Rights transfer

Power v Regent Security Services Ltd

The 1981 Transfer of Undertakings (Protection of Employment) Regulations (better known as TUPE) protect an employee’s contractual rights if their job is transferred under the regulations to another employer.

In Power v Regent Security Services Ltd (2008 IRLR, 66; IDS 843), the Court of Appeal said that employees can choose whether to take advantage of an pre-transfer contractual term or a post-transfer variation that is more favourable to them.

Basic facts

Mr Power’s contract stated that his normal retirement age (NRA) was 65. After a TUPE transfer in 1997, this changed to 60. After yet another transfer to Regent in 2005, he agreed (just before the transfer took effect) to a variation of his contract that his employment would terminate at age 65. Shortly after the transfer, however, the company forced him to retire at 60.

Mr Power claimed unfair dismissal. The company argued that the contractual variation was invalid because it related to the transfer and was therefore contrary to regulation 12.

The law

Regulation five of TUPE says that any contract that has been transferred under the regulations has to be adopted wholesale by the transferee (the new employer). Regulation 12 says that any agreements that try to get round regulation five are null and void.

That does not mean that employers cannot make changes to contracts, but the transfer cannot be the reason for the change. And according to the rule in Daddy’s Dance Hall (Foreningen af Arbejdsledere i Danmark -v- Daddy's Dance Hall A/S), employees cannot waive the rights conferred on them by TUPE, even if they are offered compensatory benefits to offset any changes that disadvantage them.

Because this was an unfair dismissal claim, the tribunal also had to take account of section 109 (now repealed) of the Employment Rights Act (ERA) 1996 which states that employees cannot claim unfair dismissal once they have reached the NRA for someone “in their position”.

Tribunal and EAT decisions

The tribunal said that Mr Power’s NRA was the same as his contractual retirement age, for the purposes of the ERA. However, it then said that regulation 12 meant that the contractual variation of his retirement age from 60 to 65 was null and void. That meant he could not bring a claim of unfair dismissal. Mr Power appealed arguing that the tribunal was wrong to conclude that regulation 12 was “neutral” and protected the rights of both employers and employees.

The EAT agreed with Mr Power, saying that the regulations were not designed to protect employers. That meant that Mr Power could not be prevented from pursuing his unfair dismissal claim. It also said that the decision in Daddy’s Dance Hall meant that it was for employees to choose whether to rely on a term of their contract with the transferor, or a more favourable term in the varied agreement with the transferee.

Court of Appeal decision

And the Court basically agreed with the EAT. It said that Mr Power could either enforce his right to retire at 60 (his contractual right prior to the transfer); or he could retire at 65. This was an additional right he had obtained when he was told by Regent that his retirement age had changed from 60 to 65.

Nor could Regent rely on regulation 12 as Mr Power had not contracted out of his acquired right to retire at 60. Instead “he has contracted into and obtained a right which he did not previously have, ie he has obtained from Regent the right to continue working, if he so wishes, after the age of 60 and up to the age of 65”.