Can my New Employer Change My Contract After TUPE (Transfer of Undertakings Protection of Employment)?
If your employer has recently been acquired or is merging with another company, you may have been told that your employment will be transferred under TUPE. In today's modern commercial world, mergers and acquisitions are a regular occurrence as businesses seek to gain a larger market share or provide new products or services. Most recently, the news has been filled with the acquisition of UK-based chip maker, Arm, to US firm NVIDIA.
ARM has over 6,000 employees in the UK, some of which will undoubtedly be lost, and some of which will transfer to NVIDIA. According to Venturebeat.com, NVIDIA will continue to employ staff in the UK; "Nvidia said it will expand Arm's presence in the UK by establishing a world-class AI research and education centre there and will build an Arm/Nvidia-powered AI supercomputer for research". It is possible that Arm's UK staff being retained by NVIDIA in the UK will be transferred under TUPE. In this article, we will explain what is meant by TUPE and whether an employer can change an employment contract.
What Is TUPE?
TUPE refers to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) and provides employment protection for those whose employer is undergoing a change of ownership. For employees of a business which has been acquired or is merging with another UK business, under TUPE, their roles should be transferred to the new employer under the same employment terms and with continuity of employment.
Regulation 4 of TUPE states, "a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to the relevant transfer, which would otherwise be terminated by the transfer, but any such contract shall have effect after the transfer as if originally made between the person so employed and the transferee".
There are two main scenarios under which TUPE applies:
- Business transfers – where a whole business, or part of a business is being transferred to another business – this may in the form of a merger whereby two businesses merge to create one new business, or in the form of a purchase by an acquiring business.
- Change of service provider – where a service which is provided within a business is contracted to a third-party (or vice-versa), or if a contract is given to a new contractor.
TUPE protection is provided if:
- The businesses are in the UK, or;
- The business could have its head office in another country, but the part of the business that's transferring ownership must be in the UK.
- If for a business transfer, the identity of the employer must change in order for TUPE to apply
For TUPE to apply, the size of the business doesn't matter.
Can an Employment Contract Be Changed Following TUPE?
It is common for an employer taking on staff from a newly acquired business, or as a result of a merger to seek to standardise employment contracts, however, under the TUPE rules, this is not a valid reason for making such a change. The main principle of TUPE is that employees should enjoy the same terms of employment with their new employer. However, employers can make changes to an employment contract in limited circumstances. Under the TUPE regulations, changes to an employees' terms of employment cannot be made if the sole or principal reason for the change is the transfer itself. Changes can be made legally, however, if there is an economic, technical or organisational reason (ETO reason), or the terms of the contract expressly allow the new employer to make such a variation.
What Are ETO Reasons Under TUPE?
ETO (economic, technical or organisational) reasons are those that relate to staffing numbers and role functions required by the new employer. If an employer can make a strong case based on economic, technical, or organisation reasons to vary a contract, it may be legally able to do so. An economic reason for varying a contract may include making a large financial loss due to COVID-19. A technical reason may be valid if the new employer has been implementing new technology which has significantly reduced the number of staff in a particular type of role. And an organisational reason may relate to an ongoing process of restructuring within the organisation.
An ETO reason may also be acceptable where the employee is offered a different role type, or the new business is located in a different place. What matters is that for an ETO reason to be valid, it must have been happening anyway (i.e. not as a direct result of the merger or acquisition), and it must be conducted in a fair and balanced way across all staff members (i.e. not just those being taken on by the new employer).
If an employee is dismissed solely due to the transfer may be seen as unfair if this can be proven. In this case, it falls to the employee to prove this was the case. If the dismissal occurred on or around the time of the transfer, then this is relatively straightforward to prove to the employment tribunal.
If you have been informed that your role is at risk, or your contract will be varied as a result of a merger or acquisition involving your employer, it is recommended that you seek the advice of an employment Solicitor in the first instance. It is possible that your role is protected under TUPE even if your employer says this is not the case. What matters is determining whether they have the right to change your contract or dismiss you. If it is argued by your employer that the changes are being made for valid ETO reasons, but it can be shown demonstrably that it is more likely to be a direct result of the transfer, your rights may be protected.