Employers are faced with a number of limitations following a TUPE transfer, but most do not realise how long those restrictions might last. The recent decision of the Employment Appeal Tribunal in the case of Manchester College v Hazel and Huggins has highlighted the issue. Will Walsh from our Employment Team explains.

Any dismissal of an employee will be automatically unfair where the sole or principal reason for the dismissal is either the transfer itself, or a reason connected with the transfer that is not an “economic, technical or organisational reason entailing changes in the workforce” (an ETO reason).  Further, any changes to terms and conditions of employment for a reason connected with the transfer will be void unless there is an ETO reason. An ETO reason must normally include a change in the number of employees needed.

In August 2009 Mrs Hazel’s and Mrs Huggins’ employment was transferred under TUPE to Manchester College, together with around 1,500 other employees.  As a result of funding problems following the transfer, in January 2010 the College undertook a review of the terms and conditions of all staff to achieve cost reductions and also to harmonise terms across its different departments. Its main objective was to minimise the number of redundancies that it would have to make.

As part of the College’s exercise, Mrs Hazel and Mrs Huggins were told that they were safe from redundancy but were offered new employment contracts which involved, among other things, a pay cut of 13.2% and 18.5% respectively. They refused to agree to the new terms and, initially, were dismissed in July 2010. However the College offered them employment on the new contracts for a second time, which they then accepted and returned to work.  Following their return they both brought claims, arguing that their original dismissals had been unfair and also seeking a return to their old conditions.

Mrs Hazel and Mrs Huggins won their claims.  Even though almost a full year had passed since their TUPE transfer, the decision was that the harmonisation exercise was nevertheless connected to that transfer, making the dismissals automatically unfair and the changes invalid.  There was no ETO reason for the dismissals or for the changes to their contracts, because their jobs were not considered for redundancy and therefore there was no change in employee numbers in their area. Mrs Hazel and Mrs Huggins were both reinstated to their old terms of employment.  Harmonisation could still take place, but by allowing other employees to catch up with Mrs Hazel’s and Mrs Huggins’ terms over the course of time, not by reducing the two Claimants’ pay.

What does this mean for employers?

The common belief is that the more time that elapses from the date of a TUPE transfer, the smaller the risk that a subsequent change to terms and conditions will be considered to be connected to that transfer.  However this case serves a warning that the link between TUPE and changes to employment contracts will be a matter of fact, regardless of whether a week, a month or even a year has passed. In this particular case, the reason why the claimants were dismissed and offered different contracts arose from the funding issues which followed the transfer.  Therefore, the matter was still related to TUPE.

The key issue is that employers cannot simply rely on the passing of time to avoid the scope of the TUPE regulations.  If changes to contracts are needed, employers must be careful to find business reasons for making those changes which are not connected to the transfer.