Moving Target or Standing Still?

Damian Brown QC16th January 2013

TUPE obligations: dynamic or static?

What will be covered

• TUPE history• Previous domestic cases• Werhof• The facts of Alemo-Herron• The EAT• The Court of Appeal• The Supreme Court • Implications

TUPE history

• Settled law that:

– On transfer TUPE protection is engaged– New employer is bound by pre-existing

contractual terms– Fine when individual under Reg 4, Art 3(1)– what about collective – can a pay

determination method established by coll ag transfer ?

TUPE history

– Art 3(2) of Directive provides for compliance with any collective agreement until expiry

– Can limit to one year but UK has not chosen to do so in Reg 6

Earlier cases

– Whent v T Cartledge Ltd [1997] IRLR 153 – once accepted that reg 5 of TUPE applied and that

there had been no relevant subsequent variation in the contract of employment, the issue simply one of the true meaning of the clause that provided that the employees' pay would be in accordance with the agreement made by the NJC as amended from time to time, and that there was no apparent reason why the transfer should cause any change in the meaning of these words

– Argument on freedom of association rejected

Earlier cases

• Glendale Grounds Management v Bradley (19 February 1998, unreported)

• Glendale Managed Services v Graham [2003] IRLR 465 – both raised issues whether a different result followed

because of particular words used in the employee's contract.

• Bradley's - the particular terms of the contract required the approval of the employer for the time being to any new negotiated terms

• Graham's clause provided that the rate of remuneration would 'normally' be in accordance with the NJC.

Werhof v Freeway Traffic Systems GmbH & Co KG Case [2006] IRLR 400, [2005] ECR I-2397

• W’s employment governed by coll ag negotiated by union (of which he was not a member) and employers association (of which employer was member)

• Undertaking transferred• New collective agreement would apply and new

employer not member of association• ECJ pointed to ARD protecting employees `at the

date’ of transfer: no mention of future• Whilst ARD protects employee cannot disregard

rights of transferee

Werhof v Freeway Traffic Systems GmbH & Co KG

• Conclusion was slightly guarded:

• '… Article 3(1) of the Directive must be interpreted as not precluding, in a situation where the contract of employment refers to a collective agreement binding the transferor, that the transferee, who is not a party to such an agreement, is not bound by collective agreements subsequent to the one which was in force at the time of the transfer of the business.‘ my emphasis

Alemo-Herron - the Facts

• Cs employed by Lewisham• T and cs to be determined by NJC• Transferred to CCL Ltd• Continued to receive NJC pay rises etc• Further transfer to Parkwood• ET held Parkwood not bound in future

The EAT

• HHJ McMullen QC • Dynamic approach following Whent• On all fours with Whent• Not persuaded by Werhof• Took comfort from Article 3(2) not transposed into

domestic legislation• Not impressed by employer’s freedom of association

arguments

Court of Appeal

• Arguments were

– Werhof binding– Domestic legislation should be interpreted in

accordance with ARD– Union argued that Werhof simply established

that ARD did not require states to establish a regime whereby transferees continued to be bound nor did it prohibit

– Nothing to prohibit more favourable rights than ARD

Court of Appeal

• Held:

– But for Werhof employees claim unanswerable

– Dynamic interpretation entirely in accordance with domestic legislation and common law

– However Werhof clearly rejects that and ECJ is binding

– Not deal with freedom of association argument but did regard being bound ad infinitum as `unsatisfactory

The Supreme Court

• Referred question to the ECJ• Lord Hope suggests `dynamic interpretation’.• If solely question of UK law outcome would be clear:

question of freedom of contract and consistency with Whent, Glendale

• Lord Hope noted that the preamble to the Directive did not talk about protecting employers

• Directive not about harmonisation and allows more favourable provisions domestically

• However domestic legislation simply gave effect to Directive and was not more generous

The Supreme Court

• Noted that German legal system very different for Werhof

• Noted that a different question asked in Werhof: question here is the converse

• Question to be referred:– whether art 3(1) of the Directive precludes

national courts from giving a dynamic interpretation to reg 5 of TUPE in the circumstances of this case

Implications

• Likely outcome?• How wide does it go? • Due diligence require by transferor and transferee

and union pressure for transparency required• May 2011 TUPE review to cover this?

Damian Brown QC