TUPE protects employees by ensuring that a transfer does not disadvantage them in any way, by preventing variations to the employment contract. We are often asked - are TUPE & contractual variations permitted?
The recent case of Smith v. Trustees of Brooklands College (EAT) has confirmed that an agreed variation to an employment contract following a TUPE transfer is effective where the transfer is not the sole or principal reason for the variation.
All contractual variations are void if the sole or principal reason is in connection with the transfer itself.
Are there any exceptions?
- Any variation will be void where it is connected with the transfer but does not amount to an economic, technical or organisational (ETO) reason entailing changes in the workforce
- The ETO exception is not expressly defined in the regulations and therefore allows the courts a high degree of discretion in its interpretation
- Variations that are connected with the transfer but constitute a legitimate ETO reason or those that are entirely unconnected with the transfer (It is the employer who must prove that the variation qualifies as an ETO and this can be difficult.)
Dispelling the Myths
- It is a common misconception that it is permissible to make changes after 1 year. There is 'no safe period for avoiding the TUPE provisions
- Harmonisation of terms is not an ETO reason. This often makes it difficult for incoming employers to harmonise terms and conditions of employment of staff after a TUPE transfer. However, Smith confirms that an employer is not forever prevented from making changes to contracts of employment following a transfer provided that Regulation 4 is met
- Where a change has been made by agreement or acquiescence, problems may still lurk for the transferee employer unless they are made for;
- a reason unrelated to the transfer, or
- an ETO reason - these changes will not be valid unless they are to the benefit of the employee. This applies even if the employee has received payment for agreeing to the variation.
This is clearly a tricky area and employers who want to avoid Tribunal claims should seek advice before making variations. Contact our employment team if you wish to discuss your circumstances in more detail.