The Employment Appeal Tribunal (EAT) has ruled that if the sole or principal reason for a change to an employment contract is a TUPE transfer then that change is void – even where it is beneficial to employees.

Before the transfer of an estate management contract from Lancer to Astrea (the new service provider), the claimants (directors of Lancer) varied their contracts to give themselves generous guaranteed bonuses and termination payments. Astrea discovered this shortly before the transfer and dismissed some of the them for gross misconduct and refused to allow the others to transfer. The claimants brought claims for unfair dismissal and contractual termination payments on the basis of their new contracts.

The EAT found that the effect of the changes was to significantly improve the claimants’ rights when the transfer took place, rather than to safeguard their rights as employees. It said that all contract variations agreed by reason of the TUPE transfer were void.

Practical point:

Changes that are made to employment terms by reason of a TUPE transfer are likely to be void, whether they are detrimental or beneficial to employees.

Transferee employers should consider including a provision in the agreement that makes it clear that the transferor is not permitted to make any changes to the transferring employees’ terms and conditions before the transfer.