Key TUPE case looks set to go way of employees at European court

An opinion from the Advocate General of the Court of Justice of the European Union (CJEU) has indicated that a ‘dynamic’ rather than ‘static’ interpretation should apply to collective agreements under TUPE.

The opinion in Parkwood Leisure Ltd v Alemo-Herron was hailed by the Unison union, which brought the case. However, lawyers described it as “potentially bad news for employers”.

The dispute involved the transfer of 24 employees from Lewisham Council’s leisure department to Parkwood Leisure in 2002.

The council subscribed to the National Joint Council for Local Government Services (NJC). The employees’ contracts said that their terms and conditions would be in accordance with the “collective agreements negotiated from time to time by the NJC…..supplemented by agreements reached locally through the council’s negotiating committees”.

At the time there were collectively agreed terms setting out pay rates from 1 April 2002 to 31 March 2004.

Subsequent NJC settlements provided for further pay increases, but Parkwood refused to increase the transferred employees’ pay in line with those deals.

At issue therefore was whether the employees should continue to benefit from increased pay and conditions negotiated at their previous workplace.

The claimants lost at an Employment Tribunal, won at the Employment Appeal Tribunal and lost again at the Court of Appeal. The latter court ruled that, as a result of the Werhof case, TUPE only applied to the first transfer – ie ‘statically’ – rather than ‘dynamically’ to later settlements.

The Supreme Court unanimously agreed in June 2011 to refer the case to the CJEU.

The CJEU will in due course issue its final decision. This will then be followed by a decision of the Supreme Court.

Bronwyn McKenna, Unison Assistant General Secretary, said: “This ruling will be a huge relief for the many thousands of people who have been transferred out from their original employer, including those who have been, or are now at risk of being privatised.

“We are now calling on Parkwood Leisure to pay our members what they are owed, and for other employers to honour any contractual pay increases owed to transferred staff, or run the risk of finding themselves in court."

McKenna added that the union would continue to campaign against the Government’s plans to limit TUPE.

Emma Burrows, head of the employment department at Trowers & Hamlins, warned that the AG’s opinion was “potentially bad news” for employers inheriting public sector staff under TUPE.  

She said: “It means that they may be bound by the terms of collective agreements incorporated into transferring employees' contracts, but will have no control over, or involvement in, the bargaining process.  

“Proper due diligence prior to a TUPE transfer will be essential so that employers are fully aware of any collective agreements in existence that might affect the terms and conditions of staff post-transfer.”

Burrows also warned that the opinion, if the CJEU agrees with it, would also affect second generation outsourcings where transferees inherited employees from another private sector business where the service being transferred was rooted in the public sector.

She added that the impact of a dynamic interpretation would depend on the wording in the employees' contracts of employment.

“The scope of the collective agreements applying to their contract might be limited, unlike the employees in Parkwood who had a contractual entitlement to benefit from terms agreed ‘from time to time’.”