Variation of contracts following a transfer
Under Regulation 4(4) of the 2006 Transfer Regulations any purported variation of a contract of employment is void if the sole or principal reason for the variation is the transfer itself, or a reason connected with the transfer. Similar provisions in Regulation 7 state that any dismissal will be automatically unfair if the sole or principal reason for the dismissal was the transfer or a reason connected with it.
Regulation 4(4) effectively prevents employers from harmonising terms and conditions of employment following a transfer unless for an economic, technical or organisational reason entailing changes in the workforce (“ETO reason”). However, as two recent cases show, it is possible to make changes to the terms and conditions of transferred employees if it can be shown that the change is not connected with the transfer.
The first case (Smith v Brooklands College) concerned four teaching assistants (TAs) who were paid on the basis of a 36-hour week when in fact they worked 22-25 hours per week. This was unusual in the education sector but had been agreed between the parties and was not a mistake.
In 2007 the sixth form college for whom the TAs worked was transferred to another college. Two years later the transferee’s HR director looked at the pay of TAs across the college and assumed that there had been a mistake in the payments made to the four claimants. She considered that the payments were out of step with the rest of the sector and sought agreement to phase in a reduction in the TAs’ pay from January 2010. The TAs made a claim to a tribunal arguing that the college had made unlawful deductions from their pay. They claimed that the changes made to their pay were transfer-related.
EAT held that the question was not ‘but for’ the transfer would the HR director have sought to reduce the TAs’ pay? The question was what was the reason for reducing their pay? This was a question of fact for the tribunal to determine and the tribunal had found that the HR director believed that there had been a mistake in the sense that the payments did not conform to any other payments within the sector and were not standard practice. The changes were not made for a reason connected with the transfer. As such it was open to the employer and employees to vary the terms by consent. The claims were dismissed.
In the second case (Enterprise Managed Services v Dance), the transferee provided maintenance services to the Ministry of Defence. In order to improve productivity the transferee had introduced performance-related pay for its engineers. When it subsequently won a tender to provide additional services to the MOD it sought to make the same changes to the contracts of the transferred employees in order to ensure that the contract would not be lost. Some of the transferred employees refused to accept the changes and were dismissed. They claimed that the dismissals were for a transfer-related reason.
EAT concluded that the changes made to the contracts post-transfer were aimed at improving productivity and were not transfer-related. The transferee did not simply want to tidy up the terms and conditions so that everyone looked the same. The changes were driven by the need for productivity, which were rooted in the success of the changes made by the transferee to the terms and conditions of its existing workforce prior to the transfer.
This is a tricky area and the issues are not clear cut. A transferee needs to be cautious about making harmonising changes without strong evidence as to the non-transfer related reason for such changes or a reduction in workforce numbers/changes in job function to establish an ETO reason of connected to the transfer.