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Changes to individual contract terms
[ch 12: pages 478-479]Changes to individual contract terms will be void if the sole or principal reason for the change is the transfer (regulations 4(4) and 4(5), TUPE, as amended), unless that reason is an economic, technical or organisational reason (an ETO reason) entailing changes to the workforce (see page 479).
This means that the “harmonisation” of individual contract terms (cutting pay or other terms and conditions on a transfer simply to bring them into line with those of the employer’s existing workforce) is against the law.
The law allows employees to accept beneficial changes, such as a pay rise, made because of a transfer, even if there is no ETO reason. These beneficial changes will not be void. For example:
Mr Power’s original contract terms included a retirement age of 60. Following a TUPE transfer, the new employer decided to increase 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 his mind. He now wanted Power to retire at 60. So the employer insisted on the original retirement age of 60. The employer argued that the contractual retirement age remained 60 because the original change from 60 to 65 was void as a breach of TUPE.
The Court of Appeal disagreed. The change to Power’s contract terms (raising 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. In other words, Power now had the choice between retiring at 60 under his original 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 60, as this would be a breach of TUPE.
Power v Regent Services Limited [2007] EWCA Civ 1188
This complicated but important ruling establishes that an employee (but not an employer) can choose to enforce a beneficial contract change made in breach of TUPE. It is a powerful deterrent to the “harmonisation” of individual contract terms after a transfer. However, changes to collective terms are now treated differently, as a result of changes to TUPE introduced by CRTUPEAR 14. The changes are explained on pages 481 to 483.