If your employment transfers under TUPE – the Transfer of Undertakings (Protection of Employment) Regulations 2006 – your existing terms of employment will also transfer to the new employer. It is possible for the new employer to make changes to your terms and conditions of employment. However, changes can only be made in limited circumstances.
When Does TUPE Apply?
TUPE applies to a ‘relevant transfer’ which means either or both of the following:
- a transfer of a business, undertaking or part of a business or undertaking where there is a transfer of an economic entity that retains its identity (a business transfer);
- a client engaging a contractor to do work on its behalf, reassigning such a contract or bringing the work ‘in house’ (a service provision change).
TUPE uses the term transferor and transferee to describe the original and new employer.
Limits On Changing Terms
In general terms, your employment contract may only be amended in accordance with its terms or with your agreement. TUPE, however, imposes additional restrictions on your employer’s ability to change your terms of employment on a transfer. A change to your employment contract would not be affected if the transfer itself is the reason for the variation, this is even where the variation is with your consent and less favourable terms are offset by other benefits so that your contract as a whole is no less favourable. The starting point therefore is that any purported variation to your employment contract that is, or will be, transferred under TUPE is void if the sole or principal reason for the variation is the transfer. However, certain changes are permitted.
When Is A Change Allowed?
A contractual variation will be permitted if it is unrelated to the transfer.
Otherwise, a transfer-related variation will only be permitted where one of the following applies:
- The sole or principal reason for the variation is an Economical, Technical or Organisational reason (ETO reason) entailing changes in the workforce provided that your employer and you agree that variation. The expression ‘changes in the workforce’ includes a change to the place where you are employed to carry on the business of the employer or to carry out work of a particular kind with the employer.
- Terms of the employment contract permit your employer to make that particular variation.
- Terms are incorporated from a collective agreement, provided that the variation takes effect more than one year after the date of the transfer and the varied terms, when considered together, are no less favourable to you.
- The transferor (i.e. the original employer) is subject to ‘relevant insolvency proceedings’.
Therefore changes to terms and conditions will not be void if the reason for the change is unrelated to the transfer.
ETO reasons might include:
- a reason relating to the profitability or market performance of the new employer’s business;
- a reason relating to the nature of the equipment or production processes which your new employer operates;
- a reason relating to the management or organisational structure of your new employer’s business.
A change in the workforce has to include change in numbers, or possibly functions, of the employees.
TUPE also allows a variation if the terms of your contract permit the employer to make that particular variation. This is intended to apply to existing contractual terms to allow your employer to make unilateral variations, such as a mobility clause.
If the change involves a substantial change to your working conditions to your material detriment, even where the specific change is permitted under your contract, you may have grounds to resign.
Harmonising Terms
Understandably, your new employer may wish to bring your terms and conditions in line with its existing staff. However, harmonisation would be regarded as a change by reason of the transfer. It would not qualify as an ETO reason as it is always linked to the transfer and will not entail changes in the workforce in terms of numbers or job functions. Therefore, an attempt to harmonise terms in a TUPE transfer will be void. Because transferring employees transfer on their existing terms of employment, this often results in a discrepancy between the rate of pay that a transferring and pre-existing employee doing the same or similar roles are entitled to post-transfer. The transferring employees could be entitled to either a higher or lower rate of pay than pre-existing staff. TUPE does not oblige the new employer to increase the rate of pay of either the transferring or pre-existing staff where there is such a pay disparity. It is not therefore a breach of TUPE for transferring employees to remain on their pre-transfer rate of pay, whether it is higher or lower than pre-existing employees. It is worth noting, however, that pay disparities could result in an equal pay claim.
Dismissal and Re-engagement
It may be possible to effect a change in terms through dismissal and re-engagement on new terms. Your original employer would need to dismiss you immediately before the transfer, therefore enabling the new employer to argue that since, at the moment of transfer, you had no existing terms, it is then free to agree new terms of employment after the transfer. The same principal would apply to a dismissal (and offer of re-engagement on new terms) by the new employer after the transfer takes place.
While the termination would be effective, if you have service of two years or more you are likely to have a claim for automatic unfair dismissal and liability for the dismissal will pass to the new employer. In a successful claim, in addition to compensation, the Employment Tribunal could order the new employer to reinstate you on your original terms.
What Are My Options If New Terms Are Proposed?
Even if a proposed change is transfer related without any ETO reason entailing changes to the workforce, you may be willing to accept any changes and remain on good terms with your employer. However, alternatively you could:
- continue working, but seek a declaration that transfer related changes are void;
- resign and claim constructive dismissal;
- bring a claim for substantial changes in working conditions.
A Tribunal may declare that such changes are void and make clear which of the alternative conditions apply. A Tribunal may also order compensation to be paid where you have been deprived of a term and this has caused financial loss. If you have the two years’ requisite service you have the right to resign and claim constructive dismissal and unfair dismissal where the new employer commits a breach of contract by seeking to impose changes in your terms of employment which are expressly preserved by TUPE.
Regulation 4(9) of TUPE gives employees who would otherwise have transferred a right to resign if the transfer involves a substantial change in their working conditions to their material detriment. Employees may resign with or without notice although your employer will not be liable to pay in respect of any failure to pay wages to you in respect of a notice period that you have failed to work.
Lincs Law Employment Solicitors Can Help You
If TUPE applies and a change to your terms and conditions is proposed, we recommend that you take specific legal advice about your options before you take any action, particularly before resigning. If you would like advice or assistance please contact us for a free enquiry on 01522 440512 or via the web chat or contact form on our website at www.lincslaw.co.uk.
Kathryn Bolton
Associate Specialist Employment Solicitor
Lincs Law Employment Solicitors
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