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TUPE and sector-level bargaining
[ch 12: pages 459-460]The Collective Redundancies and Transfer of Undertaking Protection of Employment Amendment Regulations 2014 (CRTUPEAR) have changed the way the law treats contract terms that are agreed through sector- or industry-level collective bargaining after a TUPE transfer. This change codifies a decision of the European Court of Justice in Alemo-Herron v Parkwood Leisure Limited [2013] EUECJ C-426/11.
In summary, these changes deny transferred workers the benefit of any improved contract terms (such as pay increases) that are negotiated through national, sector or industry-level collective bargaining after the transfer date unless the new employer agrees to the improved terms. Here is a summary of the key ruling:
Local government employees in the council’s leisure services division had their wages determined by sector-level collective bargaining under the national collective agreement negotiated by the National Joint Council (NJC) for Local Government Services (the Green Book). The leisure services contract was outsourced to Parkwood, a private company. After the transfer date, Parkwood refused to honour new NJC pay settlements, arguing that since it was not party to the collective agreement, nor involved in the negotiations, it should not be bound by its terms.
The case reached the European Court of Justice (ECJ) which unexpectedly agreed with Parkwood. It ruled that employees whose contract terms are governed by industry or sector-level collective agreements cannot 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 or agrees to be bound by its terms. In a potentially far-reaching judgment, the ECJ suggested that binding an employer to the outcome of negotiations to which it is not a party was a breach of Article 16 of the Charter of Fundamental Rights of the European Union — the freedom to conduct a business.
The ECJ also suggested that the Acquired Rights Directive was not aimed only at safeguarding the interests of employees on a transfer. Instead those interests must be “balanced”, said the ECJ, 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, TUPE was enacted to codify the Alemo-Herron ruling into UK law (for England, Wales and Scotland but not Northern Ireland). It says:
• 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 transfer date will not bind the transferee unless they are one of the parties 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.
In other words, the new employer is no longer obliged to honour an employee’s contractual right to have their pay determined by national or sector level collective bargaining. After the transfer date, their pay and conditions will remain fixed until changed through negotiation with the new employer.
Under the common law, a term that has already been incorporated into a contract of employment continues to exist independently of the collective agreement even after that agreement has fallen away, until it is changed by agreement with the employee concerned (Gibbons v Associated British Ports [1985] IRLR 376).