Variation of contract following a TUPE transfer

 

 

PPMA WEBSITE EMPLOYMENT LAW UPDATE October 2011 (2)

 

 

It is quite often the case that, following a TUPE transfer, the new employer would like to review/make changes to the contracts of employment of the transferred employees, for example, with the objective of harmonising terms and conditions and/or pay rates. However, as HR professionals will be aware, the Regulations place a number of restrictions on an employer’s ability to effect any such changes, setting out the circumstances in which they may be permitted and those where any variation would be void. A prime consideration is whether the sole or principal reason for the variation is either the transfer itself or a reason connected with it. This was the issue considered in the case of Smith & ors v Trustees of Brooklands College.

 

The employees in this case were employed as Teaching and Learning Assistants at a sixth form college. Although they only worked for between 22 and 25 hours per week for 43 weeks a year, they were effectively treated for salary purposes as having been employed on a full-time contract (36 hours per week).

 

The staff at the college, including the claimants, were TUPE transferred to another college. In due course, the HR Director began to look at the staff salaries, including those of the claimants, and discovered what she thought was a mistake, concluding that they had been overpaid in error. She secured an agreement with them that their pay be reduced on a phased basis and their contracts were varied accordingly. They subsequently brought claims of unauthorised deductions from wages, arguing that the variation was void by virtue of the relevant provision within the TUPE Regulations. However, the employment tribunal dismissed their claims, finding that the real reason for the variation was the HR Director’s belief that the employees had been mistakenly paid at a higher rate. The reason was not connected with the transfer and the agreed variations were therefore valid. The employees appealed against this decision.

 

Having considered a number of previous authorities on this issue, the Employment Appeal Tribunal (EAT) upheld the tribunal’s decision. The employment judge had undertaken an assessment of the issues and made findings of fact which were open to him.These included an assessment of the period of time that had elapsed from the transfer to the variation and what was going on in the mind of the HR Director. Although she was mistaken in her belief regarding the salary “overpayments”, there was no doubt that was her reason for making the contractual change. The employment judge had made the correct decision as a matter of law, the reasons for the change were not connected with the transfer and were therefore not caught by the TUPE provision which would otherwise render this void. Where the sole reason is a wish to harmonise terms and conditions, that provision within the Regulations would be engaged but this was not the case here.

 

This case illustrates the importance of being clear about the reason(s) for any change in terms and conditions following a TUPE transfer. If the circumstances demonstrate that the reason is not the transfer itself or a reason connected with it, the change will not be caught by TUPE and, provided other relevant employment considerations have been met, may lawfully take effect.