One of the most difficult issues a transferee employer has to deal with after the transfer of a business to it is when it can make changes to the terms and conditions of staff in the transferred company. TUPE 2006 makes clear that any purported variation of an employment contract will be void if the sole or principal reason for the variation is the transfer itself or a reason connected with the transfer that is not an "economic, technical or organisational reason" (Regulation 4(4)).
This has led to a great deal of caution exercised by transferee employers and their advisors when intending to implement changes. However, the legislation is quite clear. There is no absolute prohibition on changes to terms and conditions in the context of a TUPE transfer unless such changes are solely or mainly by reason of the transfer, or are for a reason connected with the transfer (which is not an economic, technical or organisational reason). On occasion, it can be said that sight of the wood is lost for the trees.
The case of Smith & others v Trustees of Brooklands College illustrates this point succinctly. The claimants worked as teaching and learning assistants at Spelthorne College. They worked for 43 out of 52 weeks a year and the salary paid to them was divided accordingly. The salary treated them as having been employed on a full time contract which was deemed to be a 36 hour week although they worked for less. They were not paid in accordance with union guidance and the system of payment did not correspond to anywhere else in the education sector. Spelthorne College then transferred to Brooklands in 2007 by way of TUPE transfer. As part of a general review on pay, the HR director of the merged colleges, Ms Hopkins, noted the irregular rates of pay of the Spelthorne staff and assumed a mistake had been made. She negotiated with the staff and finally agreed with them in 2010 that their pay should be reduced in a phased process. The Spelthorne staff promptly brought unlawful deductions from wages claims against Brooklands, arguing that the variation to their contracts was void under regulation 4(4).
The EAT agreed with the tribunal judge that the reason for the variation was Ms Hopkins’ genuine belief that the Spelthorne staff had been incorrectly paid and this rate of pay was out of step with the rest of the sector. This belief was not in connection with the transfer. The fact that the transfer facilitated a review was neither here nor there.
HHJ McMullen referred to his own judgment in London Metropolitan University v Sackur in which he stated "the tribunal knew exactly what it was to determine: whether there was a connection; and if the connection was the principal reason between the dismissal and the transfer".
Clearly, chronology is an issue and where a variation takes place very shortly after the date of transfer it is likely to be much harder to show that such a variation is not in connection with the transfer. However, there is no cut off date, no period in time after which an employee is barred from arguing that a change is connected to a transfer so employers need always be on their guard. That said, the longer the gap in time, the more likely it is that any variation to terms is not connected with an earlier transfer.
In this case, HHJ McMullen noted that the judge had correctly assessed the period of time that had elapsed from the transfer to the variation and what was going on in Ms Hopkins’ mind. Although Ms Hopkins got the premise wrong, her reason for making the change was clear and did not fall within regulation 4(4).
HHJ McMullen noted the ECJ decision in Martin v South Bank University and accepted that where the sole reason to vary terms is in effect a wish to harmonise, regulation 4(4) is engaged, but where the sole or principal reason is not connected with the transfer the variation may take effect. The Acquired Rights Directive is intended to safeguard employees’ rights, not give them additional ones.
The decision in Brooklands is a helpful reminder that the ‘but for’ test (‘but for the transfer, the variation would not have happened’) is not appropriate for the application of regulation 4(4). The proper focus should be on what was the reason for the variation. Here the reason was the (erroneous but genuine) belief that the ‘over payments’ were a mistake.