This can be a real headache for employers where they have “inherited” employees following a transfer of an undertaking under the TUPE (Transfer of Undertakings (Protection of Employment) Regulations 2006. It is quite well known that if TUPE applies to a transfer then if the Transferor (let’s call it NewCo for ease if not originality) dismisses an employee from the transferee (OldCo) for a reason connected with the transfer, the dismissal will be automatically unfair, unless NewCo can show that an “economic, technical or organisational” reason applied entailing changes in the workforce. TUPE has the effect of transferring all employment contracts and rights from OldCo to NewCo.
However, what is the situation where the TUPE transfer occurred some time ago and NewCo now wants to ensure that the employees from OldCo are on the same pay deal, the same holidays, sick pay arrangements etc? This presents a problem for NewCo because Regulation 4(4) of TUPE provides that any variation to a term of a contract covered by TUPE will be
“void if the sole or principal reason for the variation is (a) the transfer itself; or (b) a reason connected with the transfer that is not an economic, technical or organisational (ETO) reason entailing changes in the workforce”
So, if the proposed variation is because of the transfer of the undertaking or is linked to the transfer but is not an ETO reason, the variation will not be legally valid, even if the affected employees agree to the change. On the other hand if the proposed variation is because of the transfer but is an ETO reason then it can take place. An ETO reason usually, but not always, entails reductions in the workforce but whether the proposed variation will be an ETO reason will usually be a matter for close factual analysis.
When employees seek legal advice on this issue it is usually the case that the proposed variation would adversely affect the employees, but it doesn’t have to be the case. In 2007 the Court of Appeal confirmed that any changes that were beneficial to the affected employees would be binding.
Many people think that if much time has passed since the transfer of the undertaking (OldCo to NewCo) that is sufficient defence, but mere passage of time is not the whole answer. The real issue is “what is the reason for the proposed variation?” The fact that many months, or even years has passed, since the transfer is not going to be conclusive on its own. A case involving Dale Langley (my partner’s) previous firm, Langley & Co, called Taylor v Connex South Eastern EAT/1243/99  held that a lapse of two years was insufficient. As ever though, as in all cases, they all turn on their own facts: this is a difficult area and legal advice should be taken (especially by employers) before proposing a variation that might fall foul of TUPE. Even if TUPE is not engaged, an employer that tries to implement a unilateral change in an employee’s terms and conditions e.g. by reducing employee’s pay may find itself facing a claim for constructive dismissal and/or unfair dismissal. Employers should proceed with care…
If I can assist please do not hesitate to contact me on 0207 464 8433 or at firstname.lastname@example.org. Nothing contained in this post or anywhere else on this blog constitutes or is intended to constitute legal advice or creates a solicitor-client relationship between me and you the reader.