This case is a rare example of changes to terms and conditions which were made after a transfer not being held to be void under Reg 4(4).
The claimants were electricians who were paid a travel allowance (‘ETTA’). This had been paid by the local authority employer since 1958 and had continued through various transfers until the claimants transferred to M on 1 April 2008. ETTA was an obsolete allowance which bore no relation to the way in which the claimants currently worked. After M ceased to pay the allowance a group of electricians challenged this in a case brought in 2010. M defended the case on the basis there was no contractual entitlement to ETTA and lost. The case was appealed to the EAT (see Salt & Others v Mears) and M lost again.
After the Salt decision, in July 2012, M wrote to each of the electricians and unilaterally decided to vary their contracts to cease the entitlement to payment of ETTA. The rationale was that it was generally recognised that the entitlement (albeit held to be contractual) was outdated and obsolete and it made no business sense to continue it. The claimants challenged the variation on the basis that reason or principal reason for it was the transfer and was void. They pointed out that the payment ceased from the date of the transfer.
The ET judgment
The ET dismissed the claims and held that M’s reason for varying the contract was both the adverse ET/EAT decisions in Salt and that it genuinely believed that the entitlement was outdated. It further held that the submission of a claim form was perquisite for payment of ETTA which some claimants had not done.
The EAT judgment
The claimants raised the following issues on the appeal relevant to TUPE:
(1) That the decision of the ET ignored the fact that the subject matter of the Salt decision was the transfer and there was a clear and continuing link to the transfer.
(2) The interpretation of the ET rendered Reg 4(4) wholly ineffective and open to easy avoidance.
(3) The ET failed to recognise the harmonisation intent behind the decision.
(4) The decision failed to take account of the non payment of the ETTA from the date of transfer.
The EAT (HHJ Eady) restated that the question to be asked is: what is the reason? – What caused the employer to do what it did? (see Smith v Trustees of Brooklands College.) In applying this approach she went on to reject the claimants’ appeals for the following reasons:
(1) The decision in Salt provided the context for M’s decision not the reason for it.
(2) The decision was question of fact for the Tribunal.
(3) The concern about the outdate nature of the ETTA and that it made no sense predated the transfer and had been expressed by previous employers.
(4) There was not an attempt to harmonise, simply a recognition of the unfairness that one group of employees received an outmoded allowance to which others were not entitled.