TUPE Transfers all change?

The Transfer of Undertakings (Protection of Employment) Regulations 2006, known widely as ‘TUPE’, allows an employee transferring from one employer to another to retain all the contractual employment terms on which he was transferred. Inevitably, transferee employers want to change and harmonise terms. Unfortunately, it’s not that simple. Over the last two weeks, the question of whether a transferee employer can change the terms of employment has cropped up several times, so I thought it might be timely to take a look at it.

Unless the contractual changes satisfy the ‘economic, technical or organisational reasons’ defence, it will be difficult to make and enforce contractual changes. Harmonisation is not regarded as reason that will invoke the ETO defence.

The unilateral introduction of contractual changes will mean transferring employees may resign and complain that they have been unfairly dismissed by the constructive route. Alternatively, they could stay and make a claim against the transferee employer for the difference between the new and old terms.

In some cases transferred employees are consulted and agree to a change, often in response to some form of inducement. However, they have the right to change their minds without suffering any detriment. And even if the transferee employer makes a payment or gives some other benefit to achieve the change of contract, it cannot be enforced if the employee changes his mind. The case law indicates that the employee would be able to keep hold of the payment or benefit too. In one case the employee changed his mind and kept an eye watering £625,000!

While the terms of most transferred contracts tend to blur a bit over time, if an employer wants to make a fast change, there are no guaranteed risk-free routes.

Many employers make the desired change and cross their fingers for luck, because in reality, most employees who agree to adopt new terms will accept and act on them, especially if there is some form of encouragement.

Some employers will serve notice to terminate the employment and offer to re-employ on the new contractual terms. This is a high risk strategy and is likely to result in complaints of unfair dismissal. Since the dismissal is likely to be for a reason connected with TUPE it will automatically be unfair.

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