Collective agreements and TUPE

28 May 2013

Parkwood Leisure Ltd v Alemo-Herron and Others asks the intriguing question, is the new employer bound by subsequent changes negotiated through a relevant collective agreement?

A group of Parkwood employees were originally employed by the London Borough of Lewisham.  Their pay was governed by a collective agreement covering Local Government employees.  After the Lewisham staff transferred to Parkwood, there was a new pay settlement for Local Government staff which increased their pay scales.  This was negotiated under the collective agreement.

Parkwood is not a member of the Local Government organisation so it could not take part in the negotiations.  Not surprisingly, it adopted a static approach to TUPE and the collective agreement, arguing that it was only bound by terms in place at the time of the transfer.  The transferred employees argued they were entitled to the benefit of the new pay scales because TUPE is dynamic in the way it operates; the collective agreement still applies, so the new pay scales must also apply.

The argument went to the Supreme Court, which referred the question to the Court of Justice of the European Union (CJEU).  A decision will be given later in the year (probably in July).  In the meantime, the Advocate General has given his opinion on the matter, namely that there is no bar to a dynamic approach to collective agreements in the context of TUPE.  The CJEU usually adopts the Advocate General's advice. 

The Advocate General also observed that the UK has not taken advantage of a proviso in the EU Acquired Rights Directive which permits member states to limit the application of collective agreements across a business transfer.

Our view

It is entirely reasonable for employees to expect a new employer to honour existing terms of employment for the duration of a relevant collective agreement.  However, it is madness to suggest that employers should be bound indefinitely by negotiations to which they are not a party and in which they cannot participate, even if they want to do so.  We therefore expect the CJEU to follow the line taken by its Advocate General. 

We also expect the UK government to hastily take advantage of the flexibility offered by the Acquired Rights Directive but whether it will do so effectively or in time to forestall the CJEU's judgement is an open question.