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The Transfer of Undertakings (Protection of Employment) Regulations, better known as TUPE, have long given headaches to employers that are transferring staff in or out of their businesses.  In this article, we look at some of the risks for an employer seeking to integrate new employees into a business and, in particular, change the new employees’ terms and conditions. The dismissal of an employee will automatically be unfair where the sole or main reason for the dismissal was either the TUPE transfer itself or a reason connected to the transfer that is not an economic, technical or organisational (ETO) reason entailing changes in the workplace.

In addition, any changes to a transferred employee’s terms and conditions will be void – even if the employee agrees to the changes – unless they are made for a reason not connected with the transfer or are for an ETO reason entailing changes in the workforce.

In the recent case of Manchester College v Hazel and another [2012], the Employment Appeal Tribunal considered the situation of two employees who were dismissed for failing to agree to new terms following a TUPE transfer.

Following a successful bid for Offender Learning contracts, the claimants transferred toManchesterCollege. Once the college had completed a redundancy exercise, it asked the claimants to agree to a salary reduction. The claimants refused, were dismissed and were then immediately offered new contracts on different terms, which they accepted. However, they also lodged claims for unfair dismissal.

The Employment Tribunal found that the reason for dismissal was connected to the transfer and there was not a valid ETO reason entailing changes in the workforce. Furthermore, the proposed change was not part of the redundancy process, as that had been completed. It ordered re-engagement on the claimants’ new terms and conditions, save for salary, which was to be restored to the previous level. The claimants’ pay was frozen, however, until the new payscale caught up with their salaries.

The Employment Appeal Tribunal agreed with the Employment Tribunal’s decision by confirming that the harmonisation of terms was not to entail a change in the workforce.  Therefore, the dismissals were unfair.

The case serves as a reminder to employers that the ability to make changes following a TUPE transfer is limited and does not give an employer the freedom to harmonise the terms of transferred employees with those of the existing workforce, particularly where they involve offering less favourable terms to the transferred employees.

Even if an employer waits for a period following the TUPE transfer before they try to impose changes, there is a risk that these changes will be found to be connected to the transfer, if they are detrimental to either the new or old workforce.

An employer would, however, be able to agree with a transferred employee to change their terms, as long as the transfer itself is not the reason for the amendment or if it can show an ETO reason for changes in the workforce.  The employer’s reason for the changes must therefore be considered carefully.

Employers should approach this subject with caution and seek legal advice from the outset, before they attempt to make any changes to employees’ contracts. Lyons Davidson’s employment teams are happy to provide such advice. For more information, please contact our Employment Law team or call us on 0117 904 6000.