Guidance given on changing terms after a TUPE transfer

The European Advocate-General (A-G) has given some important guidance on
when an employer can change terms and conditions after a TUPE transfer.

In Martin v South Bank University (Case C-4/01), the A-G confirmed that an
employer and employee may not agree new terms if the agreement is by reason of
the transfer. The A-G, whose opinion is generally followed by the European
Court of Justice, said whether the transfer was the reason for the changes was
a question of fact in each case, but stated that:

– The fact that the alterations are made at the same time as the transfer
may well be an indication that the transfer is a reason for the change

– If the reason for the change is to bring the conditions of transferring
employees into line with those of existing staff, that too is a sign that the
transfer is the reason for the change

– However, a change cannot be criticised if it is dictated by other reasons,
such as economic, technical or organisational ones and is linked merely
chronologically and not causally to the transfer of the undertaking.

The reason given in the Martin case was that the offer of enhanced
retirement terms resulted in a greater financial burden on the transferee
because of prospective changes in the law. It became impossible for him to
offer his employees the possibility of early retirement in the future given his
economic position. The A-G said this might point to the likelihood that the
transfer of the undertaking was not the reason for the variation – rather it
was the economic position of the new employer.

John McMullen, national head of employment law at Pinsents, said: "What
is clear from this decision is that if the change takes place at the time of
the transfer, the employer will be on the back foot in trying to assert that
the change is not transfer related. The Advocate-General seemed to consider
that a mere desire to harmonise terms and conditions would not be enough to disassociate
the change from the transfer.

"There is scope, however, for argument in future cases about economic
reasons the new employer might have for changing terms. The court’s decision
will be now eagerly awaited."

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