Employer's post-transfer removal of outdated allowance not void under TUPE

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Changing terms and conditions following a TUPE transfer is a minefield for employers, with the penalty of changes being void if the reason for the change is found to be the transfer itself. Helpfully, however, the recent EAT case of Tabberer and Others v. Mears Ltd and Others has provided a clear example of where a change is permitted under the law.

Background

To understand the decision, we have to turn the clock back to 1958, when a travel time allowance (called ETTA) was introduced for electricians who worked for Birmingham City Council. The background to the allowance was to compensate electricians because their working arrangements meant that they could not earn a productivity bonus. The electricians were working across 30 to 40 depots, resulting in more travel time between sites and lost working time on site.

By 2006, the working arrangements had changed. There was only one depot left and the electricians were now working in vans, receiving their job instructions on mobile devices. The productivity bonus had been phased out and was no longer available. But ETTA was continuing to be paid, despite the employer believing this was no longer justified.

On 1 April 2008, there was a TUPE transfer to Mears Limited. The electricians were told they would cease to receive ETTA. They were told they were not entitled to it because it was out of line with their current (bad pun intended) working practices. This sparked (all right, no more) a Tribunal claim for unlawful deduction of wages (Salt v. Mears Ltd). On 1 June 2012, the EAT agreed with the Tribunal that there was a contractual entitlement to ETTA.

However, during the unlawful deductions proceedings both the Tribunal and the EAT had referred to the ETTA payments as "outdated" and "prehistoric". Using the same language, Mears wrote to the employees on 30 July 2012 giving them notice that their contract would be changed such that they would no longer be entitled to receive ETTA. Mears also stated that the allowance was unfair on the remainder of the workforce, whose working hours operated in the same way as the electricians, but who could not claim the allowance.

The electricians brought fresh claims, alleging that this change was void under TUPE. Their argument was rejected at first instance by the Tribunal and the electricians appealed to the EAT. They argued that the change was linked to the TUPE transfer on the basis that there was a factual link with the date of transfer and ETTA payments not being made. They highlighted the fact that there was a campaign from the point of transfer to remove the allowance. They also argued that Mears' reasoning in respect of unfairness to the remainder of the workforce indicated an intent to harmonise.

The EAT had to decide what the reason was for the variation to the relevant employment contract. This is a question of fact and not of law. If it was found that the transfer had been the sole or principal reason for the variation, it would have been void.

EAT decision

It was held that:

  • The outcome of the Salt litigation was not the reason for the decision to vary the contract, although it had set the context.
  • The Tribunal had made a permissible finding of fact that the reason or principal reason for the decision was to ensure that the contractual entitlement to ETTA was brought to an end because Mears believed that the entitlement was outdated. Mears could not countenance having to maintain a contractual entitlement when the historic rationale for this had long since disappeared.  
  • The Tribunal was entitled to take into account the fact that the previous employer felt that ETTA was unjustified. Therefore the belief that the payment was outdated and unjustified did not arise purely on the occasion of the transfer. It was a pre-existing state of affairs. 
  • Although Mears only came into the picture on the transfer, it would have questioned the payment of ETTA even if there had been no transfer. This would be no different to a new manager coming into the workplace and taking action upon learning of such an entitlement. It just so happened that Mears learned of the payment at around the time of the TUPE transfer.
  • The need for fairness across the workforce as a whole did not necessarily indicate a desire to harmonise.

Comment

The lesson to be learned is that it is important not to confuse the context with the reason when assessing what caused a change in employment terms following a TUPE transfer. In this case, the reason for the variation existed regardless of the transfer.

This does not give employers carte blanche to make changes to terms and conditions following a transfer. Advice should always be sought, particularly since changing terms and conditions of employment without agreement can have other legal consequences, including constructive dismissal.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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