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CJEU Favours Static Approach to TUPE Collective Agreements

The Court of Justice of the European Union (CJEU) has ruled that Article 3 of the Acquired Rights Directive, which is transposed into UK law by the Transfer of Undertakings (Protection of Employment) Regulations (TUPE), must be interpreted as meaning that a ‘static’ rather than a ‘dynamic’ approach should be taken to collective agreements when there is a transfer to which TUPE applies (Alemo-Herron and Others v Parkwood Leisure Limited).

Prior to a TUPE transfer, the 24 claimants had worked for the London Borough of Lewisham in its leisure department. Their employment contracts stated that their terms and conditions of employment would be in accordance with collective agreements negotiated from time to time by the National Joint Council for Local Government Services, supplemented by agreements reached locally through the council’s negotiating committees. They claimed that their new employer, Parkwood Leisure Limited, was bound to honour pay increases under a collective agreement reached after the transfer had taken place – the ‘dynamic’ approach.

Parkwood Leisure favoured a ‘static’ interpretation of the burden on the new employer following a TUPE transfer, arguing that it should not be bound by changes to employees’ terms and conditions that were negotiated after the transfer had taken place and in which it could play no part.

The Supreme Court referred the matter to the CJEU, which, rejecting the Advocate General’s earlier opinion, supported the ‘static’ approach. In its view, Article 3 must be interpreted as precluding a member state from providing, in the event of a transfer of an undertaking, that ‘dynamic’ clauses referring to collective agreements negotiated and adopted after the date of transfer are enforceable against the new employer where the latter does not have the possibility of participating in the negotiation process of collective agreements that are concluded after the date of the transfer.

This decision will be welcomed by employers considering acquiring undertakings that were previously part of the public sector.

When businesses change hands, employment issues can become complex and it is important to take advice early on to avoid the pitfalls. We can guide you through the process in order to ensure compliance with the applicable employment law.