The Department for Business and Trade has launched a wide-ranging review of the TUPE regulations. Employers have until 1 July 2026 to make their voices heard.

What is the background?

The Transfer of Undertakings (Protection of Employment) Regulations 2006 – known as TUPE – sit at the heart of almost every business sale, merger, outsourcing arrangement and service provision change. They are also, in the experience of most HR professionals and in-house teams, among the most complex and demanding pieces of employment legislation to navigate in practice.

On 8 April 2026, the Department for Business and Trade (DBT) published a Call for Evidence on TUPE as part of the Government’s broader “Plan to Make Work Pay” programme. The review follows hot on the heels of the Employment Rights Act 2025 and signals that further legislative change is on the agenda.

The Call for Evidence is explicitly framed around two, sometimes competing, objectives: making TUPE easier for businesses to operate, while simultaneously strengthening protections for employees who are subject to a transfer. Ministers have been candid that they want both outcomes and are seeking evidence to understand whether the current regulations deliver either goal satisfactorily.

At this stage, however, the Government is gathering information and experience from employers, employees, trade unions, legal practitioners and business representative bodies.  Depending on the results, it may go on to develop policy proposals and consult on those.

The six areas under scrutiny

The Call for Evidence covers six broad areas:

The current framework

The Government asks whether the existing framework strikes the right balance between employer flexibility and employee protection, covering terms and conditions, consultation rights, collective agreements and pensions. Notably, occupational pension benefits tied to old age, invalidity or survivors remain exempt from automatic transfer under TUPE. The review invites views on whether that exemption remains appropriate, signalling potential change in this area.

Identifying a “relevant transfer”

One of the most persistent practical difficulties with TUPE is the threshold question: does it apply at all? The definition of a “relevant transfer” (i.e. an economic entity retaining its identity, or when a service transfers to a new provider) has generated extensive case law and significant uncertainty, particularly in complex outsourcing arrangements. The Government asks how clear the current test is in practice and whether it needs to be reformed.

Process and practicalities

The Call for Evidence asks about the areas where employers experience difficulty in the TUPE process: planning, employee liability information, consultation, terms and conditions post-transfer, and/or situations involving insolvency. These are the friction points where legal disputes commonly arise, and where clearer rules could benefit business.

Variation of terms and conditions

Under the current rules, employers cannot vary terms and conditions where the reason for doing so is the transfer itself.  Variations are only permissible for economic, technical or organisational (ETO) reasons entailing changes in the workforce and the employee agrees to the change, or in certain other limited circumstances.

In practice, the bar on harmonisation is one of the most commercially significant features of TUPE. Acquiring businesses frequently find themselves managing workforces on incompatible terms for years after a transfer, creating both operational complexity and employee relations difficulties. The Government is asking whether this framework is clear, fair and proportionate.

Guidance and support

The review asks how useful the existing Government and Acas guidance is in practice. This reflects a longstanding criticism from employers and practitioners that the guidance does not give businesses the practical direction they need when navigating novel or complex transfers.

Cost and impact

The Government is seeking quantitative evidence on the cost burden of TUPE compliance, both direct costs such as legal advice, HR resource and restructuring costs, and indirect ones including delay to transactions and difficulty in workforce planning.

What does this mean for employers?

It would be premature to predict specific reforms at this stage. What is clear is that the Government is open to relaxing some aspects to facilitate smoother transactions, while tightening others to strengthen employee protections.

Employers should be particularly alert to the possibility of changes to the ETO framework, which currently provides the main route for post-transfer harmonisation of terms. Reform to the service provision change rules is also plausible. Any tightening of the information and consultation obligations, or of the protective award exposure for non-compliance, would have immediate and significant financial consequences for employers involved in transfers.

It is also worth setting this review in its broader legislative context. The Employment Rights Act 2025 has strengthened employee rights across multiple areas. Any TUPE reform is likely to be developed in that spirit.

Responses may be submitted online, by email to tupepolicy@businessandtrade.gov.uk, or in writing to the TUPE Policy Team at the Department for Business and Trade, Old Admiralty Building, London SW1A 2DY. The response deadline is 11.59pm on 1 July 2026.

BDBF is a leading employment law firm based at Bank in the City of London. If you would like to discuss any issues relating to the content of this article, please contact Amanda Steadman (AmandaSteadman@bdbf.co.uk), Rose Lim (RoseLim@bdbf.co.uk) or your usual BDBF contact.

