Changing an employment contract after a Transfer of Undertakings (Protection of Employment) or TUPE transfer is a complex process that requires careful consideration and adherence to legal requirements.
When a business or organization undergoes a TUPE transfer, the employment contracts of affected employees are typically transferred to the new employer, ensuring their rights and protections are maintained.
However, there may be instances where the new employer wishes to make changes to the terms and conditions of employment. In such cases, it is crucial for the employer to consult and negotiate with the employees or their representatives in good faith, providing clear and transparent reasons for the proposed changes.
Any modifications to the employment contract must be agreed upon by both parties, and any unfavorable changes could potentially result in a breach of contract or claims for unfair dismissal.
Therefore, employers must approach changing an employment contract after a TUPE transfer with caution and ensure compliance with legal obligations to maintain a harmonious and fair working relationship.
Can my employer change my contract after TUPE?
The question of whether your employer can change your contract after a TUPE transfer is a common concern among employees impacted by a transfer of undertaking. The Transfer of Undertakings (Protection of Employment) Regulations 2006, commonly known as TUPE, aim to safeguard employees’ rights in such situations.
When your organization undergoes a transfer to a new owner, TUPE ensures that your terms and conditions of employment (excluding pensions) are protected, preserved, and automatically transferred to the new employer. The new employer assumes responsibility for all employment duties and obligations, both statutory and contractual, that were previously held by your outgoing employer.
These provisions apply to all employers, regardless of size or sector, in cases of relevant business transfers. In addition to the transfer of your contract and its terms, you also have the right to be consulted about the transfer. This means your outgoing employer must provide you with advance notice, sharing key details such as the proposed transfer date, reasons for the transfer, implications for affected employees, proposed measures for employee support, and a process for raising objections if needed.
Overall, TUPE ensures that your employment rights and protections are maintained during a transfer of undertaking, providing a level of stability and security amidst organizational changes.
If the main reason for a contract change is the transfer
After a TUPE transfer, you can only make changes to contracts because of the transfer if:
- You improve employees’ terms and conditions, for example, you increase their holiday entitlement (annual leave).
- There is an ‘economic, technical or organisational’ (ETO) reason involving a change in the workforce, for example, your organisation needs restructuring.
Under TUPE regulations, employees enjoy enduring safeguards for their terms and conditions that remain in place indefinitely. For instance, even if someone has been transferred to your organization a decade ago, you may find a need to modify their terms and conditions relating to the transfer.
It is essential to note that any changes can only be made if they result in an enhancement of the employee’s terms and conditions or if there is a valid ‘economic, technical, or organisational’ (ETO) reason necessitating a workforce change. These legal requirements ensure that any alterations made to the employee’s contract are aimed at improving their situation or are justified by legitimate business needs. By adhering to these guidelines, employers can ensure a fair and compliant approach to modifying terms and conditions after a significant period of time following a TUPE transfer.
ETO reasons for contract changes
As per legal requirements, you have the opportunity to reach an agreement with an employee to modify an employment contract when there exists a valid ETO reason entailing a workforce change.
ETO reasons include:
- Essential cost-saving requirements (economic reasons)
- Using new processes or equipment (technical reasons)
- Making changes to the structure of an organization (organizational reasons)
A change in the workforce could include:
- Making redundancies
- Restructuring an organization
- Job role changes
- A change in work location
Example – Valid ETO Reason for Contract Change:
In a recent business acquisition, PrintsCo, a prominent printing organization in Luton, purchased Medias Creative, a smaller entity based in Dunstable. As part of the transfer, all 27 employees from Medias Creative became employees of PrintsCo. While PrintsCo boasts more advanced technology, there are still some specialized equipment and processes used at Medias Creative. This technological difference allows for the completion of work with fewer employees. To align with the new operational structure, PrintsCo undertakes an organizational restructuring, leading to the redundancy of five employees. Through careful consultation with the affected staff, PrintsCo agrees to modify their contracts, granting them the flexibility to work from either the Dunstable or Luton locations. This change is likely to be deemed a valid ETO reason due to the technical factor involving new equipment and the corresponding change in the workforce resulting from redundancies.
Example – Invalid ETO Reason for Contract Change:
A college finds itself managing staff members who operate under six different sets of terms and conditions due to past TUPE transfers. Seeking administrative simplicity and cost reduction, the college decides to standardize everyone onto the same terms. In pursuit of this objective, the college dismisses and subsequently rehires an employee with a reduced salary, which the employee refuses to accept. Upon review, an employment tribunal deems this action as automatically unfair. In this case, the reason for dismissal was primarily driven by the transfer itself, lacking a valid ETO reason since the proposed changes did not involve any significant alterations to the workforce.
Improving terms and conditions to match those of existing staff
After a TUPE transfer, it is common for employees who have been transferred to have different terms and conditions compared to the existing workforce within your organization. While it is not mandatory, you may consider harmonizing these terms and conditions, aligning them with those of the existing workforce. However, any changes made must improve the employees’ terms and conditions.
It is important to note that terms and conditions cannot be altered in a way that worsens the employees’ conditions, unless there is a valid ‘economic, technical, or organizational’ (ETO) reason involving a change in the workforce. This ensures that any modifications made to terms and conditions are fair and justifiable under the law.
Moreover, it is crucial to avoid treating specific groups of employees unfairly when addressing any disparities in terms and conditions. Ensuring equality and fairness across the workforce should be a priority in these situations. By carefully managing these considerations, you can navigate post-TUPE transfer changes to terms and conditions while upholding employee rights and fostering a harmonious work environment.
Read more: Redundancy and TUPE
Changing terms and conditions in collective agreements
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.