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TUPE and sector-level bargaining
[ch 12: pages 442-443]Changes to TUPE affecting all transfers on or after 31 January 2014 have altered the way the law treats contract terms that are agreed through sector- or industry-level collective bargaining after a transfer. These 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 these changes is to deny outsourced workers the benefit of improvements to contract terms (such as pay increases) that are negotiated at national, sector or industry level after the transfer date, 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 the collective agreement negotiated by the National Joint Council (NJC) for Local Government Services. The leisure service contract was outsourced to Parkwood, a private 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.
The case reached the European Court of Justice (ECJ) and the court unexpectedly ruled in favour of Parkwood. It ruled 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.
The ECJ went even further, suggesting that the Acquired Rights Directive 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, TUPE (regulation 7, 2014 Regulations) was enacted to give effect to the Alemo-Herron ruling. 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 employees’ 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 they are changed through negotiation with the new employer (see above: changes to terms incorporated from a collective agreement).