Economic technical or organisational reason

[ch 6: page 60]

In England, Wales and Scotland, changes to individual contract terms are void if the sole or main reason for the change is the transfer, unless that reason is an economic, technical or organisational reason entailing changes to the workforce (ETO reason) (Regulations 4(4) and 4(5), TUPE, as amended). For the position in Northern Ireland, see the box on page 11.

Here are some typical ETO reasons for changing contract terms:

• an economic reason: where the new business lacks demand for a service provided by the old employer;

• a technical reason: where the new employer uses a different technical system and incoming employees must change job roles to adjust to it;

• an organisational reason: where two workforces come together and job roles are duplicated, so that some roles must be changed or eliminated.

One reason that is not a valid ETO reason is “harmonisation” — cutting wages, holiday or other terms to bring them into line with the existing workforce. Harmonisation of individual contract terms is unlawful because it does not “entail changes to the workforce” (Delabole Slate Limited v Berriman [1985] IRLR 305). The position is different where the term has been incorporated from a collective agreement (see page 62).