This clause determines what happens to employees when a contract ends—specifically, whether they move to another company, stay with the original employer, or are laid off. It matters because employment law in both the UK and US generally protects workers from being transferred without consent, but this clause can override that protection if you agree to it in advance. For example, if you're a manager at Company A and the contract says "upon termination, all staff transfer to Company B," you could find yourself working for a new employer with different pay, benefits, or working conditions. The legal principle here is that contracts can set terms about employment consequences, but only if both sides agree clearly beforehand.
Before signing, get clarity on three things: (1) Will employees keep their current salary and benefits after transfer? (2) Can they refuse the transfer and resign instead? (3) What happens if the new employer doesn't want them? Push back if the clause is vague—ask for a written list of who transfers, under what terms, and what happens to their pension or seniority. If you're the employer, consider whether you actually want this obligation, as it could be expensive and create legal disputes. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause determines what happens to employees when a contract ends—specifically, whether they move to another company, stay with the original employer, or are laid off.
Why should I care about this clause?
It matters because employment law in both the UK and US generally protects workers from being transferred without consent, but this clause can override that protection if you agree to it in advance.
What are my options?
For example, if you're a manager at Company A and the contract says "upon termination, all staff transfer to Company B," you could find yourself working for a new employer with different pay, benefits, or working conditions.
How does this affect small businesses?
The legal principle here is that contracts can set terms about employment consequences, but only if both sides agree clearly beforehand.