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Collective agreements and TUPE

The Advocate General has issued his Opinion ahead of the ECJ judgment in the case of Parkwood Leisure which had been referred to the ECJ last year by…

Advocate General’s opinion - Parkwood Leisure Ltd v Alemo Herron and ors

Executive summary

The Advocate General has issued his Opinion ahead of the ECJ judgment in the case of Parkwood Leisure which had been referred to the ECJ last year by the Supreme Court.

The issue for determination by the ECJ is whether the Acquired Rights Directive (which is implemented in the UK as TUPE) “prohibits, permits or requires” the acceptance by Member States of the transfer of ‘dynamic clauses’ which are linked to collective agreements.

Unsurprisingly the Advocate General’s Opinion is that the Acquired Rights Directive does not prohibit Member States from allowing ‘dynamic clauses’ which are freely agreed between the parties to a contract of employment and which refer to existing and future collective agreements, to be transferred as a result of a TUPE transfer.

Facts

As you will recall from earlier updates, a ‘dynamic clause’ is one which has been agreed between the employees and the transferor employer prior to a TUPE transfer and which has the effect of requiring the transferee employer to abide by conditions agreed in future collective agreements, even though the transferee employer is not, and cannot be, a party to the negotiations leading to that collective agreement.

The issue for Parkwood Leisure was they were not prepared to honour NJC agreed pay rises in respect of former council employees which had transferred into its employment under TUPE on the basis that it was not, and could not be, a party to the NJC negotiations which had resulted in the pay award.

The employees on the other hand argued that their terms and conditions of employment contained a clause which incorporated NJC collectively negotiated terms, including NJC pay awards, and that the clause continued to operate post transfer on the basis that it was ‘dynamic clause’.

As noted above, the Advocate General’s Opinion has found that ‘dynamic clauses’ are not prohibited by the Acquired Rights Directive and, providing that the Opinion is followed by the ECJ, once the matter is referred back to the Supreme Court it will rule in favour of the Parkwood employees.

Comment

Whilst the Advocate General’s Opinion is not binding on the ECJ it is as matter of practice usually followed.

The Opinion is therefore an extremely important one for UK employers, particularly for employers in the public sector or those private sector employers who regularly do business with the public sector, because if the Advocate General’s Opinion is followed by the ECJ, transferee employers will continue to be bound by collectively negotiated terms post transfer, even though the transferee employer is not a party to those negotiations.

However, the Government is currently in a period of consultation regarding proposed changes to the existing TUPE regulations and, if as expected, the ECJ adopts the Advocate General’s Opinion it is likely that the Government will seek to amend TUPE and limit the period that transferee employers have to observe collectively negotiated terms and conditions. The Acquired Rights Directive currently allows Members States to limit the period of time in which a transferee employer has to honour collectively negotiated terms to one year post transfer.

Weightmans will provide a further update once the judgment of the ECJ in Parkwood has been issued.

For further information about Weightmans or to discuss any of the issues in this update, please contact Lee Rogers, Associate on 0151 242 6830 or lee.rogers@weightmans.com