Court of Appeal clarifies law on collective agreements following TUPE transfers

The Court of Appeal has ruled that private sector companies that take on staff transferred from local authorities under TUPE are not bound to honour collective agreements negotiated after the transfer has taken place.

The decision follows a claim against Parkwood Leisure (Alemo-Herron v Parkwood Leisure Limited) by staff that had been transferred from a local authority as part of an outsourcing agreement.

According to their contract, salaries would be in accordance with collective agreements negotiated periodically by the National Joint Council for Local Government Services (NJC). The employees transferred to Parkwood in May 2004 and in July 2004, before fresh negotiations with the NJC set a new pay level.

Parkwood had be excluded from these negotiations and refused to pay the new rates. The employees brought a claim to the Employment Tribunal for unlawful deductions of wages – referring to the difference in pay between their previous and new pay rates negotiated by the NJC. The Employment Tribunal found for the employees, a decision that was reversed by the Employment Appeal Tribunal before being taken to the Court of Appeal.

Philip Pepper, an associate at law firm Weightmans, who represented Parkwood said:

“Although existing UK case law binds future employers to any new negotiated contractual amendments after a transfer, we were able to refer to a similar decision in the European Court of Justice which stated that the Acquired Rights Directive (which aims to safeguard the rights of workers by ensuring the same terms and conditions for workers undergoing a transfer) could not be interpreted to give effect to changes post-transfer. The UK law effectively fell foul of this ECJ decision because of its lower status.”

He added: “Organisations like facility services companies that transfer large numbers of employees from local authorities will feel the benefits since historically, UK law has bound them to collective agreements made without their consent. This decision gives a hitherto unseen level of protection for private businesses taking on transfers of employees from the public sector.”