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Employment Law News

 

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TUPE: beneficial contractual changes were void because they were by reason of the transfer

In this case, the EAT considered whether four company directors were entitled to rely on contractual terms which had been put in place shortly before a TUPE transfer and were designed to significantly improve their position post-transfer. 

What does the law say?

Where an employer inherits employees following a TUPE transfer, it is unable to change their contractual terms where the transfer is the sole or principal reason for the change.  An attempt to do so will be void.

However, in the 2007 case of Power v Regent Security Services Ltd the Court of Appeal held that the incoming employer was bound by more favourable contractual terms that it had agreed with the transferring employees.   This decision has been understood to mean that employees should be able to rely on positive changes to their contracts, even if they are transfer-related.   Non-binding Government guidance also suggests that contractual changes which are “entirely positive” for the employee are allowed.

What happened in this case?

Mr Ferguson and three fellow claimants (the Claimants) were directors of Lancer Property Asset Management (Lancer).  Lancer provided estate management services to a single client, Berkeley Square Estate, in respect of a portfolio of 140 properties worth £5.5 billion owned by the Royal Family of Abu Dhabi.

Berkeley Square Estate terminated the contract with Lancer and moved its business to Astrea Asset Management Ltd (Astrea).  This amounted to a service provision change under TUPE.  Two months before the transfer took place, the Claimants made a series of extremely favourable changes to their own terms and conditions, including introducing rights to generous pay rises, guaranteed bonuses and termination payments, as well as increasing their notice periods.

Two of the Claimants were not accepted by Astrea.  The remaining two transferred to Astrea but were dismissed shortly afterwards.  All four brought claims against Astrea, including for the contractual termination payments introduced just before the transfer took place.  The Employment Tribunal rejected the claim on the basis that the pre-transfer changes were abusive because the Claimants had sought to take advantage of the effect of TUPE to award themselves additional compensation.  The Claimants appealed to the EAT.

What was decided?

The EAT dismissed the Claimants’ appeal on two grounds.

First, the Claimants had sought to argue that the restriction on transfer-related variations only concerned changes which were unfavourable to the employee.   The EAT rejected this argument, referring to the fact that the underlying purpose of the TUPE legislation is to safeguard the rights of transferring employees, not to improve them.  The Powercase was distinguished on the basis that, amongst other things, the contractual variation in that case had occurred after the transfer.  The EAT concluded that TUPE prevented any purported variation by reason of the transfer, regardless of how favourable it is to the employee.

Second, the EAT agreed with the Employment Tribunal that the Claimants’ actions had amounted to an abuse of the TUPE legislation.  The pre-transfer variations had been designed to improve the Claimants’ position and obtain an improper advantage, rather than to safeguard rights.

What are the learning points?

In a business sale situation, a buyer will usually require a seller to agree not to change employees’ terms and conditions in a specified window before the transfer without the buyer’s consent.  Outsourcing situations are more complicated, since the incoming contractor has no direct contractual relationship with the outgoing contractor.  For this reason, the outsourcing agreement between the client and the contractor usually includes a similar restriction on the contractor changing terms pre-transfer.   If it does not, it’s possible that the incoming contractor will seek indemnity protection from the client to cover any losses suffered as a result of any such changes.  This latest decision is helpful in that it provides that, even without such contractual protection, any changes made by reason of the transfer will not be enforceable.

Ferguson and others v Astrea Asset Management Ltd

If you would like to discuss any of the issues raised in this article please contact Amanda Steadman (amandasteadman@bdbf.co.uk) or your usual BDBF contact.

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Employment Law News

 

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TUPE and long-term sickness benefits: employee had contractual entitlement to receive benefits until he could return to original job

A long-term sick employee transferred under TUPE but was denied long-term sickness benefits by both the old and new employers’ PHI insurers.  After he was dismissed, he brought claims against the new employer.  The Court had to consider whether the new employer was liable to compensate the employee for the lost benefits until he was able to return to work and, if so, what that meant. 

What does the law say?

The right to benefit from an insurance scheme, such as permanent health insurance (PHI) will automatically transfer under TUPE.  What is not clear is whether the old employer’s right to be indemnified by their PHI insurer transfers to the new employer.  As a result, this is a high-risk area for the new employer.  If an employee who is receiving (or waiting to receive) PHI benefits transfers and is unable to claim under the old employer’s PHI scheme, then the new employer may be on the hook to make those payments itself. 

