that could be bestowed upon the employees of a company being transferred to another as a result of a merger or an acquisition if the proposed amendments of the Employment Act, 2007 will be enacted into law.

More specifically, and of keen interest in this article, is the amendment and insertion of section 15A of the Employment Act, 2007 that introduces the role and status of an employee during the transfer of an undertaking as a going concern; either effected through a sale, merger or operation of the law.

Our labour or employment laws have been unerringly silent on the automatic transfer or assumption of employment contracts during the transfer of an undertaking. This is arguably so, because employment contracts in connection with Mergers and Acquisition transactions are considered as personal contracts incapable of transfer without the consent of the employee.

The new amendment would, therefore, ensure that employment contracts will automatically transfer to the proposed merged entity, making such contracts to gain effect after the transfer, as though originally made between the employee and the transferee.

This implies that the employees have a right to transfer on their old employment terms, including pay, working hours and annual leave.

Therefore, the new employees of the merged entity are protected from having their previous employment terms and conditions amended because of the automatic transfer.

This, nonetheless, does not in any way suggest that harmonisation of employment contracts is impossible. It can still occur where the merged entity cites technical, economical/financial reasons which may inevitably result to the restructuring of the previous employees’ contracts.

Most importantly, it means that the transfer of a business or undertaking shall not operate to terminate the contract of service of any persons employed by the transferor in the undertaking. Most horizontal mergers would ordinarily result to duplicity of roles in the merged entity, leaving many employees at the risk of being declared redundant.

It is in light of this that the proposed amendments intend to introduce a window period which captures a consultation to ensure that before a transfer is done, the affected employees will be notified by the transferor when the transfer is to take place, the approximate date, reasons for it, implications and the measures that are envisaged will be taken in relation to the employees.