The EAT has held that where a collective agreement is incorporated into an employee's contract of employment, the new employer (after a TUPE transfer) was not only bound by rights fixed under a collective agreement in effect at the date of the transfer but also by the terms negotiated under the collective agreement in future e.g. future pay increases negotiated by the old employer.
As you know, the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE") protect an employee's rights on a change of employer. Where a collective agreement has been incorporated into the employee's contract of employment those rights which are fixed at the date of the transfer will be protected under TUPE. The question arose as to whether an employee could benefit from rights, for example pay increases, under a future collective agreement. Until 2006, case law said yes, an employee could benefit from this notwithstanding that pay increases were negotiated by the old employer rather than the current employer (assuming that the wording of the contract was wide enough). However, a German case heard in the ECJ in 2006 appeared to change the position such that a new employer would not be bound by pay increases negotiated after the transfer.
The Claimants were employed by the London Borough of Lewisham until their employment was transferred under TUPE to CCL Limited ("CCL") in 2002. The Claimants' contracts stated that they would be paid on a particular salary scale of the National Joint Council for Local Government Services ("NJC") which was in turn collectively negotiated with trade unions. After the transfer CCL awarded the Claimants pay increases in line with the NJC collective agreement.
In May 2004, the Claimants were the subject of a second TUPE transfer to Parkwood Leisure Limited ("Parkwood"). Shortly after the transfer, the NJC negotiated a new collective agreement with the trade unions which set out pay increases for the period April 2004 until March 2007. As a private sector employer, Parkwood was excluded from the collective bargaining structure. Parkwood gave pay increases in accordance with the NJC rates in 2005 (without acknowledging that it was obliged to do so) but declined to do so thereafter. The Claimants issued unlawful deductions from wages proceedings.
The EAT held that Parkwood was bound by the pay increases negotiated by the NJC after the transfer. All member states are entitled to offer more favourable rights than the European directive and the ECJ judgment could not operate to reduce the protection afforded to employees in England. The EAT acknowledged that as a private sector employer Parkwood did not have the opportunity to participate in the collective negotiations, but noted that it was open to Parkwood to seek to change the Claimants’ contracts.
This is a particularly complex issue and Parkwood Leisure have now appealed to the Court of Appeal.
Alemo-Herron & Others v Parkwood Leisure Limited (EAT) (http://www.employmentappeals.gov.uk/Public/Upload/08_0456fhwwZTcorrectedMCM.doc)
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