The purpose of the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) is to ensure that the transfer of a business has no prejudicial effects on its employees and that it does not subject them to less favourable treatment. Even though the legislation was amended in 2006, problems can still arise, particularly with regard to contractual variations made by reason of the transfer of a business.
The TUPE Regulations state that a variation in a contract of employment will be void where the sole or principal reason for it is the transfer itself. However, it would appear, following a recent case at the Employment Appeal Tribunal (EAT), that an employee may be able to pick and choose individual improved terms offered on the transfer of a business where TUPE applies.
The case in question, M D Power v Regent Security Services Ltd., has shed further light on the rights of an employee, particularly with regard to the extent to which the transferee and the employee can agree to vary the employment contract. Although the case considered the 1981 legislation, this issue remains relevant.
Mr Power was employed to manage an estate under a contract which stated that his contractual retirement age was 60. When the business was transferred to Regent Security Services Ltd., he was in a unique position as he was the only employee transferred. He was told that the estate was to be redeveloped and that his retirement would coincide with this, taking place some time after his 60th birthday. Shortly before the transfer took place, he was sent a letter, effectively altering his retirement age to 65. Both parties agreed that this variation in his contract was made because of the transfer.
After the transfer, Mr Power was told that the company was going to retire him on his 60th birthday. He objected on the grounds that his revised contractual retirement age was 65, but his employment was ended and so he brought a claim of unfair dismissal.
Regent Security Services argued that the agreed new contractual retirement age of 65 was a variation on his employment contract by reason of the transfer and was therefore void under Regulation 12 of the TUPE 1981 Regulations and could not be relied upon by either party. Mr Power claimed that relevant case law of the European Court of Justice on this point merely rendered void any variation which was to the detriment of the employee and did not prevent him taking advantage of a variation which he considered to be to his benefit.
The EAT could see no reason why Mr Power should be excluded from relying on a contractual variation which he considered to be to his advantage. It judged that there is nothing in the relevant ECJ case law or the Regulations which would require that the new employer be allowed to retract from a variation that is for the benefit, rather than to the detriment, of the employee, even when the transfer is the reason for the change.
The EAT went on to say that 'the employee can object to any change which he considers to be to his detriment, and the existence of compensating advantages will not deprive him of that right (although he may well have to give up any benefits obtained under the varied contract as a condition of so doing)'.
It is understood that an appeal against this decision is likely.
If you are involved in a transfer to which the TUPE legislation applies, always take timely advice before taking any action to vary employees' contracts of employment.
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