Further, where an employee is entitled to receive PHI benefits the courts may imply a term preventing dismissal where such dismissal would deprive them of those benefits.  If an employer dismisses in those circumstances it will be in breach of contract and may have to pay compensation equivalent to the lost PHI benefits, potentially up to the earlier of retirement or death.   

What happened in this case?

Mr Visram was employed by American Airlines as an International Security Co-ordinator at Heathrow airport. His employment contract provided for a long-term disability benefits plan.  Under the plan, he was entitled to be paid after 26 weeks’ sickness absence until the earlier of the return to work, death or retirement.  The plan was funded by a PHI policy that American Airlines held with Legal & General.  That policy provided that Mr Visram would be entitled to benefits provided that he remained employed and was too sick to perform the essential duties of the role he performed immediately before going off sick.

In October 2012, Mr Visram went off sick.  Several weeks later his employment transferred from American Airlines to ICTS (UK) Ltd (ICTS).   He remained off sick after the transfer.  When he had been off sick for 26 weeks, he expected to receive the long-term disability benefits.   However, ICTS’ own PHI insurer, Canada Life, refused to pay because Mr Visram was already on sick leave when the policy commenced.   Legal & General also refused to pay because Mr Visram was no longer employed by American Airlines.  After some discussion with ICTS, Legal & General agreed to make 18 months’ worth of payments.  At the end of that period, ICTS dismissed Mr Visram on the grounds of capability and he brought claims for unfair dismissal and disability discrimination. 

What was decided?

Mr Visram succeeded in his claims and the Employment Tribunal decided that he had a contractual entitlement to the long-term disability benefits until he was able to return to work.  This meant that ICTS had been liable to make the payments, regardless of the PHI insurers’ position. 

The question was then how long such payments should have been made for.  If return to work meant the original role, then Mr Visram should be compensated for lost benefits until the earlier of death or retirement.  If return to work meant any suitable full-time work, then, in the Tribunal’s view, compensation should be limited to 4 years’ worth of lost benefits.   The Tribunal decided that “return to work” meant returning to his original role, not an alternative role.   Therefore, ICTS had to pay compensation based upon the lost long-term disability benefits until the earlier of death or retirement.  ICTS appealed to the EAT and then the Court of Appeal.

The Court of Appeal rejected the appeal.  The Court decided that the way the contract was drafted made it clear that Mr Visram was entitled to receive the benefits until he was able to return to his previous work as an International Security Co-ordinator, not just any work.  If the intention had been to provide benefits until the point that the employee could return to any work, then this should have been made clear. 

What are the learning points?

This decision highlights two key points for employers:

• Very careful drafting around the entitlement to long-term disability/PHI benefits is needed. Here, the drafting ultimately obliged the employer to pay these benefits to a qualifying employee.  Although the benefit was funded by insurance, the contract did not stipulate that the employee’s entitlement was contingent upon the insurer accepting the claim and making the payment to the employer.  Further, the employer’s hands were tied by the requirement to pay the benefits until the employee returned to their original role.  Had the wording been extended to cover return to an alternative role, the employer may have avoided liability.

• Incoming employers in TUPE transfers must conduct careful due diligence on the precise nature of such entitlements. In this case, both the old and new insurers refused to fund the claim, meaning the new employer was on the hook for the payments.   Incoming employers in this situation should seek to agree an adjustment to the sale price and/or seek an indemnity from the seller to cover the risk.

ICTS (UK) Ltd v Visram

If you would like to discuss any of the issues raised in this article, please contact Amanda Steadman (amandasteadman@bdbf.co.uk) or your usual BDBF contact.

 

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Employment Law News

 

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Tribunal rules that workers are protected by TUPE

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) provide extensive protection for employees who work for a business that is sold or who perform activities for a service that is outsourced.  But which individuals have the benefit of this protection?  In Dewhurst and ors v (1) Revisecatch Ltd t/a Ecourier and (2) City Sprint (UK) Ltd, an Employment Tribunal concluded that “workers” are covered by TUPE.

What does the law say?

The law deems different types of workers are entitled to differing levels of protection.  Traditional employees are best protected, whilst workers who are not strictly employed have some, but a lower level, of protection.

