TUPE transfers and subsequent changes in the law affecting employment terms

The effect of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) ensures that, when a relevant transfer takes place, the employee’s contractual terms of employment, i.e. those which applied with the transferor employer, are preserved and are not changed as a result of the transfer. This includes the preservation of

• any contractual terms derived from collective agreements; and

• any contractual provisions on how any discretion within statute will be applied to the employee

which are in force at the time of the transfer.

There is then likely to be an issue over what happens if, subsequent to the transfer, either the provisions of the relevant collective agreement change or the relevant statute changes.

The case of Parkwood Leisure Ltd v Alemo-Herron & ors, which was heard by the Court Of Appeal earlier this year, changed the previously-understood position over subsequent changes in collective agreements. This made it clear that changes in the terms of a collective agreement which were reached after the date of the transfer were not automatically applied to the transferee’s terms and conditions. (It is worth noting that Parkwood Leisure Ltd v Alemo-Herron & ors is currently under appeal to the Supreme Court.)

So far as subsequent changes to statute are concerned, the recent case of Worrall & Ors v Wilmott Dixon Partnership Ltd & anor has now made it clear that, if the relevant statute changes, the exercise of the employer’s discretion which previously applied will not be preserved by TUPE.

A test case was brought by Mr. Worrall, who started employment with Birmingham City Council in July 1971, but, by April 2008, following a series of TUPE transfers and company name changes, was employed by Wilmott Dixon Partnership Ltd. It was clear that, generally speaking, Wilmott Dixon Partnership Ltd was bound to abide by the terms of Mr. Worrall's original contract with Birmingham City Council by reason of the TUPE Regulations (notably Regulation 4).

In 1993, the Council had entered into a collective redeployment and redundancy agreement with its recognised trade unions. This provided that, in respect of employees who took voluntarily redundancy, the Council "will in exercising its discretion in accordance with the Superannuation Regulations award at least 5 added years".

When Mr Worrall took voluntary redundancy from Wilmott Dixon Partnership Ltd in 2008 he claimed that that company, as his employer, was bound by TUPE to observe the terms of the 1993 collective agreement and therefore was obliged to award him "at least 5 added years". Wilmott Dixon Partnership Ltd refused to make the “added years” award and Mr Worrall pursued his claim against them in an employment tribunal.

At the tribunal Wilmott Dixon Partnership Ltd argued that the 1993 collective agreement was never incorporated into Mr Worrall's contract of employment and so was not carried forward by TUPE to subsequent employments. But they also argued that, even if their first argument was wrong, subsequent legislation affecting the Local Government Pension Scheme introduced after 1993 meant that the agreement relating to the award of "5 added years" was no longer valid.

The tribunal found against Mr Worrall on the grounds that, although the 1993 collective agreement was incorporated into his contract of employment and so was carried forward by TUPE to subsequent employments, post-1993 changes to the Local Government Pension scheme had negated the "5 added years" provision.

Mr Worrall appealed to the Employment Appeal Tribunal (EAT), but was unsuccessful. The EAT disagreed with the tribunal’s view that the 1993 collective agreement was incorporated into Mr Worrall’s contract. But it supported the tribunal’s finding that, regardless of whether or not the relevant provision had been incorporated into Mr Worrall's contract of employment, the provision of the original collective agreement which provided for "at least 5 added years" had ceased to have effect when the Local Government (Early Termination of Employment) (Discretionary Compensation) (England and Wales) Regulations 2006,came into force. It held that the 2006 regulations had revoked earlier regulations with the result that a local authority's power to award "added years" had been removed before Mr Worrall retired in 2008.

It said that employment contract terms existing at the time of a TUPE transfer can be removed and rendered void by subsequent statutory regulation and Regulation 4 of the 2006 TUPE regulations (which provides for the contract to have effect after the transfer as if originally made between the employee and the transferee) does not override their removal.

Back to home page