Can You Change a Contract After TUPE?

Under the Transfer of Undertakings (Protection of Employment) Regulations (TUPE), employees’ terms and conditions of employment are protected when a business or service is transferred to a new employer. Following a transfer, employers cannot make changes to employment contracts if the sole or main reason for the change is the transfer itself. Any changes made purely because of the transfer will be legally unenforceable.

However, contract changes may be allowed if there is an Economic, Technical, or Organisational (ETO) reason that entails changes in the workforce, such as restructuring or redundancy. Even with a valid ETO reason, employers must follow fair procedures and consult with affected employees.

There is no fixed period after which contract changes can automatically be made, but in practice, the longer the time that has passed, the easier it may be to demonstrate that changes are unrelated to the transfer. Employers should be cautious when considering changes and ensure they are for legitimate business reasons, rather than connected to the transfer.

Failing to comply with TUPE regulations can result in legal claims, including claims for unfair dismissal or breach of contract.

 

TUPE protections

 

TUPE, or the Transfer of Undertakings (Protection of Employment) Regulations 2006, aims to protect employees in the event their employment is transferred to a new employer following a business transfer or service provision change.

If an organisation is transferred to a different owner, under TUPE affected employees’ terms and conditions of employment (except in relation to pensions) should be protected, preserved and automatically transferred to the new owner.

Responsibility for all employment duties to the employee under statute and under their contract should transfer from the previous (outgoing) employer to the new (incoming) employer.

The provisions are mandatory for all employers, irrespective of size and sector, where there is a relevant business transfer.

In addition to the transfer of contract and its terms, they also have the right to be consulted about the transfer. This means the outgoing employer must give affected employees advance notice of any business transfer before it happens. They should also be informed of key details such as the proposed date of transfer, the reason for the transfer, any implications the transfer may have on them and any proposed measures that will be put in place for affected employees and a process to raise any objections to the transfer.

Employment terms should not be altered as a direct result of a TUPE transfer without the employee’s consent. TUPE is a complex piece of legislation and much will depend on how employers have interpreted and applied the provisions.

 

Changing contract terms after TUPE

 

Generally speaking, changes to employment terms and conditions typically require the employer to obtain employee consent. This effectively prevents employers from being able to harmonise contractual terms of transferred employees and bring them in line with existing employees following a transfer – unless specific exemptions apply.

The potential lawful reasons which an employer may seek to rely on to justify amending employees’ terms include:

 

• Where the reason for variation is completely unrelated to the transfer
• Where the variation is favourable to the employee
• When the terms of the employment contract permit variation, for example, a mobility clause
• Limited insolvency situations
• If there has been a collective agreement that incorporates terms and conditions, those may be varied after more than a year from the transfer, as long as the employee’s terms are no less favourable overall than they were before the variation
• Where there is an economic, technical or organisational reason (ETO reason) relating to changes in the workforce, and the employer and employee agree to the variation
• A change to the place where employees are employed after the transfer can be an ETO reason

 

In most cases, employers will use the ETO (economic, technical, organisational) reason as the basis for making changes to employee contracts post-transfer. An ETO must relate to the numbers or functions of the workforce or the location of the workplace. Examples could include:

 

• Economic: a necessary reduction in headcount for cost-cutting
• Technical: an increased adoption of tech has reduced the need for staff
• Organisational: restructuring

 

Even where the employee has accepted a variation in terms, if the decision is found to have been due to the transfer, the changes will not be binding. This is because statute supersedes contract terms. This means if your employer offers you a financial incentive to accept the change in terms, while you may be less likely to bring a claim, you are not prevented from bringing a TUPE claim.

Transferring employees should be protected for at least two years after the transfer. In practice, however, it can become more difficult to establish the connection between the change and the transfer where more time has passed.

Any insistence by an employer that an employee has to accept new terms or face dismissal can be deemed automatically unfair dismissal.

 

Can pay be reduced following a TUPE transfer?

 

Under TUPE, any attempt to change contract terms will be void if the only reason or main reason for the change in contract terms is the TUPE transfer.

This means it would be unlawful for a new employer to reduce pay, or make any of the existing contract terms less favourable. This includes where the employer is seeking to harmonise pay with lower wages or lower benefits of its existing workforce.

Insistence or pressure to accept the new terms could be deemed automatically unfair dismissal.

 

Dismissal following TUPE transfer

 

It is automatically unfair to dismiss an employee either before or after the date of transfer if the main or only reason for the dismissal is the transfer.

The only exemption where an employer may lawfully dismiss an employee in a TUPE scenario is where they can show an economic, technical or organisational reason (an ‘ETO’ reason) for the dismissal, entailing changes in the workforce. ETO reasons concern:

 

• ‘Economic’ reasons – relating to profitability or how the organisation is performing.
• ‘Technical’ reasons – relating to the technology, equipment or processes the organisation uses.
• ‘Organisational’ reasons – relating to the management or structure of the organisation.

 

Even where an ETO reason applies, the employer must act reasonably and follow the relevant legal procedures correctly in making the changes, or risk claims for unfair dismissal.

 

Accepting a post-transfer role

 

It is possible to refuse a new position that has been offered by a new employer, known as ‘objecting to the transfer’, but this could limit the individual’s rights under TUPE.

