The Supreme Court has made a reference to the ECJ in the case of Parkwood Leisure v Alemo-Herron to ascertain whether the Acquired Rights Directive precludes national courts from applying a ‘dynamic’ interpretation to regulation 5 of TUPE (automatic transfer of employees and associated rights and liabilities), particularly in relation to the ongoing application of collective agreements.

UK case law had previously indicated that it was possible to adopt a ‘dynamic’ approach by which a transferee would be bound by terms and pay changes under collective agreements which were agreed some time after the transfer even though neither the employee nor the transferee were involved in the negotiations or parties to the collective agreement at the time changes were agreed. This approach was not followed by the ECJ in Werhof v Freeway Traffic Systems Gmbh & Co KG which indicated that the Acquired Rights Directive does not require a ‘dynamic’ approach and preferred a ‘static’ approach.

If the ECJ rules that the ‘dynamic’ approach is not precluded by the Directive, it is likely that the decision of the Court of Appeal which followed the reasoning in Werhof that the Directive did not bind transferees to any collective agreement made after the transfer, will be overturned and the ‘dynamic’ approach applied. This will have important ramifications for public sector outsourcings where currently, private sector transferees can ignore collective bargaining terms agreed after transfer.