The question in this case is whether only traditional employees are covered by TUPE or whether the protection extends more broadly.  On its face, TUPE only protects “employees”, however, the definition of employee is wider than that used in the Employment Rights Act 1996 (ERA).  TUPE defines an employee as: “any individual who works for another person whether under a contract of service or apprenticeship or otherwise but does not include anyone who provides services under a contract for services.”  The use of the words “or otherwise” leaves open the question of whether other types of workers may be protected.   

Of greatest interest is whether the protection extends to those who qualify as:

• “workers” under the ERA (and/or the Working Time Regulations 1998); and/or
• “employees” under the Equality Act 2010 (this is a wide definition capturing workers and potentially also certain independent contractors).

There are three hurdles to qualifying as a worker.  First, there must be a contract between the parties.  Second, that contract must provide for personal service by the worker.  Third, the other party to the contract must not be a client or customer of the individual’s profession or business undertaking. 

Previous cases have confirmed that TUPE protection only applies where there is a contract in place between the parties which provides for personal service.  Logically, it seemed that “workers” would, therefore, pass the “employee” test under TUPE.  However, until now, there has been no explicit ruling on this point, which caused uncertainty.

What happened in this case?

The claimants worked for City Sprint as cycle couriers providing courier services for a client called HCA Healthcare.  In 2016, one of the claimants brought an Employment Tribunal claim against City Sprint and was found to be a worker.  Two years later, City Sprint lost the HCA Healthcare contract to a rival, Ecourier.  The claimants stopped working for City Sprint on 31 January 2018 and began working for Ecourier the next day. 

The claimants brought claims against both City Sprint and Ecourier, including for failure to inform and consult under TUPE.  These claims could only proceed if the claimants, as workers, came within the wider definition of employee used in TUPE.  A Preliminary Hearing was held to decide this point.

What was decided?

The Employment Judge decided that the words “or otherwise” were designed to reflect a broader class of working relationship beyond traditional employment.  He concluded that the words should be construed to include both workers under the ERA and employees under the Equality Act 2010.

What are the learning points?

It should be noted that this decision is not binding on other Tribunals and, given the importance of the issue, it is quite likely that it will be appealed.  In the meantime, however, this decision is helpful to workers who are working for a business or service that is to be sold or outsourced.  They can seek to rely on this decision to say that they have the right to be informed and consulted about the transfer and to transfer automatically to the new employer on their existing terms and conditions.  Once transferred, they will also be protected from variations to their terms and conditions save in limited circumstances. 

However, they will not acquire the all-important automatic unfair dismissal protection.  The right to claim unfair dismissal is only available to those who qualify as employees under the ERA.  TUPE preserves, not improves, employment rights and so a worker is not converted to an employee under the ERA just because they are within the scope of TUPE.  Therefore, an employer who inherits workers under TUPE will be able to dismiss them by reason of the transfer without the risk of an unfair dismissal claim.  However, they could face claims of up to 13 weeks’ actual pay per worker if they fail to engage in an information and consultation process.

Employers looking to acquire a business (or take over a service contract) should conduct appropriate due diligence to identify the seller’s worker population.  To complicate matters, where the seller engages independent contractors, the buyer will need to scrutinise whether those contractors might, in fact, be workers.  Failing to do this could result in a deficient information and consultation process and leave the buyer (and seller) exposed to claims.

Dewhurst and ors v (1) Revisecatch Ltd t/a Ecourier and (2) City Sprint (UK) Ltd

If you would like to discuss any of the issues raised in this article, please contact Amanda Steadman or your usual BDBF contact.

 

 

 

 

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Permanently ill employee did not transfer under TUPE

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An employee who had been unable to work due to illness for 6 years and would not be returning to work was not assigned to the group transferring under TUPE, so his employment did not carry over to the incoming employer. The employee was simply ‘on the books’ in order to continue to receive permanent health insurance, therefore lacking the necessary involvement in the work being done by the transferring team to be regarded as part of it.

Mr Edwards worked for Orange in its domestic network outsource (DNO) division and had been on permanent sick leave since January 2008. From 2009, Mr Edwards was receiving regular payments from the company’s permanent health insurance provider. In July 2009, the DNO division at Orange transferred to a subsidiary of BT and Mr Edwards and his colleagues transferred to BT under TUPE. It became apparent in 2010 that Mr Edwards would never return to work, so he continued to receive permanent health insurance payments as he had before the TUPE transfer. In June 2013, the DNO division transferred again, this time from BT to Ericsson. Ericsson refused to accept BT’s argument that Mr Edwards transferred to Ericsson as part of the division despite his absence.