The timing of the objection will be important, and should in most circumstances be made before the date of transfer. If the worker has not yet objected by the date of transfer, they will automatically transfer to the new employer on the transfer date, along with any other transferring employees.

If they object to the transfer before the date of transfer, their employment contract will be considered to have come to an end on the date of transfer. They do not have to give notice. Having effectively resigned, their exit will not be considered a dismissal and they may not be entitled to claim compensation unless one of two exemptions apply. There are two scenarios where objecting to a transfer could be deemed a dismissal:

 

• If the employee’s objection is on the grounds of constructive dismissal or
• If the employee’s objection is on the grounds of a substantial change in working conditions to their material detriment and treats the employment contract as having been terminated.

 

In some cases, the individual might look to negotiate a new contract with their new employer, but they would not be part of the pool of transferring employees, taking them outside the scope and protection of TUPE. Some individuals may look to initiate a negotiated exit under a settlement agreement.

 

TUPE transfer & redundancy

 

Transferring employees benefit from some protection under TUPE in respect of redundancy. Being redundant by an existing employer in advance of a TUPE transfer could be deemed automatically unfair. It would be unlawful for a new employer to make someone redundant following a transfer unless certain, limited circumstances apply.

There must be a genuine redundancy situation and an ETO reason involving changes to the workforce for redundancies to be made ‘fairly’ after the transfer.

The ETO reason has to relate to changes in the new employer’s combined workforce.

The employer must be able to evidence changes in the workforce and the future conduct of the business, which they may not have following the transfer.

 

Need assistance?

 

DavidsonMorris’ provide employers with specialist guidance and support on all aspects of TUPE transfers, including changing contract terms. Contact us for expert advice.

 

TUPE contract change FAQs

 

Can an employer change contract terms after a TUPE transfer?

An employer cannot change contract terms solely because of a TUPE transfer. Any changes must be justified by an Economic, Technical, or Organisational (ETO) reason that involves changes to the workforce.

 

What is an Economic, Technical, or Organisational (ETO) reason?

An ETO reason is a legitimate business justification for contract changes, such as financial difficulties, restructuring, or changes in processes. The reason must genuinely require changes in the workforce.

 

How soon after a TUPE transfer can contract changes be made?

There is no fixed timeframe. Changes made too soon may be seen as transfer-related and could be challenged. Employers should wait until they can demonstrate legitimate business reasons unrelated to the transfer.

 

What happens if contract changes are made without a valid reason?

If contract changes are made without a lawful justification, employees may have grounds to claim unfair dismissal or breach of contract. TUPE protections remain in place to safeguard employee rights.

 

Do employers need employee consent to change contract terms?

Yes, employees must agree to any changes unless the employer can demonstrate a lawful reason for making the change without their consent. Consulting with affected employees is a legal requirement.

 

Can improved terms be offered after a TUPE transfer?

Yes, employers can offer improved terms and conditions, but they should ensure that enhancements are not linked to the transfer to avoid potential legal challenges.

 

What are the risks of changing contract terms too soon?

Making changes without a sound business reason may result in tribunal claims, reputational damage, and financial penalties if employees successfully challenge the changes.

 

Can terms and conditions be harmonised after TUPE?

Harmonisation of terms across the workforce is generally not permitted unless an ETO reason applies. Employers should take legal advice before attempting to align terms.

 

What should employers do if contract changes are necessary?

Employers should consult with employees or their representatives, provide clear justifications for changes, and ensure compliance with TUPE regulations to avoid disputes.

 

Can employees refuse contract changes after a TUPE transfer?

Yes, employees have the right to refuse changes that are not legally justified. If they feel forced to accept, they may claim constructive dismissal.

 

Glossary

 

 

Term	Definition
TUPE (Transfer of Undertakings Protection of Employment)	UK regulations that protect employees’ rights when their employment transfers to a new employer as part of a business or service transfer.
Contract of Employment	A legally binding agreement between an employer and employee outlining the terms and conditions of employment.
Economic, Technical, or Organisational (ETO) Reason	A legitimate business reason allowing an employer to make changes to contracts after a TUPE transfer, such as financial difficulties, operational needs, or restructuring.
Employee Liability Information (ELI)	Information about transferring employees that the outgoing employer must provide to the incoming employer at least 28 days before the transfer.
Consultation	The process of informing and discussing proposed changes with employees or their representatives before implementing them.
Constructive Dismissal	When an employee resigns due to a fundamental breach of contract by the employer, such as unauthorised changes to terms and conditions.
Automatic Unfair Dismissal	A dismissal directly linked to a TUPE transfer without a fair reason, which is considered unlawful.
Statutory Rights	Legal entitlements provided to employees under UK employment law, including protection under TUPE.
Collective Agreement	A negotiated agreement between employers and trade unions that may outline terms and conditions applicable to transferring employees.
Measures	Planned actions by the incoming employer that may affect employees post-transfer, such as changes in work location or job roles.
Information and Consultation Process	A legal requirement for employers to inform and discuss the effects of a TUPE transfer with affected employees.
Breach of Contract	When an employer fails to adhere to the agreed terms of employment, potentially leading to legal claims.
New Employer (Incoming Employer)	The organisation taking over the employees and business operations as part of the TUPE transfer.
Existing Employer (Outgoing Employer)	The organisation transferring its employees to the new employer under TUPE.
Variation of Contract	Any agreed change to the terms of an employment contract, which must comply with TUPE regulations.