The following case highlights the importance of proper investigation of contractual rights when participating in TUPE transfers.
In Whitney v. Monster Worldwide Ltd it was accepted that, under TUPE, there was no statutory transfer of rights under an occupational pension scheme. However, in these proceedings the court was asked to consider whether pension rights and liabilities had been transferred to the new employer by virtue of ordinary contract law. It was claimed that certain key employees had been given a "no detriment guarantee" in relation to changes that had been made to their pension provision. The court agreed that the guarantee was a legally enforceable obligation and thus the employer found itself liable to pay over £900,000 in respect of the claim.
Mr Whitney was a long-standing employee of MSL Group Ltd ("MSL"). MSL's holding company was acquired in February 1997. Shortly after, in July 1997, the new owner transferred the trading activities of MSL to another subsidiary, and this subsidiary subsequently changed its name to Monster Worldwide Ltd ("Monster"). Mr Whitney's employment transferred to Monster under TUPE and he was employed by Monster from July 1997 until December 1997.
In January 1979, whilst employed by MSL, Mr Whitney had joined the company's final salary pension scheme: he was then aged 33. This scheme paid two thirds of final salary to members after 30 years' membership. In 1989, the final salary scheme was wound up and replaced by a money purchase scheme. The money purchase scheme was likely to pay much less than the final salary pension scheme would have done.
Mr Whitney claimed that MSL had entered into a legally enforceable contract with him and 29 other key employees in the form of a "no detriment guarantee" that they would be no worse off under the money purchase scheme than if they had remained under the final salary pension scheme. He argued that this obligation had transferred to Monster as a matter of contract law (both sides having accepted that it could not have transferred under TUPE).
In defence of the action Monster, firstly, disputed the fact that MSL and these key employees had entered into such a contract. Secondly, Monster argued that even if such a contract existed, it had not transferred and that its terms were not enforceable against Monster.
The Court upheld the claim stating that the no detriment guarantee had evolved from a statement of intention into a legally enforceable obligation. Although the guarantee was "not comprehensively spelt out in a written document", Mr Whitney was able to satisfy the court of its existence, including that it was referred to and disclosed in the acquisition documentation from February 1997. The court concluded that there had been a novation of all of Mr Whitley's pension rights in July 1997 when Monster took over the money purchase scheme. As a result of this decision Mr Whitney became entitled to the sum of £908,303.78, being the cost of supplementing the benefits from the money purchase scheme so that it would provide benefits at the same level as would have been provided under the final salary scheme.
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