Employees on Loan - A Transfer of Obligations?

When an employee is on 'loan' to a company, who is responsible for that employee?

When an employee is on 'loan' or secondment to another company, the company with which the employee maintains a contract of employment is ultimately responsible to that employee for any infringement of their employment law rights. This does not mean that the company to whom the employee has been seconded has no liability whatsoever for any breaches of the employees' employment law rights. However, such liability will be dependent on the circumstances of the case. 

Liability in Cases of Redundancy

In An Apprentice -v- A Construction Company (ADJ00029367), the complainant brought about a complaint seeking adjudication by the Workplace Relations Commission under Section 39 of the Redundancies Payment Act, 1967.

The complainant had been employed by the respondent company from April 2017 as an apprentice. In December 2019, he was transferred to a different employer and the respondent, in due course, went into liquidation in February 2020. That being the case, the complainant sought a redundancy payment.

However, the respondent argued that the complainant employee was legally and formally transferred to the second employer. There was evidence of a transfer of employment and he was registered to his new employer with Solus.

Transfer of Employees

The Adjudication Officer noted that “the idea of employees, other than professional soccer players, being sent on loan to another employer is an unusual one. As noted above, the union representing the complainant said at the hearing that it was not uncommon for this to happen. Therefore, the critical question is whether the complainant’s contract of employment with the respondent was terminated by this transfer or not. Clearly the intentions of the parties are critical on that point.”

That being the case, the Adjudication Officer was tasked with deciphering what the relevant intentions of the parties were at the time of the transfer. The complainant had written to the director of the respondent which noted that there was some ambiguity as to whether he was on loan or a permanent employee of the company to whom he had been transferred. A director of the respondent company noted that “the intention is that you would be coming back in March when the project is complete.” He went on to say that “they have put you on their books for revenue so that all is above board. So, for now, you are employed by them.”

Employee on Loan - Intention of Parties

The Adjudication Officer noted that it was quite clear from both of these items of correspondence that the intention of both parties at the time the loan arrangement was made would be that the complainant would be returning to the original respondent company with effect from March 2020. However, that respondent company went into liquidation on 17 February 2020. The Adjudication Officer noted that neither the complainant nor the respondent was in any doubt that the complainant was and would continue to be an employee of the respondent. Therefore, the act which actually terminated his employment was the same for him as for his co-workers, namely the liquidation of the respondent company.

On that basis, the Workplace Relations Commission noted that the complainant was entitled to a redundancy payment based on his service with the respondent company between April 2017 and February 2020.

Further Information

For further information, please contact the author of this article, Barry Crushell.