Redundancy & TUPE transfer

The Pharmacists’ Defence Association (PDA) says it is considering a legal challenge against Lloyds Pharmacy over claims the pharmacy company had “removed enhanced redundancy benefits for all former Sainsbury’s staff” now working for Lloyds Pharmacy.

This is based on arrangements made when Sainsbury’s sold its pharmacies to Lloyds Pharmacy in 2015, and approximately 2,500 employees, including “hundreds of pharmacists”, were transferred under the TUPE legislation to become Lloyds Pharmacy employees.

The PDA claims that “all Sainsbury’s staff were entitled to an enhanced redundancy package, and this valuable benefit transferred to their new employment at Lloyds Pharmacy regardless of whether it was written in their employment contract”.

The PDA says the company has informed some members that “enhanced redundancy payment is not contractual unless written specifically into your contract of employment”, and only the statutory minimum redundancy payment will apply.

TUPE Transfer

As a reminder, TUPE stands for the Transfer of Undertakings (Protection of Employment) Regulations. Its purpose is to protect employees if the business in which they are employed changes hands. It has the effect of transferring the employment contract and related rights, liabilities and obligations of any employee who is employed immediately before the transfer to the new employer on their existing terms of employment. The new employer can only make changes to those terms in limited circumstances.

If an employee is made redundant after a TUPE transfer, the new employer is responsible for any redundancy pay.

A right to receive enhanced redundancy pay is contractual and depends on whether the employee has:

• An express right to enhanced redundancy pay; for example, if it is written in their contract of employment or incorporated in the employer’s policies (staff handbook, redundancy policy, etc); or
• An express right to enhanced redundancy pay; for example, if it is written in their contract of employment or incorporated in the employer’s policies (staff handbook, redundancy policy, etc); or
• An implied contractual right. This will generally apply if the employer has consistently followed an established practice of paying employees who are made redundant an enhanced rate of redundancy pay.
• An employee may also be entitled to enhanced redundancy where there is a non-contractual policy in place.

This suggests that any obligations that are not contractual (whether expressly or impliedly) will not transfer under TUPE. In Jefferies v Powerhouse Retail Ltd, the tribunal found that an employee was not entitled to receive an enhanced redundancy payment based on a non-contractual enhanced redundancy scheme that was found to be discretionary.

However, the wording of regulation 4(2)(a) also includes any rights and obligations “in connection with” the contract. This arguably could include non-contractual terms; for example, those arising under a non-contractual policy.

In Secretary of State for Employment v Spence and others, the Court of Appeal held that regulation 4(2)(a) would transfer non-contractual obligations such as those arising under statute. A similar decision was reached by the Court of Appeal in Bernadone v Pall Mall Services.

One thing to bear in mind is that TUPE preserves existing rights; it does not create them where none existed. Therefore, a purely non-contractual policy would not be enforceable against the new employer after the transfer if it was not legally enforceable against the old employer before the transfer.

Read more:

Redundancy and the 'pool of one'