Beneficial contract changes made prior to TUPE transfer were void

It is well established that contract changes made solely (or principally) because of a TUPE transfer will be void. However, case law has, so far, focussed on changes that are detrimental to the employee.  In the recent case of Ferguson and ors v Astrea Asset Management Ltd the EAT had to consider beneficial changes.

The Claimants were four directors of a property management company.  Another company was due to take over management of the properties triggering a TUPE transfer.  Prior to the transfer the Claimants changed their contracts of employment to allow for generous guaranteed bonus and termination payments.  Astrea did not accept the transfer of two Claimants under TUPE and the other two, who they accepted transferred, were dismissed immediately after the transfer for gross misconduct as a result of the contract changes.

The Claimants brought various claims against Astrea including breach of contract for the termination payments and unfair dismissal. The EAT held that the contractual changes were void as they were made solely because of the transfer.  This was the case even though they were beneficial changes.   The two Claimants who had been dismissed were successful in their unfair dismissal claims but one of them had been instrumental in changing the contract terms and, as such, had his compensation reduced by 100% on account of his conduct.

This case demonstrates that void changes apply to beneficial changes as well as detrimental ones.  The Tribunal said that even if it was wrong about beneficial changes being void, it would have found the changes void on the basis of ‘abuse’ in any event.