Background

The Transfer of Undertakings (Protection of Employment) Regulations (TUPE) 1981 protected employees in a business which is transferred from one employer to another by providing that they transfer to the new employer on the same terms and conditions of employment and ‘all other rights, powers, duties or liabilities under or in connection with the contract of employment’ will transfer to the new employer (Regulation 5(1)). Regulation 12 of TUPE 1981 states that ‘any provision of any agreement…shall be void insofar as it purports to exclude or limit the operation of regulation 5…’. Under TUPE 2006, which replaced TUPE 1981, a purported variation in terms and conditions of employment is void if the sole or principal reason for it is the transfer or a reason which is connected with the transfer and which is not an ‘economic, technical or organisational reason entailing changes in the workforce’ (an ‘ETO reason’) (Regulation 4).

Facts

Mr Power’s employment transferred to Regent Security Services Limited (‘Regent’) pursuant to TUPE 1981. Before the transfer, he had a contractual retirement age of 60. Following the transfer, he agreed to an increase in his retirement age to 65. Regent then tried to retire Mr Power at 60. Mr Power brought a claim for unfair dismissal. Regent argued that under Regulation 12 of TUPE, the purported change to his retirement age was void. The Employment Appeal Tribunal (affirmed by the Court of Appeal) held that Regulation 12 did not require the agreed amendment to be treated as void and that Mr Power was therefore entitled to enforce the increased retirement age which he had agreed with Regent. The purpose of TUPE was to safeguard the rights of employees, and to allow a transferee employer to rely on TUPE to deprive an employee of the benefit of a varied term agreed by the employer would be inconsistent with that purpose. In any event, Mr Power had not contracted out of his rights under TUPE – he still had, and could have relied upon, the acquired right to retire at 60. However, he had agreed an additional right with Regent which Regent was not then entitled to withdraw.

Effect on employers

This case was decided under TUPE 1981. Unlike TUPE 1981, TUPE 2006 expressly states that any changes to terms and conditions by reason of a TUPE transfer are ‘void’, suggesting that unlike under TUPE 1981, neither employer nor employee would be able to enforce an amended term under TUPE 2006. However, it is arguable that TUPE 2006 fails to implement the ARD correctly in this regard, and employers should therefore be alert to the risk that employees who have agreed to changes in their terms and conditions in connection with a TUPE transfer will be able to pick and choose whichever of their old and new terms they consider more favourable. The judge commented that whilst ‘the employee can object to any change which he considers to his detriment, and the existence of any compensating advantages will not deprive him of that right… he may well have to give up any benefits obtained under the varied contract as a condition of so doing’. This is a positive note for employers, but it may also be worth making express provisions for the repayment of consideration made in exchange for TUPE-related contractual changes where an employee seeks to argue that he or she is not bound by them.