TUPE the final word – it's static not dynamic
The European Court has delivered the definitive Judgment on a TUPE problem which has troubled employers and Courts for years.
The European Court has delivered the definitive Judgment on a TUPE problem which has troubled employers and Courts for years. It has decided that employers who gain staff by TUPE transfer will not be stuck with pay increases and terms collectively agreed after the transfer by bodies of which they are not part. The European Court’s decision, which adopts the so-called “static” interpretation of TUPE and collective agreements, is particularly important for private sector employers who have staff TUPE transferred to them from local government or the NHS.
Alemo-Herron v Parkwood Leisure is a claim brought by staff who had transferred from Lewisham Borough Council on an employment contract which said that their terms and conditions would be in accordance with collective agreements “negotiated from time to time” by the NJC for local government services (the local government collective bargaining body). When new pay arrangements and revised terms were collectively agreed by the NJC, the private-sector company to whom they had transferred refused to apply the revised terms. That employer was not part of the NJC and indeed was not able to be.
There have been conflicting decisions on this. Some previous Judgments had held that under TUPE the employer was obliged to comply with such changes even though they were agreed after the transfer and by a negotiating body to which they were not a party. That is the so-called “dynamic” approach to TUPE. This Judgment however has determined that the dynamic approach is wrong and cannot apply. An employer post-transfer in this situation cannot be obliged to abide by the decision of a body to which they are not a party (the “static” approach). The employees' transfer with the right to what has already been agreed at the time of the transfer, but not a right to what is agreed in the future (even if it is agreed to have retrospective effect).
What does this mean for me?
This is good news for those of you who have staff transferred to you whose pay and conditions are collectively agreed by bodies of which you are not a member. For example, if staff transfer to you from a local authority you do not need to pay future nationally agreed pay increases to those ex-council staff. The same will apply to staff who transfer with the right to terms/pay agreed by an employers’ federation of which you are not a part.
You will need to pay increases which were already agreed when the staff transferred, even if these are to be paid in the future (such as a three year pay deal which is already in place). Clearly you also may have industrial relations or staff retention issues if you do not mirror what the Unions agree with other employers (albeit this may be less of an issue with the current lack of/level of current public sector pay increases). If you are in doubt about what you must do and/or how you should approach these issues please do take advice from us on the particular challenges you face.
This decision of the European Court is very clear, unusually emphasises the rights of employers, and should be the end of the legal argument. The UK courts are bound to follow it. The Government has said that TUPE will be changing, probably this October. In response to the Government’s call for evidence some respondents had said that being bound without limitation by collective agreements which they had not negotiated was untenable. In consulting, the Government had said that if this Judgment had gone the other way it would have considered changing the UK TUPE regulations to limit the period post-transfer to which such agreements would apply (the suggestion was for a year). The outcome of this case means that it is unlikely that any change to TUPE in the UK will be required on this issue.
If this raises any issues for you or your organisation, please speak to your usual contact in the Weightmans' employment team. You can also contact Phil Allen – Partner at Weightmans on 0161 214 0504 or firstname.lastname@example.org.