TUPE: Changing Terms and Conditions
When a business changes owner or a service is transferred from one provider to another, its employees may be protected under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”).
TUPE introduced the automatic transfer principle. It transfers to the new owner (the transferee) all the employees working in the business together with their terms and conditions of employment. When the transfer takes effect, the transferring employees automatically become employees of the transferee on the same terms and conditions.
Regulation 4 (4) of TUPE renders void any variation of a TUPE-transferred contract of employment if the sole or principal reason for the variation is the transfer.
In the case of Furguson and ors v Astrea Asset Management Ltd, the Employment Appeal Tribunal (“EAT”) held that regulation 4 (4) of the TUPE regulations applies to all variations, not just those that are adverse to the transferring employee. This therefore includes contractual variations which are beneficial to an employee if made by reason of a TUPE transfer.
In this case, the Claimants were directors of an estate management company who lost a management contract and were informed that another estate management would be taking over the contract. Prior to the service provision change, the directors varied their own contracts to give themselves enhanced guaranteed bonuses and termination payments. The directors were all dismissed on or following the transfer and subsequently brought various employment tribunal claims against the new company. They all claimed for termination payments based on the varied contracts.
The Employment Judge considered whether the variations agreed pre-transfer were valid. The EAT held that, although these changes were beneficial to the directors, they were void as they had been made by reason of the TUPE transfer.
We would urge any business owner who is aware that there may be a relevant TUPE transfer i.e. sale or service provision change, they should take advice before making changes to employment contracts.
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If you would like any advice regarding TUPE regulations or any other Employment related matter, please contact our Employment Partner, Kate Brooks on 01202 525333 or email firstname.lastname@example.org.