Court of Appeal clarifies law on collective agreements following TUPE transfers

A leading employment lawyer has ensured a common sense court victory – giving a hitherto unseen level of protection for private businesses taking on transfers of employees from the public sector.

Philip Pepper, an associate at law firm Weightmans has labelled the Court of Appeal’s decision in Alemo-Herron v Parkwood Leisure Limited as a ‘common sense victory’ for businesses. Organisations like facility services companies that often transfer large numbers of employees from local authorities will feel the benefits since historically, UK law has bound them to collective agreements made without their consent.

Parkwood Leisure, a leisure management company, had taken on a number of staff through a transfer from a local council as part of an outsourcing drive. According to their contract, salaries would be in accordance with collective agreements negotiated periodically by the National Joint Council for Local Government Services (NJC). The employees transferred to Parkwood in May 2004 and in July 2004, fresh negotiations with the NJC set a new pay level.

Parkwood had be excluded from the negotiations and therefore refused to pay the new rates. The employees brought a claim to the Employment Tribunal for unlawful deductions of wages – referring to the difference in pay between their previous and new pay rates negotiated by the NJC.

Mr Pepper who acted for Parkwood explains: “When the Employment Tribunal ruled in favour of Parkwood, the claimants appealed to the EAT which took their side. However, we were confident in our arguments and finally, the Court of Appeal agreed.

“Although existing UK case law binds future employers to any new negotiated contractual amendments after a transfer, we were able to refer to a similar decision in the European Court of Justice which stated that the Acquired Rights Directive (which aims to safeguard the rights of workers by ensuring the same terms and conditions for workers undergoing a transfer) could not be interpreted to give effect to changes post-transfer. The UK law effectively fell foul of this ECJ decision because of its lower status.”

This case will now stand as a benchmark for similar conflict; a great result for private sector employers according to Philip: “The position on collective agreements has now finally been clarified. Previously, businesses were powerless against newly negotiated pay increases decided by public sector trade unions and other such bodies.

“This decision will now offer some level of protection for businesses that refuse to bow to newly negotiated collective agreements after a transfer has taken place.”