TUPE: Can employees' terms and conditions change?

TUPE: Can employees terms and conditions change?

TUPE: Can employees' terms and conditions change

The Transfer of Undertakings Regulations (known as TUPE) provide that an employee’s terms and conditions cannot be changed because of the transfer of their employment from one employer to another.

TUPE and improvements in terms

It has been argued in the past that this provision only applies to negative changes and that actual improvements in terms and conditions can be valid even though a strict reading of the Regulations themselves suggests otherwise.

The issue was tested in Fergusen & ors v Astrea Asset Management Ltd in which an asset management company lost the contract to manage a high-value area of real estate in Kensington and Mayfair belonging to the Abu Dhabi Royal Family.

TUPE and bonuses

This was effectively the only contract the company managed and so it was accepted that all employees would transfer under TUPE. This included the senior leadership and directors who promptly agreed that they should be paid hefty bonuses once the transfer had gone through - and that they would be entitled to generous termination payments if they were dismissed.

These changes were incorporated into their contracts of employment and presented to the new employer. The new employer was not impressed and promptly dismissed the individuals concerned – refusing to honour the new terms.

TUPE changes to terms & conditions

One of the many issues that fell to be considered in the subsequent tribunal proceedings was whether these changes in terms and conditions were valid and binding. The Tribunal held that they were not. The only reason for the changes was that the contracts were being transferred to a new employer.

TUPE and reasons for changes to terms

They were therefore void under TUPE. The EAT agreed. The Regulations were clear that any purported change in terms and conditions was void if the reason for it was the transfer itself.

That was certainly the case here as there was no other commercial justification for the changes being made. Suggestions that positive changes were permitted were not based on the Regulations themselves which were unambiguous on the point.

A specialist employment law solicitor's view

Paul Burton, Head of our specialist Employment and HR Team:

This case clarifies a point that has, to date, not been answered fully by the courts.  The TUPE Regulations, however, are very clear in stating changes to terms and conditions are void if they as a result of the transfer. 

The courts have now confirmed that a literal interpretation of this, i.e. that no changes can be made because of the transfer, irrespective of them being positive or negative for the employees concerned, can be made. 

In practice, of course, many employees will not complain if they receive a positive change and it was only the unusual circumstances of this case that led to the clarification.

Related articles on TUPE

You may find some of the following TUPE-related articles useful, all written by our specialist employment and HR lawyers.

TUPE: Service Provision Change - 'Principal Purpose' Test

TUPE and Garden Leave

TUPE Transfers and 'Workers'

TUPE long term sick employee not 'assigned'

Specialist Employment Solicitors in Bournemouth, Poole, Christchurch and The New Forest

Our specialist employment law & HR team have advised many businesses and employees on TUPE-related matters. 

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