Staff Transfer Dilemma: Are Severance Payments Required When Jobs Are Retained?

Scenario Overview

Consider this scenario:

An operating segment of a company was sold to another company, and the staff were absorbed by the new company. The staff were not given notice of the takeover and did not receive any letter of disengagement from the selling company but have been offered a short contract by the new company. The staff are asking for a lump sum payoff from the selling company, having put in over 7 years of service. The selling company submits that no such payment is due since the transferred staff have not lost their jobs.

Options and Legal Remedies

What options are available to the staff? Are there any legal remedies?

You have not provided critical information that is needed, like which country/state the company is based in.

Under Indian laws

You have terminated the employment of the employees when you sold the business (not sold the company) to another company. The employees are given a new, short-term contract, which is different from the one you had with them. Their dues, like gratuity, will be reset.

Therefore, the demand of the staff is correct. You are liable to pay them full termination benefits according to the law.

The other alternative is that the purchasing company gives them letters confirming that their work in the previous company will be counted for terminal or retrenchment benefits if they are removed in the future.