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TUPE: Changing Terms and Conditions

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Are contract variations beneficial to an employee void if made by reason of a TUPE transfer?

Yes, if made by the transferor, held the EAT in Ferguson and ors v Astrea Asset Management Ltd.

The Claimants were directors of a company which lost an estate management contract. Prior to the service provision change, they varied their own contracts to give themselves generous guaranteed bonuses and termination payments. When the transferee discovered this shortly before the transfer, it refused to allow some of the claimants to transfer and dismissed the others for gross misconduct. The EAT held that, although these changes were beneficial to the claimants, they were void because they had been made by reason of the TUPE transfer.

The EAT upheld a 100% Polkey deduction for the Claimant who was complicit in making the variations, as his misconduct was sufficient to justify a dismissal, and held that the automatic unfairness of the dismissal because of TUPE did not preclude a finding of contributory fault.

It might still be possible for a transferee to agree changes that are beneficial to an employee after a transfer has taken place, as happened in the case of Power v Regent Security Services.

Thanks to James Medhurst of Royds Withy King for preparing this case summary.