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Power and protection

Open-access content 20th August 2008

In the context of a Tupe transfer, an important issue for parties is the extent to which there can be changes to terms and conditions. To date, matters have looked bleak for employers

 

by Tim Woodward with Alec Bennett 

 

01 June 2007

 

In Foreningen af Arbejdsledere i Danmark v Daddy's Dance Hall A/S, the ECJ held that employees do not have the right to waive this protection and that it is not possible to diminish the rights conferred by the directive, even with the employees' consent (the "Daddy's Dance Hall principle"). Effectively, that has been interpreted in the UK as meaning that any changes made to terms and conditions as a result of the Tupe transfer will be void. The EAT has now clarified that principle.

 

The principle

 

A recent decision by the Employment Appeal Tribunal - Power v Regent Security Services - raised questions  whether employers have the leeway to vary contracts changing hands under Tupe.


The effect of the EC Acquired Rights directive - which is implemented in the UK by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (Tupe)) - is that an employee's contract of employment, together with most rights and liabilities in connection with it, will be protected when the organisation for which he works changes hands.

 

The Power case


Power was employed as a facilities manager and had a contractual retirement age of 60. In July 2005 he was Tupe-transferred to Regent Security Services Ltd (Regent). After the transfer, he agreed with Regent to a change to his employment contract which stipulated that his contractual retirement age would be 65. Later that year, Regent sought to compel Power to retire at 60 despite the change to the contract. This resulted in him bringing a claim for unfair dismissal. He argued that the normal retirement age was 65 because of the contractual variation. Regent, on the other hand, sought to argue that the variation was invalid because it was made by reason of the Tupe transfer.


The EAT held that:

 

  • the contractual retirement age had been varied to 65 and there was no reason why that term should not be enforced by the employee

  • the variation was to the employee's benefit and a case in Denmark (Daddy's Dance Hall -see box) did not prevent such a variation being valid and effective, and

  • it was not necessary to construe Tupe so as to deny the employee the right to rely on the change.

 

 A transferee employer (unlike an employee) cannot rely on the case law of the European Court of Justice (ECJ) or Tupe itself to escape contractual obligations that it has voluntarily undertaken, even where those obligations arise from a variation to the contract which is by reason of the transfer.

 

What it means


It was somewhat rich for the employer in this case to attempt to rely on Tupe and the Daddy's Dance Hall principle to argue that its own agreed amendment was void. What emerges from this decision is that courts and tribunals will potentially apply a different standard when a transferee employer is trying to argue that a change is void for being in connection with the transfer, as opposed to when an employee runs that argument.


The case makes it clear that the principle that the UK courts have derived from Daddy's Dance Hall does not apply to transfer-related changes to terms and conditions of employment which are to the benefit of the employee. It is only changes which are to the employee's detriment which are void.


Although the case was decided under Tupe 1981, it remains relevant to Tupe 2006, which replaced and amended the old version of the regulations. There was much debate during the drawn-out process which led to Tupe 2006 as to what changes the government would make to clarify post-transfer variations.


Under the new regulations, a purported variation of an employment contract is void if the principal reason for it is either the transfer itself or a reason connected with the transfer that is not an economic, technical or organisational (ETO) reason entailing changes in the workforce.
This means that an employer may now lawfully effect a contract change connected with the transfer provided there is an ETO reason entailing changes in the workforce. However, case law has established that a "change in the workforce" entails a change in the numbers of employees or the functions that those employees carry out.

 

No new powers


The case does not give employers any new power to effect binding changes to terms and conditions in the absence of an ETO reason. What it means is that, if the parties do agree changes in connection with the transfer, the employees will be able to enforce any new terms that are to their benefit and it will not be possible for the employer to argue that the changes are void. The employees can effectively choose which contractual terms - old or new - are the more beneficial. The same analysis does not apply to the employer, who will be unable to enforce the new terms against the employees' will.

 

Tim Woodward is a partner at Bevan Brittan, Alec Bennett is an associate solicitor at the firm

 

The principle

 

In Foreningen af Arbejdsledere i Danmark v Daddy's Dance Hall A/S, the ECJ held that employees do not have the right to waive this protection and that it is not possible to diminish the rights conferred by the directive, even with the employees' consent (the "Daddy's Dance Hall principle"). Effectively, that has been interpreted in the UK as meaning that any changes made to terms and conditions as a result of the Tupe transfer will be void. The EAT has now clarified that principle.

 

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