Case update (2): TUPE – changes to terms and conditions

Summary: Is the removal by an employer of an ‘outdated and unjustified’ contractual allowance void under TUPE when it comes after a transfer?

No, held the EAT in Tabberer and others v Mears Ltd and Others available here.

 

Background:  This case concerned the pre-2014 version of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), which provided that changes to employees’ terms and conditions of employment were void if the sole or principal reason for the change was either:

• the transfer itself; or
• a reason connected with the transfer that is not an economic, technical or organisational reason entailing changes in the workforce.

It is likely that the outcome would have been the same under the 2014 TUPE regs which provide that changes to terms and conditions are only void if the sole or principal reason for the change is the transfer.

 

Facts:  The employees were electricians who had originally been employed by Birmingham City Council. The employees’ had been subject to a number of TUPE transfers, ultimately to Mears Ltd. Within the Council, electricians had enjoyed payments of Electricians Travel Time Allowance (ETTA). Although the reasons for the allowance had ceased to exist over the years, and certainly after the employees had transferred from BCC, it was an allowance that had continued to be paid until the transfer to Mears Ltd in 2008.

Faced with an earlier Tribunal decision that the employees had a contractual entitlement to ETTA, Mears Ltd gave notice that it was bringing this contractual entitlement to an end. The notice informed the employees that “a decision has been taken that not only is the allowance…inappropriate, but also it fails to support our business needs going forward and it is wholly unfair on the remainder of the workforce…[W]e can confirm that irrespective of whether the entitlement is an express or implied terms [sic] in your employment, this letter is notice that we no longer intend to be bound by it and we are therefore giving you a formal notice of the removal of this allowance from your Terms and Conditions of employment“.

The employees objected and brought Tribunal claims, arguing that the reason for the variation to their contractual terms was a relevant transfer for purposes of TUPE and the variation was therefore void.

The Tribunal rejected the claims. It found that the Respondent had decided to stop making the ETTA payments because they were outdated. Therefore, the reason for the variation was not the transfer itself or a reason connected with the transfer.

The employees appealed to the EAT, arguing that the Tribunal’s decision ignored the fact that the subject matter of the earlier litigation was the TUPE transfer and there was a clear and continuing link to the transfer.

The EAT dismissed the appeal. The Tribunal’s finding was that the earlier litigation had been the context for the employer’s decision, not the reason for it. To the extent that the earlier litigation was relevant, it was because it set the context or forced the issue. It did not create a connection to the transfer.

The Tribunal had found that the reason, or principal reason, for the employer’s decision to bring the contractual entitlement to ETTA to an end was not the TUPE transfer.  The reason for the decision was that the allowance was outdated. Additionally, the employer’s reason had not linked back to the transfer. The belief that the allowance was outdated and justified did not arise purely on the occasion of or because of the transfer: it was a pre-existing belief.  This was a finding of fact which the Tribunal was entitled to make on the evidence before it.

Accordingly, the EAT upheld the Tribunal’s decision and the variation was not void under TUPE.

 

Implications:  This case decision is a useful reminder that merely because a variation takes place against a backdrop of a transfer does not mean that the transfer is the reason for that variation.  The question that Tribunals will ask is “what was the reason the transferee acted as it did?” Here, it was clear on the evidence that the underlying reason would apply even if the transfer had not happened.

In this case, both the Tribunal and EAT were clearly swayed by the strength of the evidence put forward by Mears Ltd. Any employer implementing post-transfer variations would be well advised to inform the employees in writing of its reasons for doing so and also to make a contemporaneous note of its management processes in arriving at that decision and the underlying rationale. This will provide strong evidence of the reason or reasons for the employer’s decision should there be a later dispute.

Employers should remain cautious before deciding to retract a longstanding contractual right as there are other claims that employees can bring such as constructive dismissal and resignation on the basis of a substantial change to working conditions to the employee’s material detriment.