Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), employers are prohibited from making changes to contracts if they are connected to the transfer. In Smith and ors v Trustees of Brooklands College, the Employment Appeal Tribunal (EAT) said that, in order to decide whether they are, Tribunals must ask what was in the mind of the employer when they made the variation.

Basic facts

The claimants worked as part-time teaching assistants for Spelthorne College but, for some historical reason, were paid as though they were employed on full time contracts.

In August 2007 the college was transferred under TUPE to Brooklands. The HR director of the merged colleges spotted the anomaly and took steps to resolve the situation, which resulted in the claimants reluctantly agreeing to a phased reduction in their pay from 1 January 2010.

However, the claimants then brought a claim that the variation had been introduced in order to harmonise their pay terms with those of Brooklands’ existing staff.

This, they argued, was void under Regulation 4(4) of TUPE which states that “any purported variation of the contract shall be void if the sole or principal reason ... is a) the transfer itself or b) a reason connected with the transfer that is not an economic, technical or organisational (ETO) reason entailing changes in the workforce”.

Tribunal decision

The Tribunal judge, however, disagreed. He held that the reason for the variation was the belief by the HR director that the teaching assistants had been mistakenly paid the full time rate and were therefore out of step with the rest of the sector.

He found that the agreed variations on 1 January 2010, which on this basis were valid and effective, were not made void by their connection with the TUPE transfer in 2007.

EAT decision

The claimants had argued that "but for" the TUPE transfer, the variation would not have taken place, but the EAT said this was the wrong approach. Instead, the real issue to decide was what was in the mind of the HR director and why did she decide to initiate the variation?

This was a clear question of fact (and therefore for the Tribunal to establish) and once it had done so, it then just had to make a legal assessment as to whether or not it was connected with the transfer.

It went on to hold that the judge was correct in his decision that the reason for the variation in this case was to ensure that the claimants were only paid for the hours they worked and had nothing to do with the transfer and harmonisation of all employees’ salaries.

Although the HR director has been wrong to think that there had been an error (in actual fact the two parties had agreed to the payments), her rationale for varying the contracts was not connected with the TUPE transfer that had taken place two years earlier.

Comment

An interesting case which confirms that when a contractual change is made after a TUPE transfer and the change is said to be unlawful, the question to be answered is “what was in [the employer’s] mind and why did [they] decide to do it”. The case also illustrates that often these decisions are fact sensitive, the EAT saying that the Tribunal judge recognised that there was a fine line between the submissions of a difficult case. If the Tribunal had found that the sole or principle reason for the variation was to effect the harmonisation of terms (as argued by the claimants), as opposed to a belief that there was an error (as argued by the respondent), then the outcome may well have been different.