The directors of a property management company ran into a brick wall when they tried to boost their benefits package before transferring to a new employer, under the TUPE regulations.
TUPE stands for the Transfer of Undertakings (Protection of Employment) Regulations. These rules are designed to protect jobs, and safeguard contractual terms of employment, when a business transfers to new ownership, or a contract is placed with a new service provider.
It has been clear that the new employer must not change terms to disadvantage an employee. Now the Employment Tribunal has ruled that changes made solely for the transfer should not advantage an employee either.
The case involved Lancer Property Asset Management. This company provided estate management services to one large client, Berkeley Square Estate, who decided to move to a new service provider. As a result, the directors of Lancer were to become employees of the new provider, Astrea Asset Management Ltd, under the TUPE regulations.
In preparing for the transfer, the directors decided to award themselves a salary increase, generous new terms for bonus and termination payments, together with a 24-month notice period.
The new employer disputed the terms. It dismissed two of the directors for gross misconduct, and refused to pay the enhanced benefits to the other directors. The dispute ended up at the Employment Appeal Tribunal. The directors argued that the TUPE regulation regarding pre-transfer variations was for situations where the change was detrimental to the employee.
TUPE is about ensuring fairness and continuity. It’s no surprise that anything that makes an employee worse off would be prohibited, but being better off hasn’t been tested in this way before.
The Employment Appeal Tribunal said that all contract variations which are connected to a transfer are void, whatever the outcome. The objective of TUPE is to protect, not enhance. The Tribunal also highlighted that no legitimate commercial purpose could be demonstrated for the changes, meaning they infringed the general abuse principle of EU law, and were unenforceable.