The hidden dangers for employers making changes to staff contracts after a takeover or merger

When an employer acquires a business or takes on a new service, there is often a business need to review the terms and conditions of employees.

Recent amendments to the TUPE regulations diluted the protection for employees and gave employers more room to move, however, a decision of the Employment Appeal Tribunal (EAT) provides a timely reminder that when changing terms and conditions of employees, there is more for an employer to consider than TUPE.

Attempting to harmonise terms and conditions of employees can, in some circumstances, open to the door to discrimination complaints.

Employer objectives

Sometimes employers make changes immediately following a transfer. Other times, the changes can occur much later, even years after different businesses or services have blended together.

Typically an employer has to be comfortable that the procedure that they are going to follow is going to result in the changes being made, one way or another, and this may involve obtaining the employees’ agreement, or making changes by relying on an express variation clause, or by terminating one contract and offering to replace it with another. Very often the focus of the employer is on mapping out the steps to take and ensuring that an appropriate procedure is in place to secure the desired change.

Indirect discrimination

The recent decision of the EAT involved an attempt to harmonise the terms and conditions of employees after multiple business mergers left the workforce with widely varying employment conditions.

One group of employees argued that the decision to make changes placed them at a particular disadvantage in comparison to younger colleagues, because they argued that they benefited much more from the rights that were being removed than the younger employees.

The EAT concluded that the making of the change, which was to impose a choice between accepting new terms or being dismissed, was capable of being a ‘provision, criterion or practice’ (PCP) upon which a claim of indirect discrimination could proceed.

Although the employees’ claims failed because on the facts and circumstances of the case the operation of the PCP was justified, employers need to be very careful to assess whether or not making any changes to terms and conditions could amount to unlawful indirect age discrimination, and if so, whether the change can be justified in law.

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This case emphasises the inherent risk in making changes to terms and conditions of employment.

We can help by identifying risks, planning appropriate procedures and coordinating communications when contractual changes are necessary.