Collective agreements – incorporation into employment contracts and effect after TUPE transfers

News

The Employment Appeal Tribunal (EAT) has ruled that a term of a collective agreement was not incorporated into the employee's contract of employment where it had not been brought to the employee's attention. The EAT also ruled that whilst collective agreements are 'frozen' in time at the date of a TUPE transfer they were still subject to any statutory changes which affected their terms.

Implications

This decision is relevant for employers involved in TUPE transfers where the terms and conditions of the transferred employees are governed by a collective agreement. This is most likely to be the case where employees have transferred in from the public sector.

This decision is also relevant for all employers who have employees with collective agreements as to how those terms can be incorporated into the employees contracts of employment. The EAT's view is that it is not enough for a term of the collective agreement to be simply 'available' to the employee in say, a staff handbook. Instead the employee must be given notice of its terms. This suggests that a copy of the document containing the terms needs to be sent to the employee and their attention drawn to the relevant terms.

Details

In the case of Worrall v Wilmott Dixon Partnerships Limited Mr Worrall brought a claim that his employers Wilmott Dixon Partnerships Limited (Wilmott) had breached his employment contract when they failed to give him credit for an additional 5 years service in calculating his pension, following his redundancy.

Mr Worrall began employment with Birmingham City Council (the Council) in 1973. In 1996 the Council and its recognised trade union entered into a collective agreement concerning redundancy. The Council staff handbook contained the collective agreement, but there was no evidence before the Employment Tribunal that Mr Worrall had ever been sent the handbook.

One of the terms (Clause 3.2) of that collective agreement provided that "3.2. In respect of employees who are made voluntarily redundant, the City Council will, in exercising its discretion in accordance with the Superannuation Regulations award at least 5 added years".

The term 'added years' essentially meant the same as the statutory concept of a 'credit period' referred to in the Local Government (Early Termination of Employment) (Discretionary Compensation) Regulations 2000. As these regulations were based on a worker's age they were seen to be potentially discriminatory and therefore in 2006 were abolished by the Local Government (Early Termination of Employment ) (Discretionary Compensation) Regulations 2006 (the 2006 Regulations) and replaced with the power to award a lump sum payment instead.

Following a series of transfers to and within the private sector, Mr Worrall was by April 2008 employed by Wilmott. He subsequently applied for voluntary redundancy and this was accepted by Wilmott. However they maintained that they could not award Mr Worrall 'added years' as the statutory discretion to do so had been removed by the 2006 Regulations.

An Employment Tribunal found that Clause 3.2 of the collective agreement had been incorporated into Mr Worrall's contract of employment, but as the ability to award 'added years' was abolished in 2006 Wilmott had no obligation or discretion to do so. Mr Worrall appealed.

The EAT dismissed the appeal.

It overturned the finding of the Employment Tribunal that clause 3.2 of the collective agreement had been incorporated into Mr Worrall's contract of employment as he had not been given notice of the collective agreements terms nor agreed to them. The fact that the collective agreement was in a staff handbook available to employees was not sufficient. In the EAT's view "it cannot be right that a party is bound by a contractual document which he has not received".

The EAT then reviewed the Court of Appeal's decision Parkwood v Alemo-Herron (See Howes Percival Newsflash 3rd February 2010). In its view that decision simply prevents parties from being bound by future changes to collective agreements made after a transfer. It does not mean that subsequent statutory changes which affect the terms of a collective agreement can be ignored. Therefore, whilst the EAT had already found that Willmott was not bound by the collective agreement, it went on to uphold the Employment Tribunal's finding that Mr Worrall's right under Clause 3.2 of the collective agreement would have been terminated by the 2006 Regulations in any event.