In the recent case of Tabberer v. Mears Ltd [2018] All ER (D) 180, the Employment Appeal Tribunal (EAT) held that an employment tribunal had been entitled to conclude that a post-transfer variation to contractual terms was enforceable, and not because of, or for a reason connected with, a relevant transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).

The decision helpfully sets out the correct test to be applied when dealing with any variation of contractual terms after a TUPE transfer. It is also a useful reminder that merely because a variation takes place against a backdrop of a transfer does not mean that the transfer is the reason for that variation, a common misconception held by employers and employees alike.

The facts

The Claimants were electricians who had originally been employed by Birmingham City Council; their employment had been subject to a number of TUPE transfers, ultimately to the Respondent. Within the Council, electricians had enjoyed payments of Electricians Travel Time Allowance (ETTA). Although the reasons for the allowance had ceased to exist over the years, and certainly after the employees had transferred from the Council, it was an allowance that had continued to be paid until the transfer to the Respondent in 2008.

Faced with an earlier ruling that the Claimants had a contractual entitlement to ETTA, the Respondent gave notice that it was bringing this contractual entitlement to an end. The notice informed the Claimants that “a decision has been taken that not only is the allowance…inappropriate, but also it fails to support our business needs going forward and it is wholly unfair on the remainder of the workforce…[W]e can confirm that irrespective of whether the entitlement is an express or implied terms [sic] in your employment, this letter is notice that we no longer intend to be bound by it and we are therefore giving you a formal notice of the removal of this allowance from your Terms and Conditions of employment”.

The Claimants objected, arguing that the reason for the variation to their contractual terms was a relevant transfer for purposes of TUPE and the variation was therefore void.

The law

Under TUPE, any purported variation of a contract of employment that is, or will be, transferred is void, even with employee consent, ‘if the sole or principal reason for the variation is the transfer’ (regulation 4(4)).

TUPE further provides that such a variation will not be void if the sole or principal reason is also an economic, technical or organisational reason entailing changes in the workforce (ETO reason) provided that the employer and employee agree that variation (regulation 4(5)(a)).

There are two particularly important consequences of the wording of regulation 4:

First, TUPE will generally restrict an employer’s ability to vary the contractual terms of transferring employees to bring them in-line with the rest of its workforce; because the harmonisation was due to the fact of the transfer, the sole or principal reason is the transfer and so the variations will be void.

Secondly, harmonisation of terms due to organisational structure or variation due to profitability alone will rarely, if ever, be a valid ETO reason because they will not ‘entail changes in the workforce’; changes in the workforce apply only where there are changes in:

  • the actual numbers employed in the workforce;
  • the functions performed by employees; or
  • the physical location or place of work.

The decision

The EAT ruled that the central question under regulation 4(4) is whether “the reason for the variation relates back to the transfer, so that the transfer is the sole or principal reason for the change”.

It noted that the passage of time will not necessarily mean the causal connection disappears. On the other hand, merely because the variation takes place against the backdrop of a transfer does not mean that it is the reason for that variation; this is not a “but for” test (i.e., that but for the transfer to the Respondent, the variation would never have occurred) and context alone is not sufficient. The question to be asked is: “what is the reason? – What caused the employer to do what it did?”

The EAT concluded that what the employment tribunal clearly found was that the reason, or principal reason, for Respondent’s decision to bring the contractual entitlement to ETTA to an end was not the TUPE transfer but because it believed that entitlement was outdated and unjustified. That was a finding of fact which the tribunal was entitled to make on the evidence before it.

In the present case, both the tribunal and EAT were clearly swayed by the strength of the evidence put forward by the Respondent. Clearly, any employer implementing post-transfer variations would therefore be well advised to inform the employees in writing of its reasons for doing so and also contemporaneously to minute its management processes in arriving at that decision and to document it underlying rationale. This will provide strong evidence of the reason or reasons for the employer’s decision should there be a later dispute.