Parkwood Leisure Ltd v Alemo-Herron and others

The Court of Appeal has held that, where employees have a contractual right to pay rises agreed as part of a collective bargaining process, the transferee in a TUPE transfer is not bound by collective agreements reached after the transfer date.

The Court of Appeal overturned the EAT’s decision and held that a clause in transferred employees’ contracts of employment linking pay rises to those agreed by a negotiating council were not binding on the transferee. The Court of Appeal relied upon the European Court of Justice’s decision in Werhof v Freeway Traffic Systems GmbH and Co KG which held that the Acquired Rights Directive from which the TUPE Regulations derive, requires a “static” approach to collective agreements, preserving only those terms agreed at the date of transfer.

Implications

The Court of Appeal considered both domestic and European case law when deciding upon the issues raised. It also considered and commented upon the interpretation, and implementation of, the Acquired Rights Directive and the TUPE Regulations and much of the decision does in fact focus on this issue.

It should be noted that this case was decided under the Transfer of Undertakings (Protection of Employment) Regulations 1981 which were repealed and replaced by the Transfer of Undertakings (Protection of Employment) Regulations 2006. Notwithstanding this however, the same principles would apply to cases under the new 2006 Regulations.

Background

The Claimants were originally employed by the London Borough of Lewisham. In May 2004, their employment, and their contracts of employment, transferred under TUPE to Parkwood Leisure Ltd. Their contracts of employment provided that “their 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 Claimants were paid, prior to the transfer of their employment to Parkwood, according to pay scales agreed by such collective agreements.

After the transfer, a new collective agreement relating to pay rates for the period 1 April 2004 to 31 March 2007 was negotiated. Parkwood was not a party to the negotiations. Parkwood increased the Claimants’ pay in 2005 in line with the newly negotiated collective agreement, but did so expressly without acknowledging any liability to do so.

The Claimants brought claims for unlawful deductions from wages arguing that Parkwood was legally obliged to award the increases in the newly negotiated collective agreement for the period 31 April 2006 to 31 March 2008.

The Employment Tribunal dismissed the claims. The Claimants appealed to the EAT and their appeal was successful. Parkwood appealed to the Court of Appeal which overturned the EAT’s decision and held that a clause in transferred employees’ contracts of employment linking pay rises to those agreed by a negotiating council were not binding on the transferee.