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Changes for an ETO reason
[ch 5: pages 62-63]Under Regulation 4(5)(a) of TUPE, changes to contract terms are permitted where the reason for the change is an economic, technical or organisational reason entailing changes to the workforce (often known as an ETO reason).
Any change must be agreed, just like any normal contract change.
It is not enough to show that the change is for an “economic, technical or organisational reason”. The employer must also show that the change involves “changes to the workforce”.
The phrase “changes to the workforce” has been interpreted narrowly to mean changes to the numbers and functions of the workforce. This was established in the following case:
Mr Berriman was a quarryman with a guaranteed weekly income. The new employer proposed a change to his pay, to bring it into line with an existing collective agreement. This meant a substantial pay cut. Mr Berriman refused to accept the change and resigned, claiming constructive unfair dismissal.
The Court of Appeal upheld his claim. Although the employer established an organisational reason for the pay cut — a wish to standardise employment terms — that reason did not “entail changes in the workforce”. The Court of Appeal held that there was no change to the workforce if the numbers or functions of the workforce do not change.
Delabole Slate Limited v Berriman [1985] IRLR 305
One person leaving and someone else taking their job cannot be a change in the workforce, because the numbers and the role stay the same. Even if an employer dismisses all its employees and replaces them with new employees, this cannot be a change to the workforce, for the same reason. However, dismissing all the employees and replacing them with franchisees operating through limited companies (who may, or may not, be operated by the same individuals) or with agency or self-employed workers, can be a change in the workforce, as long as the arrangement is not a “sham” (Meter U Limited v Ackroyd [2012] UKEAT/0207/11).