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Eversheds comment: European court says collectively agreed pay rises should not survive TUPE

  • United Kingdom

    18-07-2013

    The decision of the European Court (CJEU) in the case of Parkwood Leisure v Alemo-Herron has been published today, nearly a year since hearing. Employers will be relieved by the Courts unexpected decision that, in principle, employees covered by industry or sector-wide bargaining which is incorporated into their contracts of employment are unlikely to remain entitled to increases in pay negotiated after transfer. Tom Bray, Principal Associate at Global Law Firm Eversheds comments:

    “Today’s decision of the European Court of Justice brings us pretty much to the end of the legal wrangling surrounding this case. What has proved an unexpected turn of events today, and contrary to the views expressed by the Advocate-General back in February, the Court has ruled in favour of the employers in rejecting the continued application of collectively negotiated terms after a business and instead applying a “static” interpretation.

    “Significantly, the Court confirmed that the TUPE Directive does not solely aim to safeguard the interests of employees in the event of a transfer of an undertaking, but also seeks to ensure a fair balance between the interests of those employees, on the one hand, and those of the transferee, on the other. The expression of such an interpretation of the Directive by CJEU is new. In the past, court emphasis in the context of business transfers has very much been upon protecting the interests of the employees. Whilst common sense suggests such protection would be finite, the Directive has not previously been referred to as involving a balancing exercise in the way described today.

    “The case will now return to the Supreme Court for final decision as to how the CJEU’s conclusions fit with the UK TUPE Regulations and the facts of the case. Even so, the case will almost certainly be decided in favour of the transferee employer, reinstating the decision of the Court of Appeal and reasserting a static interpretation of contract terms, such as those of the employees.

    “An important issue which may need clarification by the Supreme Court is whether it will interpret the case narrowly and applicable only to scenarios where public sector employees governed by collective bargaining have transferred to the private sector, as arose here. This seems unlikely, however, as collectively agreed pay is obviously not a uniquely public sector issue. Depending upon the approach now taken by the Supreme Court, it also seems unlikely that the Government will choose to amend the TUPE Regulations to reflect today’s decision as part of its current review. The question of the duration of collective agreements in this context is nonetheless still to be debated.”

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