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New employers offered some protection from collective agreements in TUPE transfers under EU law

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) protect the rights of employees transferring from one employer (the transferor) to a new employer (the transferee).  The European Court of Justice (ECJ) gave judgment  on 18 July 2013 in the case of Alemo-Herron v Parkwood Leisure Ltd, clarifying the extent to which the new employer will be bound by changes to collective agreements made after they have taken on the new employees.  This would typically arise where the transfer is from a public sector employer to a private sector one.  This article looks at what this means in practice for employers.

Collective agreements: are they enforceable?

Collective agreements between employers and trade unions are not, as a matter of UK law, presumed to be legally binding unless expressly stated to be so.  However, terms of a collective agreement that affect the employee as an individual, for instance, relating to their pay, would generally be legally binding and form part of the individual’s contract of employment.

Effect of TUPE regulations

Where a “relevant transfer” occurs for the purposes of TUPE, all the old employer’s “rights, powers, duties and liabilities” in connection with the transferring employee’s contract will, in most circumstances, transfer to the new employer.  This means that the employee would, for instance, be entitled to the same pay and bonus with the new employer that they enjoyed before the transfer.

If those rights are set out in a collective agreement, the new employer will be bound by the collective agreement.

What happens if a new agreement is made after the transfer of employment?

In the UK, the Employment Appeal Tribunal has previously held that if a new collective agreement is reached after the transfer, the new employer will be bound by that agreement.  It meant that the new employer could be bound to pay higher pay to staff who had transferred, even if the new employer did not recognise the trade union that negotiated the new agreement and it hadn’t been given the chance to participate in those negotiations.  This is known as a “dynamic” clause or interpretation.

However, the European Court of Justice (ECJ) case of Hans Werhof v Freeway Traffic Systems GmbH & Co held that the new employer would not be bound by the agreement.  The exact position was therefore not clear.

The decision in Alemo-Herron

The ECJ held that “collective agreements negotiated and adopted after the date of the transfer […] where that transferee does not have the possibility of participating in the negotiation process,” will not bind the transferee.

Employers’ rights

The ECJ noted that the EU law from which TUPE arises “does not aim solely to safeguard the interests of employees in the event of [a transfer], but seeks to ensure a fair balance between the interests of those employees, on the one hand, and those of the transferee on the other.”  The ECJ commented that if a new employer were bound by new agreements reached without their input, that would be likely to “limit considerably the room for manoeuvre necessary” for the new employer to carry out its business and make appropriate changes to ensure that business could survive.  The judgment is interesting in the focus it gives to protecting new employers’ rights in TUPE transfers.

The ECJ decision means that new employers in a TUPE transfer will be bound by the collective agreement in place between old employer and the trade union at the date of the transfer but they will not have to, for instance, put up pay if a new agreement is reached after the transfer.

For more information about TUPE or to discuss how this may affect your business, please contact David Leslie on 0113 368 7804 or by emailing dleslie@lyonsdavidson.co.uk

Posted on Jul 25th, 2013 by Lyons Davidson

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