TUPE contract variations – EAT brings clarity or uncertainty?

In Power v Regent Security Services, the EAT (January 2007) decided that contractual variations made by reason of a TUPE transfer are legally enforceable where they benefit the employee, rather than void. This creates the risk for transferees that employees could cherry pick individual improved terms, from a packaged offer, rather than accept the package.

This was hardly an issue in the case, which was about whether the employee’s retirement age was 60 or, post-transfer, 65. When the transferee went back on its word, it argued the change was void because it was transfer connected, but lost.

Mr Justice Elias, President of the EAT, held that there was no reason why an employee should not be permitted to hold the transferee to a new term if the employee considers it to be more favourable than an original term. Elias stated that it was immaterial whether, objectively viewed, the term was more favourable; it was enough that the particular employee considers that it is more favourable. However if the employee perceives it to be beneficial to seek to rely on an original term instead, he can seek to do so in preference to the later term.

This decision is a difficult one for employers as it introduces uncertainty over the terms of post transfer employment. According to this decision employees can choose to rely on original terms or on varied terms, whichever they prefer. The decision does not address how pecuniary benefits derived under the new contract should be treated when an employee chooses to retain original terms. However, Elias does concede “that there is a powerful argument why it should sometimes be a condition of so doing that he (the employee) gives credit for benefits derived under the new contract”.

It should be noted that although this case considered 1981 TUPE this particular issue remains under TUPE 2006.