Where an employer either sells its business as a going concern (other than through a sale of shares) or outsources certain services to another provider, the employment of its employees will likely be automatically transferred to the new employer or service provider. In these circumstances, the contractual terms of the employees will be protected under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (‘TUPE’).
Whilst a post-transfer employer or service provider may wish to vary the contractual terms of the transferred employees to bring them into line with those of its existing employees, TUPE 2006 requires a post-transfer employer or service provider to abide by the employees’ existing contractual provisions.
However, there are certain exceptions to this rule with two in particular being found in TUPE itself:-
- For a transfer that occurred before 31st January 2014, the post-transfer employer or service provider may amend the contractual terms if it is able to offer a sound business reason for doing so (technically known as “an economic, technical or organisational reason entailing changes in the workforce”), or
- For a transfer that has taken place or will take place on or after 31st January 2014, the post-transfer employer or service provider may vary the contractual terms if this is permitted by the contract itself.
In the case of Tabberer & Others v Mears Ltd & Others, the EAT considered a variation to contractual terms following a TUPE transfer that had occurred before 31st January 2014.
In this case, the employees were electricians who had been entitled to claim an allowance reimbursing them for travel between depots. This allowance had first been introduced in 1958 and, over the years, the depots had gradually closed until there was only one left. Even though some of the employees continued to claim the allowance, there clearly was no longer a business need for the allowance to remain in force.
Nevertheless, there had been TUPE transfers of employment prior to this one and the allowance had remained in force following all previous transfers. The electricians’ managers had also previously questioned the relevance of the allowance, but it had continued to have effect as there were concerns that withdrawing it may have caused problems with the trade union.
The EAT upheld the original decision of the Employment Tribunal that the withdrawal of the allowance by the post-transfer service provider in this case was because the allowance was outdated and unjustified in the circumstances and not for a reason connected with the TUPE transfer. Another point that was taken into account by the EAT was that employees who were not electricians but were required to travel between different sites were not entitled to claim a similar allowance.
In coming to this conclusion, the EAT held that the key point to consider in circumstances involving a variation of contractual terms following a TUPE transfer is:
“...merely because the variation takes place against the backdrop of a transfer does not mean that it is the reason for that variation.... The question to be asked is: what is the reason? – What caused the employer to do what it did?”
Owing to the nature of the Regulations, decisions relating to the application of TUPE are not always as straightforward as this one, even though the case itself involved complex facts and litigation.
It is worth noting that the decision in this case will likely also apply in circumstances where the TUPE transfer has taken place on or after 31st January 2014, bearing in mind that the amendments made to TUPE for those transfers arguably make it easier for post-transfer employers and service providers to justify varying an employee’s contract, depending on what the contract says.
Nevertheless, it is important that employers and service providers continue to be cautious when attempting to vary an employee’s contract following a TUPE transfer as, despite this decision, each case will still be determined on its own facts.
This article is not a substitute for legal advice on specific facts and circumstances. It is designed as a free update on the law at the time of publishing. Knight Polson Limited trading as QualitySolicitors Knight Polson accepts no responsibility for reliance on this article and recommends that you seek independent legal advice on your specific circumstances prior to taking any steps.
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