Ericsson was right to object, as the Employment Appeal Tribunal held that Mr Edwards did not transfer under TUPE in 2013. The EAT held that, in order for Mr Edwards to have transferred, he would either need to have been involved in some way with the work being carried out by the DNO division before the transfer, or be expected to return in future to carry out the work after the transfer. As he met neither of the criteria, he was not part of the DNO team, but instead had a merely administrative or historical connection to it.

The EAT was at pains in this case to make clear that its judgment applies only to the relatively rare situations in which employees have no prospect whatsoever of returning to work. In the majority of cases, where employees are expected to return to work at some point in the (however distant) future, the likelihood is that they would transfer under TUPE.

BT Managed Services Ltd v Edwards and another UKEAT/0241/14

 

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Employee transferred under TUPE despite client instruction to remove her from the contract

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If a client instructs that an employee be removed from working on its contract which is set to transfer under TUPE, that employee will still transfer if the outgoing employer decides not to heed the instruction.

Ms Jakowlew was a care manager employed by Saga Care, which provided care services to the London Borough of Enfield. Saga’s contract with Enfield was set to expire, at which point the services would be provided by Westminster Homecare Ltd. Conflict between Ms Jakowlew and her manager led to her being suspended pending a disciplinary hearing. Following Ms Jakowlew’s suspension, Enfield exercised its contractual right to instruct Saga to remove Ms Jakowlew from the team providing its care services. Saga refused and gave Ms Jakowlew a final written warning the day before the TUPE transfer was due to occur. Saga advised Ms Jakowlew that her employment had transferred to Westminster; however, Westminster alleged she had never transferred. Ms Jakowlew claimed to have been unfairly dismissed.

The Employment Appeal Tribunal found that Ms Jakowlew’s employment had indeed transferred to Westminster as part of the TUPE transfer. The instruction by Enfield to remove her from the undertaking was not of itself enough to prevent a transfer taking place. To prevent the transfer, it would have been necessary for Saga to act on the request by reassigning Ms Jakowlew. As Saga had refused to do so, Ms Jakowlew went across with the undertaking.

It appears to have been material in this case that Enfield had a potential breach of contract claim against Saga for its failure to act on instructions to reassign Ms Jakowlew. However, such a claim would only be worth pursuing if it had suffered actual loss because of the breach and whether Saga was obliged to indemnify it for the loss. With that in mind, service recipients may wish to ensure that any outsourcing agreements are negotiated to include indemnities for loss suffered by them as a result of employees transferring under TUPE contrary to their direct instructions.

Jakowlew v Nestor Primecare Services Ltd (t/a Saga Care) and another UKEAT/0432/14

 

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Compensation ordered for failure to provide employee liability information where there was a reasonable belief employees would bring claims

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The First Tier Tribunal has held that an outgoing employer breached its obligations under the TUPE regulations by failing to notify the incoming employer of potential claims for unlawful deductions of wages. The fact that the failure to pay happened after the deadline for notification was not a barrier, as the outgoing employer had reasonable grounds for believing wages would go unpaid before it passed information to the incoming employer.

Eville & Jones (UK) Ltd and Grants Veterinary Services Ltd provided veterinary services to abattoirs under contract with the Food Standards Agency. Before those contracts were due to expire, the FSA invited Eville and Grants to tender for new work. Eville successfully secured a new contract but Grants did not and Grants’ employees transferred under TUPE to Eville. Grants’ financial situation worsened due to its failure to secure a contract and it entered administration.

Under the TUPE regulations, Grants was obliged to provide Eville with employee liability information, which includes notification of potential tribunal claims from its employees, by 19 March 2012.

On 27 March 2012, Grants wrote to its employees initially advising that the March salaries would be paid late. Eville learnt of the delay and asked the FSA to assist in ensuring that Grants paid the salaries owed. Grants nonetheless failed to pay its employees the March wage and Eville paid the arrears from its own funds.

Eville brought proceedings against Grants for breach of TUPE regulations on the basis that Grants failed to notify it of potential tribunal claims arising from its failure to pay salaries.

The tribunal found that by the time of the deadline for providing employee liability information, Grants was aware of its financial difficulties and were making insolvency arrangements which would make it unlikely that its employees would be paid. Once Grants had failed to pay the salaries, it had reasonable grounds to believe that claims may be brought against Eville for unlawful deductions of wages. Therefore, Grants had not complied with its duty to provide employee liability information.

