UK: TUPE - consensual post-transfer harmonisation of terms may be effective where there is some other reason for the change

Two EAT rulings suggest that agreeing changes with TUPE-acquired staff putting them on the same employment terms as the transferee's indigenous workforce may be effective provided the transferee has a reason other than simple harmonisation for making the change.

Following a TUPE transfer, the transferee will commonly want to change the employment terms of the newly acquired employees.  Where the purpose is simply to harmonise the terms with those of the transferee's indigenous workforce for the sake of administrative efficiency, this is viewed as transfer-connected and, as a result, any changes are invalid under TUPE even if agreed by the employees.  Does it make any difference to this outcome that a transferee has some other motive, apart from tidy-mindedness, for changing the acquired employees' terms?  To the surprise of some commentators, two recent EAT rulings suggest that it does make a difference, at least in some cases.

In Smith v Brooklands, a change was agreed with transferred employees two years after the transfer.  According to the tribunal's findings of fact, the reason for the change was the genuine view of the transferee's HR director that the employees were being paid incorrectly by mistake and out of step with normal practice in the sector (in that they were being paid for full-time hours when working part-time).  The EAT ruled that this was not a transfer-connected reason so the change was valid.  The fact that the change would not have occurred 'but for' the transfer was irrelevant, as was the fact that in reality the pay rates were not a mistake.  

In Enterprise Managed Services v Dance, the EAT accepted that changes aimed at improving productivity were not transfer-connected, even though in fact the transferred employees were given the same terms as the transferee's indigenous staff.  The transferee already provided one type of service to a client and, in response to the client's requirements for improvements to the service level, instituted changes to its employment terms to improve productivity.  On a retender, the transferee then won a contract to provide an additional service to the client and acquired the staff from the outgoing contractor. The transferee considered that it would need to bring about the same productivity improvement in the acquired staff in order to meet the client's contractual requirements and therefore sought to agree the same changes to terms as it had applied to its indigenous staff.  

The EAT noted that this was not the case of a transferee simply wishing to harmonise out of tidiness.  The harmonisation was simply a consequence of the fact that (i) the terms needed to be changed in order to improve productivity to retain the contract and (ii) the transferee had already made these changes successfully for the same purpose in its indigenous workforce and therefore considered those terms fit for purpose.  (The case has been remitted to a fresh tribunal given flawed reasoning by the majority in the original tribunal.)

The cases illustrate that tribunals may be willing to accept that a transferee has a reason other than a desire to harmonise for making changes that end up harmonising terms, and that such a reason can be unconnected with the transfer.  However, transferees should be cautious - evidence suggesting such a reason is likely to be examined sceptically.  For example where the argument is that the reason is to correct terms which are out of kilter with the market standard, this may not succeed where the transferee has simply assumed that the market standard is what its indigenous workforce receives.