TUPE: Pension guarantee enforceable against new owner 20 years later

In Whitney v Monster Worldwide Ltd, the Court of Appeal has confirmed that an assurance given by an employer about his pension entitlement was capable of amounting to a binding commitment, which could be enforced against the purchaser of that business 20 years later.  

Mr Whitney was verbally assured by his then employer that he would be no worse off in a new money purchase pension scheme, following the closure of the final salary scheme in 1989.  This was found to be a binding guarantee.  In early 1997, Mr Whitney’s company was purchased by a subsidiary of Monster and that company promised to honour the pension arrangements.  Later in 1997, the business transferred to Monster and TUPE applied. 

The Court of Appeal concluded that it did not matter that the assurances were not recorded in a single document, as there was a "unanimity of view that there was a contract". The guarantee transferred to Mr Whitney's subsequent employer (Monster) by novation* alongside a TUPE transfer.  

The general position is that on a business transfer, matters relating to transferring employees' rights under occupational pension schemes are excluded from TUPE protection. However, here the assurance was passed by novation*.  Therefore employers involved in TUPE transfers should take steps to ensure that historic "no detriment" pension promises are not overlooked - these can amount to binding commitments even if they are not formalised in a single document.  

Those acquiring an undertaking should undertake proper due diligence and obtain adequate warranty protection accordingly.

* Novation is where a contract is cancelled and replaced with another (with the consent of all the parties to the contract) allowing a third party takes up the rights and obligations of one of the original parties to the agreement.