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TUPE and Substantial Changes in Working Conditions

When a company is taken over by a new owner, or where work that has been outsourced is taken back in-house, or a service provider changes, the Transfer of Undertakings (Protection of Employment) Regulations 2006, more succinctly referred to as TUPE, protect the rights of the employees involved.

As this is likely to be a time of change, many companies take the opportunity to look again at working arrangements, terms and conditions and may alter these in line with the new direction they seek to take.

However, employers doing this should be careful that they do not go too far: under the TUPE regulations, if an employee considers that the change to their working conditions is substantially to their material detriment, they can resign and be treated as unfairly dismissed.

A recent Employment Appeal tribunal decision, Lewis v Dow Silicones Ltd, highlighted this feature of the regulations and it is one that employers need to be aware of.

What happened?

Mr Lewis worked at a power plant in South Wales as one of ten operations technicians. Initially he was employed by Npower but when Dow Silicones Ltd bought the plant, he and the other staff were outsourced to Engie Renewals Ltd, who became Mr Lewis’s employer. In 2017, Dow decided to “insource” the staff; this involved them transferring from Engie to Dow. This was counted as a transfer under TUPE.

Dow intended to make changes to the working arrangements at the plant. Mr Lewis was not happy with these changes and he resigned, claiming unfair dismissal.

His argument was that by bringing in the new arrangements, Dow had fundamentally breached his contract of employment and the arrangements were a substantial change in working conditions that was to his detriment. Under regulation 4(9) of TUPE:

“… where a relevant transfer involves or would involve a substantial change in working conditions to the material detriment of a person whose contract of employment is or would be transferred under paragraph (1), such an employee may treat the contract of employment as having been terminated, and the employee shall be treated for any purpose as having been dismissed by the employer.

The tribunal’s decision on the new standby/call-out arrangements was that they did not involve a substantial change to Lewis’ working conditions to his material detriment because

(a) under his existing contract the employer was entitled to introduce the changes and

(b) the changes were not “substantial change(s) in working conditions to [his] material detriment.

He appealed the tribunal’s decision.

The EAT looked at Regulation 4(9). Citing Tapere v South London and Maudsley NHS Trust [2009], they said that

(1) The Regulation can apply even where there is no breach of the employee’s contract of employment;

(2) Whether there is a change in working conditions and whether it is substantial are questions of fact;

(3) The nature as well as the degree of any change needs to be considered in deciding whether it is substantial; and the nature of the change is likely to be the most important aspect in determining this;

(4) The question of whether a change in working conditions is to the “material detriment” of an employee involves two questions:

(a) whether they subjectively regarded the change as detrimental and, if so,

(b) whether that was a reasonable position for the employee to adopt.

They said that the fact that an employer is contractually entitled to introduce a change in working conditions does not mean it is not a change. Lewis had provided many hours of cover by way of wholly voluntary overtime when asked under the previous arrangements but this didn’t mean that having to provide cover when rostered and called upon did not represent a substantial change.

Lewis considered the change detrimental to him and the EAT could not see anything unreasonable about that view. As he had pointed out to the Tribunal, the new compulsory standby arrangements clearly had the potential to affect his domestic plans and arrangements.

The EAT therefore substituted a decision that because of the changes in his working conditions in relation to his standby/call-out duties and safety, Lewis was entitled to treat his contract of employment as terminated and therefore had been dismissed by Dow.

His complaint of unfair dismissal based on regulation 4(9) was sent back to a fresh tribunal to look at again in the light of the EAT’s judgment.

rradar Employment solicitor Nkolika Oraka says:

Ultimately, what this case serves to highlight is that just because an employer may be entitled under the contract to make changes, it will not necessarily mean that such changes are deemed fair and reasonable. In addition, matters concerning contractual changes can be very subjective, so where it may seem reasonable to the workforce as a whole, it may significantly affect - in a negative way - just one individual, which should be considered with caution by an employer, especially where it can lead to a claim as was the case here.