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Changes to contract terms after a transfer
[ch 12: pages 440-441]Any contract variation made in breach of TUPE will be void. This is the case whether or not employees have agreed to the change, and whether or not the employer has “paid” for the variation, for example, with a pay rise. This is because European law does not allow individual employees to give up their rights under the Acquired Rights Directive.
This basic position is complicated by the following case:
Mr Power’s contract terms included a retirement age of 60. Following a TUPE transfer, the new employer decided to raise 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, since it amounted to an unlawful attempt to “harmonise” Power’s terms because of the transfer. The change was and remains banned by the Acquired Rights Directive.
By the time Power reached his 60th birthday,his employer has changed their mind, and decided, instead, to insist Power's retirement at age 60. To do this, his employer argued that the contractual retirement age remained 60 and that Power could be compelled to retire because the original change from 60 to 65 was void and unenforceable as a breach of TUPE.
The Court of Appeal disagreed. The change to Power’s contract terms (cutting his retirement age from 60 to 65) had indeed been void as a result of TUPE. However, instead of replacing Power’s old retirement age with a new one, the employer had given Power an extra right — to retire at 65 instead of 60 if it suited him better, said the judges. In other words, Power now had the choice between retiring at 60 under his existing contract terms or enforcing a 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 complicated but important case establishes that an employee (but not an employer) can choose whether to enforce a beneficial contract change made in breach of TUPE.
The Power case is a powerful deterrent to the “harmonisation” of individual contract terms after a transfer. As regards changes to collective terms after a transfer, the position is different and has changed as a result of the 2014 Regulations. These changes are explained below.