Transferee May be Bound by Post-transfer Changes to Collective Agreements

The Advocate General considers that EU law does not prohibit UK courts from interpreting TUPE so as to allow transferred employees to benefit from post-transfer changes to collective agreements to which the transferee is not a party.

In Alemo-Herron v Parkwood, the employees were originally employed by Lewisham Borough Council.  Their contracts provided that their terms and conditions would be in accordance with collective agreements negotiated from time to time with the National Joint Council for Local Government (NJC).  Their employment subsequently transferred to Alemo-Herron under TUPE.  Alemo-Herron was not a party to the NJC collective agreement but the employees argued that they should still receive the benefit of pay increases negotiated by the NJC after the transfer and brought unlawful deductions from wages claims.

After conflicting decisions from the employment tribunal, Employment Appeal Tribunal and the Court of Appeal, the case came before the Supreme Court.  The Supreme Court asked the ECJ for clarification and the Advocate-General has now given his opinion.  In his view, the Acquired Rights Directive does not preclude Member States from providing in their laws that transferee employers will be bound by post-transfer changes to collective agreements to which they are not a party.  However, this approach would breach the transferee’s rights under Article 16 (freedom to conduct a business) of the Charter of Fundamental Rights if the obligation to accept future collectively agreed terms is “unconditional and irreversible”.  In his view, the obligation under UK law is not “unconditional and irreversible” as UK law does not appear to preclude transferred employees from agreeing with the transferor that such clauses can be dispensed with.

If the European Court of Justice comes to the same view, employers who inherit staff whose contracts incorporate the terms of an industry-wide collective agreement as negotiated from time to time will find themselves bound by future changes to that collective agreement, even though they are not a party to it. However, the Advocate-General’s view that transferors can agree with transferred employees that future changes should not apply is over-simplistic.  Under TUPE, any detrimental changes to contractual terms made for a reason connected with the transfer are void, unless for an economic, technical or organisation reason entailing changes in the workforce – a defence unlikely to be made out in cases such as this. Arguably therefore the obligation under UK law is “unconditional and irreversible” and the ECJ’s view on this issue is awaited with interest.