In Smith v Trustees of Brooklands College, the EAT decided that a change to terms and conditions following a business transfer was not connected with the transfer and was not therefore void under the Transfer of Undertakings Regulations (TUPE).
Under TUPE, the transferee takes the transferring employees on their existing terms of employment, so any changes to their terms will be void if the sole or principal reason for the change is either:
- the transfer itself; or
- a reason connected with a transfer which is not an economic, technical or organisational reason entailing changes in the workforce (ETO reason).
An ETO change is therefore permitted, but this does not go so far as to give employers the freedom to harmonise pay across their organisation.
In this case, part-time teaching assistants employed at a sixth form college were paid a salary which was pro-rated to reflect the fact that they worked 43 rather than 52 weeks a year, but which (unusually for the education sector) was not also pro-rated to reflect the fact that they worked 25 rather than 36 hours a week. Over two years after their college was transferred to Brooklands College, the HR department of the now merged colleges began to look at rates of pay and came to the conclusion (erroneously) that the enhanced salary must have been paid by mistake. The employees reluctantly agreed to their salary being further pro-rated to take account of their reduced hours. They subsequently challenged the agreement as void, arguing that the changes were related to the transfer.
Broadly speaking, a change will be connected to a transfer if it is a knock-on effect of the transfer. But it is not connected to the transfer just because it would not have happened "but for" the transfer. The correct approach is to ask: what was the reason for the change? What caused the employer to make the change? The Employment Judge was correct to conclude that the reason for the change was the College's belief that the claimants had been overpaid in error because their pay had not been pro-rated in accordance with standard practice. That was not a reason that was connected with the transfer, even though that view was not in fact correct.