The recent case of Parkwood Leisure Ltd v Alemo-Herron & others [2011] UKSC 26 has cast doubt on the status of collective agreements following a TUPE transfer.

The employees in this case were employed by a London borough council and their contracts of employment stated that "terms and conditions of employment will be in accordance with collective agreements negotiated from time to time by the National Joint Council for Local Government". The employees were subject to a TUPE transfer in 2002, following which they continued to be paid in line with the relevant collective agreement.

A further TUPE transfer to Parkwood Leisure Limited occurred in 2004, following which the new employer did grant one pay rise in terms of an updated version of the same collective agreement but refused to follow the collective agreement thereafter. The employees claimed for unlawful deduction from wages on the basis that they should have received pay increases from 2004 in line with the updated collective agreement.

The Tribunal dismissed the claim but, on appeal, the EAT held that the employees were entitled to the benefits of the collective agreement from 2004. The employer appealed to the Court of Appeal which upheld the appeal on the basis that the Acquired Rights Directive (ARD), on which the TUPE regulations are based, does not require that transferees are bound by collective agreements made after the transfer.

The Supreme Court then considered matters and concluded that there should be a reference to the European Court of Justice to decide whether the Court of Appeal’s “static interpretation” of Regulation 5 is correct or whether the ARD allows Regulation 5 of the TUPE Regulations to be interpreted “dynamically” with the effect that transferees would be required to adhere to future collective agreements.

We will report further once the decision of the ECJ is published, although it could be some time until that judgment is available. In the meantime there will remain a degree of uncertainty in relation to whether transferees in a TUPE situation can disregard the provisions of any collective agreements made after the TUPE transfer.