The Court of Appeal has ruled that employers are not bound by the terms of collective agreements of transferred employees which are negotiated after the date of the transfer. In doing so, the Court has overturned a number of UK cases on this issue decided by the Employment Appeal Tribunal (EAT).
This decision will affect any employer involved in a TUPE transfer, or who has been involved in a TUPE transfer, where the terms and conditions of the transferred employees are governed by the terms of a collective agreement. This typically affects private sector employers who have 'inherited' employees with collective agreements who have transferred over from the public sector.
Although those private sector employers will still be bound by the terms of any collective agreements existing at the date of the transfer, they will now not be bound by any new terms of the collective agreement which are negotiated and agreed after the transfer.
In the case of Parkwood Leisure Limited (Parkwood) v Alemo-Herron, Mr Alemo-Herron brought a claim that he had suffered an unlawful deduction from his wages. Mr Alemo-Herron, along with a number of other employees, were originally employed by the London Borough of Lewisham (the Council). In 2002 Mr Alemo-Herron and other employees in the Council's leisure services department transferred over to a private sector employer CCL Limited. In May 2004 Mr Alemo-Herron and other employees were then transferred again to another private sector employer, Parkwood.
The terms and conditions of employment for Mr Alemo-Herron and the other employees were governed by collective agreements negotiated "from time to time" by the National Joint Council for local government services (NJC) which comprised representatives of local authorities and trades unions. When Mr Alemo-Herron transferred over to CCL Limited a collective agreement already existed and CCL accordingly honoured the terms within that agreement. This collective agreement was still in force when Mr Alemo-Herron was subsequently transferred to Parkwood and again it initially honoured the terms of it.
However in 2004 after the transfer to Parkwood, new negotiations concerning rates of pay for the collective agreements were entered into by the NJC and the trade unions. Parkwood as a private sector employer, was not a party to those negotiations nor did it recognise the trade union involved (Unison). When Parkwood refused to pay Mr Alemo-Herron the new rates of pay that had been negotiated in the new collective agreement, Mr Alemo-Herron brought a claim on the basis that he was entitled to these pay increases because it was part of the terms and conditions of his employment.
Mr Alemo-Herron's claim was dismissed by the Employment Tribunal. However it was upheld by the EAT who followed other UK cases, most notably Whent and others v T. Cartledge Limited (1997), which held that employers are bound by new terms of collective agreements negotiated after the date of the transfer.
The Court of Appeal though decided that such UK cases were wrong and should not be followed. Instead it ruled that UK Courts should follow the European Court of Justice's (ECJ) decision of Werhof v Freeway Traffic Systems (2006). This decision held that the effect of TUPE is only to preserve the terms and conditions of employment (including any terms negotiated under a collective agreement) which were in force at the time of the transfer. This means that employers are only bound by the terms of a collective agreement in respect of employees who have transferred over to them, until such agreement is terminated, expired or replaced. The ECJ ruled that employers are not bound by contractual terms in collective agreements which have been negotiated after the transfer by bodies in whose collective bargaining negotiations it is not entitled (or nor wishes to) participate in.
The Court of Appeal therefore applied the ECJ's decision to the facts of Mr Alemo-Herron's claim and held that Parkwood were not bound by the new terms of the collective agreement negotiated after the transfer. Accordingly Mr Alemo-Herron was not entitled to benefit from the increases in pay negotiated under the new terms of the collective agreement.