Many companies and individuals are usually unaware of how to handle the transfer of employees between different entities. The Employment Agreement is key to defining the employer-employee relationship and the termination of such. Employment Agreements are assignable unless specified otherwise by the interested parties and this process is utilized when transferring employees from one company to another. The assignor (Original Employer) and assignee (New Employer) should document all of the duties and obligations that shall be assumed by assignee in a new agreement to prevent future disputes and/or litigation. The obligor (Employee) must also be willing to consent to the assignment and its terms and conditions.
The following are the key terms which should be outlined in the new employment agreement/assignment:
If the new employment agreement/assignment is for a definite period, then the start and end dates should be specified. If it is an indefinite contract, then best to clarify the agreement will be valid and explain the termination conditions.
Salary and benefits
The salary and benefits that shall be owed to the obligor should be specified because the assignee needs to expressly consent to assuming such financial obligation.
The position and duties of the obligor should be specified, so the assignee clearly understands the obligor’s role and the obligor consents to performing such duties.
End of service benefits/gratuity
The parties can negotiate whether obligor will be paid the accrued end of services benefits upon the assignment/transfer to the assignee, or upon obligor’s termination from the assignee. Regardless of the determined payout, the accrued end of service benefits owed to obligor should be specified in the new agreement.
The assignor needs to be released for any future obligations and/or liabilities to the obligor. The obligor will now look to the assignee for salary, benefits, newly accrued end of service benefits, and any old end of service benefits that were not paid upon the transfer/assignment.
The obligor should be made aware that the type of term (indefinite/fixed) and form of termination can impact the calculation of the end of service benefits.
For the least risk for all parties, this new Employment Agreement/Assignment should be signed by the assignor, assignee and obligor.
By Najmah Brown, Esq.