Changing Terms after TUPE Transfer

In Enterprise Managed Services Ltd v Dance & others the EAT agreed that changes to terms and conditions made after a TUPE transfer designed to improve performance and efficiency were not connected with the transfer.  Although the changes resulted in a harmonisation of terms, this was not the principal reason for the changes being made.   As the changes were not connected to the transfer, the subsequent dismissal of those employees who refused to accept them was not connected to the transfer either and were not automatically unfair.

Two contractors were providing different types of services to a client under separate service contracts.   The client informed the contractors that when those contracts terminated, it would be awarding a single contract for the provisions of both services and would be looking for cost savings and improved service delivery.  Prior to the expiry of the contracts, one of the contractors agreed changes to terms and conditions with its workforce which included the introduction of performance-related pay and different working hours.  That contractor was awarded the new combined contract by the client and inherited the other contractor’s employees under TUPE.  It subsequently sought to agree similar changes to terms and conditions with those employees.  Those who refused were dismissed and brought tribunal claims arguing that their dismissals were automatically unfair because they were connected to the transfer.  

The EAT said that tribunals should ask what was the reason for making the changes and for dismissing those who refused to accept them?  If the principal reason for the change was to increase productivity, then the changes were not connected to the transfer and nor were the subsequent dismissals.  The dismissals were not therefore automatically unfair.

Attempts at harmonisation generally fall foul of TUPE’s prohibition on changes to terms and conditions which are made by reason of the transfer or for a reason connected to it.  Although transfer-connected changes can be lawful if made for an economic, technical or organisational reason, such changes must also involve changes to the workforce (e.g. a change in their numbers or functions) which is unlikely in harmonisation cases.  This case, however, shows that if the reason for a change is not connected to the transfer and harmonisation is simply a happy consequence of the changes, the changes will not fall foul of TUPE.  Nevertheless, the distinction may be a fine one and legal advice should always be sought before attempting to change terms and conditions where there has been a TUPE transfer.