The TUPE Regulations protect employees’ existing contract terms and statutory rights when there is a change of employer on the transfer of an undertaking. However, TUPE should not put the transferring employees in a better position than they would have been had the transfer not taken place.

In Computershare Investor Services v Jackson the EAT had to consider the case of an employee who had been employed since 1999. A TUPE transfer of the undertaking in which she was employed happened in 2004. In 2005 she was dismissed as part of a redundancy exercise. For employees who had worked for the transferee pre-transfer there were different contractual severance terms depending on whether they had joined before or after 2002. The EAT held that the employee could not claim the pre-2002 severance package. She could not be better off because of the transfer. The employee in this case is appealing to the Court of Appeal, so this may not be the end of the story.

Points to note –

  • The severance package in this case was expressed to benefit employees who ‘joined’ before 2002. The case might have been decided differently if the wording had referred instead to those who had ‘continuity of employment’ going back to 2002. Statutory continuity of employment is a benefit that passes under a TUPE transfer. The wording of contractual benefits is always something that should be considered very carefully as it may, as in this case, have serious implications.

  • The EAT used the example of Christmas bonuses awarded in previous years to employees of the transferor as benefits which employees who joined the undertaking on a TUPE transfer could not claim retrospective entitlement to. However, the employee’s appeal to the Court of Appeal will clearly be based on the premise that benefits that only ‘kick in’ on termination of employment fall into a different category.

  • This is yet another example of a situation in which a TUPE transfer creates a ‘two-tier’ workforce, working on different contractual terms. This situation needs to be carefully managed and we can advise on the extent to which employers can, or should, seek to harmonise contract terms.