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TUPE and sector-level bargaining
[ch 12: pages 399-401]Changes to TUPE impacting all transfers on or after 31 January 2014 have changed the way the law treats terms that are agreed through sector- or industry-level collective bargaining. The changes codify the decision of the European Court of Justice in Alemo-Herron v Parkwood Leisure Limited [2013] EUECJ C-426/11.
The effect of the changes is to deny transferred workers the benefit of any improvements to their terms and conditions that are negotiated at sector or industry level after the transfer date, such as pay increases negotiated under a sector-wide collective agreement, unless their new employer agrees:
The Alemo-Herron case involved local government employees in Lewisham Council’s leisure department whose wages were fixed by sector-level collective bargaining under a collective agreement negotiated by the National Joint Council (NJC) for Local Government Services. The leisure service contract was outsourced to Parkwood, a private sector company, that refused to honour new NJC pay settlements. Parkwood argued that since it was not party to the collective agreement nor involved in the negotiations, it should not be bound by it.
The case reached the European Court of Justice (ECJ) and the ECJ unexpectedly ruled in favour of Parkwood. It said that employees whose contract terms are governed by industry or sector-level collective agreements should not benefit from pay increases and other changes to contract terms negotiated under the collective agreement after the transfer date, unless the new employer is also a party to the collective bargaining machinery.
In a potentially far-reaching judgment with implications beyond the scope of TUPE, the ECJ suggested that binding an employer to the outcome of negotiations to which it is not a party is a breach of Article 16 of the Charter of Fundamental Rights of the European Union — the freedom to conduct a business.
Other comments made in the judgment are equally troubling. The Acquired Rights Directive, said the ECJ, is not aimed only at safeguarding the interests of employees on a transfer. Instead those interests must be “balanced” against the needs of a new business to make changes “necessary to carry on its operations”, especially on a private sector outsourcing, “given the inevitable differences in working conditions that exist between the two sectors”.
Alemo-Herron v Parkwood Leisure Limited [2013] EUECJ C-426/11
A new regulation 4A of TUPE has been enacted to give effect to the Alemo-Herron ruling. The new regulation affects all transfers on or after 31 January 2014. In summary it states:
• where a contract term incorporates provisions of collective agreements “as may be agreed from time to time”, any provision that is agreed and comes into force after the date of transfer will not bind the transferee unless they are a party to the collective bargaining process for agreeing the term;
• instead, the contract of employment will take effect “as if it does not incorporate” the collectively agreed term.
The meaning of this new regulation on contract terms is not clear and will need to be clarified in future court rulings.