Economic, technical or organisational reason entailing changes to the workforce 



As explained above, changes to individual contract terms are 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.


Here are some typical ETO reasons:


• an economic reason for changing contract terms could be where the new business lacks demand for a service delivered by the old employer, and the new employer wants to cut hours or change job functions to respond to the reduced demand;



• a technical reason could be where the new employer operates a different technical system, and needs incoming employees to take on new roles to accommodate this; and



• an organisational reason could be where, due to a merger of two workforces, the new employer needs to eliminate some job roles and introduce others, or make redundancies to reduce headcount.



An example of a reason that is not a valid “economic, technical or organisational reason entailing changes to the workforce” is an employer’s wish to cut wages, holiday or other contract terms in order to bring them into line with less favourable terms and conditions paid to the employee's own workforce. This is “harmonisation” and is unlawful.




Courts and tribunals have interpreted the phrase “changes to the workforce” narrowly. Only changes to workforce numbers, functions (Debole Slate v Berriman [1985] IRLR 305) and, since 31 January 2014, ‘location’ can provide a valid ETO reason justifying a change to contract terms.


A dismissal that results from a change in work location is no longer automatically unfair (regulation 4(5A), TUPE). However, normal principles of unfair dismissal law apply (see Chapter 10).



To provide a valid ETO reason, any change in workforce numbers must involve a change in overall workforce numbers. One person leaving and someone else taking their job is not a change to the workforce.


“Workforce” does not include franchisees. This means that there will be a change in workforce numbers if direct employees are replaced with franchisees, even though the people involved are the same. This will also produce a redundancy situation, because switching from direct employees to franchisees reduces the size of the employed workforce (Meter-U v Ackroyd [2012] UKEAT/0206/11/CEA).


To provide a valid ETO reason, any change in “job functions” must be significant (Nationwide v Benn [2010] UKEAT/0273/09, Miles v Insitu Cleaning Company Limited [2012] UKEAT 0157/12/0210). Splitting job functions was a significant change, according to the EAT in Osborne v Capita Services Limited [2016] UKEAT/0048/16/RN. 


Some cases, for example Manchester College v Hazel [2013] EWCA Civ 281, suggest that only a redundancy situation (i.e. where the change is so significant that you are looking at a different job) can provide a valid ETO. 


The ETO reason must relate directly to the employee whose contract terms are to be cut. It is not good enough that at the time of seeking to impose a change, there is a backdrop of organisational change affecting other members of the workforce (Manchester College v Hazel [2013] EWCA Civ 281).



Even if an employer has a valid “ETO reason” for changing contract terms, any change must be agreed.


In non-unionised workplaces, the inequality of bargaining power between the employer and the employee gives the employer a great deal of freedom to impose “agreed” changes to contract terms after a transfer.