You will remember that we gave you an introduction into TUPE, which has hopefully given you a pretty good grasp of when TUPE does and does not apply.
This insight explores in more detail at under what circumstances you can:
1) Make changes to employees’ terms and conditions; and
2) Dismiss staff where there has been, or will, be a TUPE Transfer.
Why would an employer want to change terms and conditions and/or dismiss staff?
Imagine that your organisation (Organisation A) has just taken over another (Organisation B). All of Organisation B’s employees have automatically transferred to you under TUPE.
The employees that have transferred under TUPE may have different terms and conditions to the staff you already have. Also, you may be worried that your organisation now may have too many employees for the amount of work that needs to be done. You may then want to think about doing the following:
- Changing the terms and conditions of the employees that have come over to you to make them consistent with your staff; and
- Look to dismiss some of the people that have transferred as you think you may have too many staff.
What can I do in this situation?
The basic position under TUPE is:
- Any changes made to transferring employees’ terms and conditions will be void; and
- Any employees who are dismissed because of the transfer will be automatically classed as being unfairly dismissed (as long as they have 2 years’ service).
There are certain circumstances where an employer can make changes to the employees terms and conditions and/or dismiss.
- Changes to contracts of employment are permitted under TUPE where;
- the reason for the variation is unconnected to the transfer;
- when the sole or principal reason for the variation is an economic, technical or organisational, entailing changes in the workforce (ETO reason) and the employer and employee agree that variation; or
- the change varies a term or condition incorporated from a collective agreement provided that;
- the variation takes effect more than one year after the date of the transfer; and
- following the variation, the rights and obligations in the employee’s contract, when considered together, are no less favourable to the employee than those which applied immediately before the variation.
- It is possible to dismiss employees where the sole or principle reason for the dismissal is an economic, technical or organisational reason entailing changes in the workforce”.
What is an economic, technical or organisational (ETO) reason?
So, let’s break that down. In order to change someone’s terms and conditions and/or dismiss someone the sole or principle reason for the variation or dismissal must be an:
- Technical, or
- Organisational reason
- this reason entails changes in the workforce.
There is no definition of ETO that is set in stone. However, the courts have decided that it must be concerned with the day-to-day running of the business. An ETO reason could be:
- A reason relating to profitability or market performance (Economic);
- A reason relating to a change of equipment or production processes (Technical); and
- A reason relating to the management or organisational structure (Organisational).
The best way to get this into context is to look at some examples:
Example 1 (economic)
School A transfers to the MAT and the MAT inherits the staff. After the transfer, the MAT discovers that there is a budget deficit, and without making staff reductions, the School would not be able to run profitably. The MAT decides to dismiss some of the staff. In this situation, the reason relied upon in making the changes would fall into the economic category.
Example 2 (technical)
School A has 20 catering staff, 10 staff who prepare the food and 10 staff who serve the food. However, the MAT decides that going forward whilst the food will still be prepared by the existing staff, it will be self-served from vending machines. It, therefore, dismisses the 10 staff who serve the food. This may be seen as a technical reason.
Example 3 (organisational)
School A joins the MAT and School A has a different staffing structure to the MAT. Therefore, the MAT decides to change the terms and conditions of the staff that transferred to reflect the new structure (i.e. it goes through a restructure). For instance, they change their roles and responsibilities to fit with the MAT’s staffing structure. This may be seen as an organisational reason.
But, this isn’t enough on its own to justify a change or dismissal. In addition to an ETO reason, this reason must also entail changes in the workforce.
What does ‘entailing changes in the workforce’ mean?
The courts take a narrow approach when looking at what amounts to an ETO reason entailing changes in the workforce. They have restricted this to mean:
- Changes in the numbers employed; or
- Changes in the functions performed by the employees.
However, the TUPE regulations now expressly provide that a change to the place where an individual is employed to work amounts to a change in the workforce.
Examples of changes in the workforce could include:
- Genuine redundancy (changes in numbers);
- Re-organisation (where job function changes for instance from a managerial to a non-managerial role);
- A change in employees’ roles because of differences in operational structures (function).
An ETO reason does not necessarily need to entail changes to the entirety of the workforce; it may be enough that change affects a body of the employees who have transferred.
As a result of the narrow approach taken, it is unlikely that changes of financial aspects of an employee’s contract of employment (for instance, their salary or benefits) would be covered by the ETO reason entailing changes in the workforce. This is because these kinds of changes do not involve changes in the numbers employed or the functions performed. Therefore, you would find it difficult to reduce an employee’s salary or benefits following a TUPE transfer.
Also, you will not be able to able to change the new employees’ terms and conditions just because you want them to be the same as the employees you already have (sometimes referred to as harmonisation). This is specifically excluded from falling within the ETO exception. Therefore such changes will be void.
To summarise, in order to either change someone’s terms and conditions that have been transferred under TUPE or to dismiss an employee who was affected by the TUPE transfer you will need to go through 2 stage process:
1) Is the sole or principle reason an economic, technical or organisational reason?
2) If so, does it entail changes to the workforce?
If so, then those changes or dismissals may be fair and valid. Do remember it is still important for you to follow a fair process, in all cases of potential dismissal.
Read the final instalment on TUPE: A guide on informing and consulting
If you need any further advice or guidance on any area of employment law, TUPE in particular, please contact a member of our Employment & HR team on 01332 226 149 for a confidential chat.