TUPE: Can you make beneficial changes to a transferring employee’s terms and conditions?
22 July 2020
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (more commonly known as "TUPE") protects the rights of employees when they transfer to a new employer.
One of the key provisions under TUPE is that employees transfer to their new employer on their existing terms and conditions. Changes that are made to a transferring employee's contract will be void, if the sole or principal reason for the change is the transfer (unless one of the exceptions applies). Most often this is relied upon when the new employer wishes to implement terms that are detrimental to the transferring employees e.g. by increasing their hours of work or deciding to no longer pay them for overtime.
But what happens if you want to make a change that is beneficial to the employee who has transferred, does this provision still apply?
The short answer is potentially yes, if it is a TUPE related change. In the case of Ferguson v Astrea Asset Management Ltd UKEAT/0139/19 there were four employed directors who decided to vary their terms and conditions before a TUPE transfer. These terms were far more beneficial than their previous contracts of employment and included (amongst other things) the right to receive a termination payment if their employment ended. The new employer found out about the new terms and the employees were dismissed. The employees brought proceedings against the new employer and the Employment Appeals Tribunal (EAT) held that their new terms and conditions were void. Firstly, because TUPE is there to protect employees' rights (it is not designed to improve them) and secondly because there was evidence that indicated these changes were brought in to obtain an improper advantage.
Whilst this was an unusual case where the employees had themselves sought to put in place more favourable terms, it demonstrates that beneficial changes can be deemed to be void.
There is case law that came before the Ferguson whereby beneficial changes were held to be enforceable. There is also guidance from the Department for Business Innovation and Skills (BEIS) which states that "changes to terms and conditions agreed by the parties which are entirely positive are not prevented by the Regulations". However, during the case of Ferguson, the EAT did warn that this guidance is "of limited persuasive value" therefore it cannot be relied upon in order to enforce a favourable TUPE related change. The outcome will depend on the facts and the circumstances of each case.
Practically speaking, transferring employees are likely to be accepting of any beneficial changes and, generally speaking, tend to only become an issue where there is a dispute or issues relating to the beneficial change.
If you have any queries regarding TUPE or beneficial changes, please contact our Employment Team or your usual Wilsons contact.