The tribunal awarded Eville £500 per employee. With 131 employees transferred to Eville, this amounted to £65,500. Though this was significantly more than the loss Eville had suffered, the tribunal found it would not be just and equitable to reduce the award as Grant’s failure to notify had been significant and not inadvertent.

Eville & Jones (UK) Ltd v Grants Veterinary Services Limited (In Liquidation) ET/1803898/12

 

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Employment Appeal Tribunal holds that project manager should not have been assigned to a new contractor on a TUPE transfer

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The EAT has held that an employee, who was a project manager, did not transfer under TUPE. The EAT cautioned against placing too much emphasis on how much time an employee spends on each project and said that careful consideration should be given to the group transferring and whether the employee belongs to it.

Mr Armitage was a project engineer at ERH Communications Limited. ERH provided communications services to the Welsh Assembly under a regional maintenance contract, a framework agreement and an ancillary contract (under which it could bid for additional work).

In October 2012, Mr Armitage was promoted to the role of Project Manager and had to manage several matters including the regional maintenance contract. ERH subsequently lost this contract (but retained the other two contracts) to its competitor, Costain Limited, who took over the provision of services on 1 February 2013.

ERH conducted a consultation process to determine which of its employees should be transferred to Costain under TUPE and it informed Mr Armitage that he would transfer because he spent 80% of his time on the regional maintenance contract. Mr Armitage objected to this assessment which did not take account of the fact that his responsibilities had changed since his promotion. Costain also did not agree that TUPE should apply to Mr Armitage. They argued that he had spent most of his time working under ancillary projects rather than the regional maintenance contract and therefore he had not transferred.

The EAT held that when making a decision on whether or not an employee had transferred under TUPE, the courts should first consider the group of employees who would transfer and then consider whether the employee belonged to that group. It noted that: i) the group must be deliberately put together for the purpose of the relevant work; ii) it should not assume that every employee carrying out work for the relevant client is assigned; and iii) the decision on assignment should be made by a proper examination of the facts and was not a formality.

The EAT was critical of the reliance placed on the percentages of time Mr Armitage had spent on each contract, particularly given that he may have been more involved ahead of the transfer because it was likely to be a time that his skills were needed and that this in itself would not mean that he should be deemed assigned.

Although the case was remitted back to the Tribunal for a final decision, the EAT exercised its discretion and ordered ERH (not Mr Armitage) to pay Costain’s EAT fees. Indeed, when making the cost award the EAT commented that Mr Armitage was prevented from knowing who was liable for the termination of his employment until the current arguments between the two companies were resolved. This approach indicates that where two employers are the real protagonists in the litigation, the tribunals will follow a “loser pays” approach towards costs more readily.

Costain Limited v Armitage and another UKEAT/0048/14

 

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EAT holds TUPE transfer has taken place after share sale

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Normally, a share sale would not constitute a TUPE transfer because the identity of the employer does not change. However, the courts have accepted that there may be a transfer of an undertaking to a holding company or a sister company following a share sale. In this case, the control exercised by the parent company of the purchaser of the target’s shares and extensive integration exercises carried out by it led to the judgment that there had been a TUPE transfer.

In this case, Jackson Lloyd (Jackson) had 400 – 450 employees who undertook the repair and maintenance of social housing. The annual election of employee representatives had not taken place ahead of the transfer so no employee representatives had a mandate on the date the shares were sold. The shares in Jackson were purchased by Mears Ltd, whose parent company was Mears Group plc (Mears Group). No consultation process took place. Following the share purchase, Mears Group employees were appointed to the Jackson board and a team from Mears Group was deployed to Jackson’s sites to oversee the integration process. An integration consultant was tasked with reviving the Jackson brand using Mears Group’s systems, policies, procedures, methods and services.

The EAT held that the acquisition of Jackson’s shares by Mears Limited did not amount to a TUPE transfer but Jackson’s employees had subsequently been transferred to Mears Group by way of a business transfer. The tribunal pointed to the fact that Mears Group had imposed major changes on Jackson including its own systems and that Mears Group had control over Jackson.

Jackson Lloyd Ltd and Mears Group plc v Smith and others UKEAT/0127/13

 

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Employees reinstated to old contract after refusing to agree to new contract terms

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In Hazel v Manchester College, the Court of Appeal found that two employees who were dismissed for failing to agree to take a pay cut following a TUPE transfer were unfairly dismissed and entitled to reinstatement to their old terms.

