Changing contract terms in an insolvency situation

[ch 8: pages 76-77]

Regulation 9, TUPE allows an employer or insolvency practitioner to negotiate transfer-related changes to contract terms such as cuts to pay or hours which would otherwise be a breach of TUPE, as long as the changes are designed to “safeguard employment opportunities” by ensuring the survival of the business (Regulation 9(7)(b), TUPE).

Any negotiations are likely to take place much faster than normal, owing to the pressure of insolvency. This freedom to change contract terms is tightly regulated. In particular:

• if an independent union is recognised, variations must be agreed with the union rep, who is entitled to paid time off to negotiate;

• if there is no recognised union, variations must be agreed with an elected representative (see page 40);

• variations by non-union representatives are subject to the following extra safeguards:

◊ the agreement recording the variation must be in writing and signed by each non-union rep; and

◊ before it is signed, a copy must be given to each affected employee, along with an explanation in writing.

Any variations will become part of employees’ employment contract. New terms must not breach minimum statutory rights, such as the national minimum wage.