Resisting changes to contract terms after a transfer

A contract variation that breaches TUPE is void. This basic position remains the case despite the changes to the law contained in the 2014 Regulations. A contract variation in breach of TUPE will be void even if employees have agreed to the change, and even if the employer pays for the variation, for example with a pay rise. European law does not allow individual employees to give up their rights under the Acquired Rights Directive.

This basic position is complicated by a case known as Power v Regent Services Limited [2007] UKEAT/499/06. This case established that an employee (but not an employer) can choose to enforce a contract change made in breach of TUPE, as long as that change, in the employee’s subjective opinion, benefits him or her. Since the test whether or not the change is beneficial is a subjective one, the same change can be viewed as beneficial (and enforceable) by one employee, but detrimental (and therefore void) by another.

In Power, Mr Power’s original contract terms contained a contractual retirement age of 60. Following a TUPE transfer, his new employer raised the retirement age to 65 to bring it into line with the retirement age of the existing workforce. This change was void as a breach of TUPE — it was an unlawful attempt to “harmonise” Power’s terms. Later, when Power reached 60, his employer tried to resurrect his original contractual retirement age to force him to retire. The employer argued that the contractual retirement age must still be 60, because the change to 65 was void as an unenforceable breach of TUPE. The EAT disagreed, finding against the employer. The EAT ruled that Mr Power could choose between enforcing the contractual retirement age of 60 and 65.

The Power case is a powerful deterrent to harmonisation of individual contract terms. However, as a result of changes to TUPE made by the 2014 Regulations, the situation where an employer wants to make changes to terms incorporated from collective agreements is no longer as straightforward, where the transfer takes place on or after 31 January 2014.

Changes to contract terms incorporated from a collective agreement will no longer be a breach of TUPE, as long as:

• any variation takes place more than one year after transfer; and

• the contract terms when considered together are no less favourable to the employee than those applying immediately before the transfer.

This change does not give the employer a free hand to make changes to collectively agreed terms. Any change must be by agreement. Although the negotiation of the change can begin at any time, the change cannot take effect until one year after transfer.

Reps should also note that:

• to avoid a breach of TUPE, any change must be “no less favourable overall”;

• a term that is “less favourable overall” will be void, and any dismissal for refusing to agree that term will be automatically unfair;

• any inducement to abandon collectively agreed terms is likely to infringe section 145B of the Trade Union and Labour Relations Consolidation Act 1992 (see page 124);

• this change to the law is likely to infringe Article 11 of the European Convention on Human Rights (Demir and Baykara v Turkey Case No 34503/97, see page 125), as well as to other international conventions ratified by the UK government in support of collective bargaining (see Chapter 5);

• only terms “incorporated from a collective agreement” are caught by this provision. Many other terms will not be caught, including, for example, terms fixed by external pay review bodies, terms derived from custom and practice, employer policies or staff handbooks, even if influenced by a trade union, and terms incorporated from statutory instruments, policy or guidance, even if negotiated by a trade union. It may also not catch terms derived from a collective agreement but written out in full in the individual contract terms, or terms imposed on employees following a failed collective negotiation (see, for example, Cabinet Office v Bevan & Others [2013] UKEAT/0262/13/BA).