Mrs Hazel and Mrs Huggins’ employment transferred under TUPE to Manchester College in 2009. In 2010, as a result of economic difficulties, the College proposed both: (i) redundancies; and (ii) pay cuts. Mrs Hazel and Mrs Huggins were offered alternative contracts but they refused due to the pay cut. The College then terminated their old contracts and offered employment on new contracts, which they accepted but brought unfair dismissal claims in relation to the termination of their old contracts.

The Court of Appeal confirmed that whilst dismissals for redundancy after a transfer may be fair, here the sole or principal reason for Mrs Hazel and Mrs Huggins dismissal was because they refused to sign the new terms (i.e. by reason of the transfer), therefore it was automatically unfair. As they could not be re-instated to their old positions, they kept their new roles but on their old salaries.

Orders for reinstatement and reengagement for unfair dismissal are rarely sought and even more rarely granted. However, although the employer in this case claimed it was impracticable for it to have to employ two sets of workers to do the same job on different terms, the Tribunal disagreed. It was confident that the College could handle the HR fallout.

 

This could be a significant spur for more employees to seek these orders that have the benefit of potentially leading to uncapped compensation.

 

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Proposed TUPE amendments

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Parliament has amended the TUPE regulations, which are in force in respect of transfers occurring on or after 31 January 2014.

In brief, the changes include:

1.  A new employer (with the old employer’s agreement) can elect to consult about large scale redundancies pre-transfer of the work force;
2. For a service provision change (e.g. outsourcing) to be covered by TUPE, the activities carried out by a new organisation must now be ‘fundamentally the same’ as those carried out by the old organisation;
3. Any purported variation of a contract of employment that is transferred under TUPE or the dismissal of an employee will still be automatically unfair if the ‘sole or principal reason’ for the variation or dismissal is the transfer. However if the sole or principal reason for the variation or dismissal is an economic, technical or organisational reason entailing changes in the workforce which expressly includes redundancies caused by relocations, then this is not unfair and a variation of terms may be valid;
4. Where a transferring employee’s contract of employment includes a collective agreement clause (i.e. where contract terms are updated as a result of negotiations between an employer and a trade union); any changes to collective terms agreed post-transfer without the new organisation’s approval will not automatically transfer;
5. The outgoing employer now has to provide “employee liability information” at least 28 days (rather than 14) before the transfer from and including 1 May 2014; and
6. Small businesses with less than 10 employers will be able to consult directly with employees (instead of representatives) affected by a TUPE transfer occurring on or after 31 July 2014.

These changes are intended to benefit employers. For example, the effect of (4) means that employers who inherit staff under TUPE from the public sector will have certainty over transferring employees salary costs when tendering for service contracts.

 

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Static trumps the dynamic approach

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In July 2013, the European Court of Justice in Herron v Parkwood Leisure held that employees who TUPE transfer to a new organisation cannot benefit from collectively agreed terms where such terms are agreed after the date of the transfer and where the new employer is not a party to those collective negotiations.

To put this into context, Parkwood Leisure acquired leisure centres in Lewisham via a TUPE transfer, which meant that the Lewisham employees transferred across to Parkwood with their original contracts of employment. These contracts contained clauses to the effect that they would be entitled to the terms and conditions (in particular relating to pay) negotiated from time to time by the National Joint Council (NJC) for local government. Parkwood were not part of the NJC. Post-transfer, the NJC negotiated new terms which increased the employees’ pay and which Parkwood refused to implement on the grounds that it was not bound by the new terms of the collective agreement as these were negotiated post-transfer and without its participation. The employees brought unlawful deduction of wages claims, which Parkwood disputed.

The case went all the way through the legal system up to the Supreme Court who referred the matter to the ECJ, who held that Parkwood were right. In essence, the terms and conditions in the transferring employees’ employment contracts were frozen as at the date of transfer and could not be updated as a result of further post-transfer negotiations with the NJC.

The impact of TUPE may be further reduced in September 2013 when the government will respond to its TUPE consultation paper, which has proposed to limit the future applicability of terms and conditions derived from collective agreements to one year from the date of transfer.

In the meantime, for employers who inherit staff under TUPE from the public sector, this decision provides a level of certainty over transferring employees salary costs when tendering for service contracts. However, companies in a similar position to Parkwood should note that if the negotiating process of collective agreements allows for their participation, then employees may be able to benefit from collectively agreed terms from time to time.

 

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