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Changes to contract terms after a transfer
[ch 12: page 398]Any contract variation made in breach of TUPE is void, whether or not employees have agreed to the change, and whether or not the employer has “paid” for the agreement to variation, for example through a pay rise. This is because European law does not allow individual employees to give up their rights under the Acquired Rights Directive.
However, this basic position is complicated by the following case:
Mr Power’s contract terms included a retirement age of 60. Following a TUPE transfer, his new employer changed Power’s contractual retirement age to 65 to bring it into line with that of the existing workforce. This change was void as a breach of TUPE — it was an unlawful attempt to “harmonise” Power’s terms.
When Power reached his 60th birthday, his employer argued that the contractual retirement age was still 60 and that he could force Power to retire, because the change from 60 to 65 was void and unenforceable as a breach of TUPE. The Court of Appeal disagreed. The employer’s change of terms had given Power an extra right — to retire later at 65 if he wanted to. Power was free to choose between retiring at 60 under his existing contract terms or enforcing his new right to retire at 65. His employer could not force him to give up his original retirement age of 65, as this would be a breach of TUPE.
Power v Regent Services Limited [2007] EWCA Civ 1188
This case establishes that an employee (but not an employer) can choose whether or not to enforce a beneficial contract change made in breach of TUPE. It is entirely up to the employee to assess whether the additional right offered by the employer is beneficial and worth enforcing. Some employees could regard a change as favourable and choose to enforce it, while others might regard the same change as unfavourable and choose not to enforce it.
The Power case is a powerful deterrent to harmonisation of individual contract terms. However, as a result of changes to TUPE explained below, the position in relation to changes to terms incorporated from collective agreements is no longer as straightforward. The new law affects all transfers on or after 31 January 2014.