28-10-2011

Employers may be able to vary new employees’ pay following TUPE transfer

An employer may be able to vary the pay of TUPE-protected employees following transfer to it of a new business, to get rid of a disparity between their pay and that of comparable employees in the sector.

Part-time employees were paid as if they were full-time under a special deal. They were transferred to a new employer. They were protected by the TUPE rules, which are designed to protect the rights of employees on a transfer.

Reluctantly, they agreed a variation in their pay with their new employer, to bring it into line with that of other comparable employees in the sector. Subsequently, they claimed the variation was ineffective on grounds that the ‘sole or principal reason’ for it was the transfer, so it was void under TUPE rules.

The Employment Tribunal (ET) said that the transfer was not the sole or principal reason for the variation – the reason was that the employees’ pay was out of line with that of comparable employees. The employees appealed, on grounds that ‘but for’ the transfer, their pay would not have been varied.

The Employment Appeal Tribunal (EAT) said that the question to ask was ‘what was the reason for the variation?’ This was a question of fact, not law. The EAT could not therefore overturn what the ET had decided. The ET had applied the correct test – what was in the employer’s mind – and decided it was to correct a disparity in pay. There had also been a sufficient period of time between the transfer and the variation to support this.

Recommendation

Employers with a pay disparity between comparable employees following a TUPE-protected transfer should take specialist legal advice, as they may be able to vary employees’ pay to get rid of it.