Freedom of Contract as a General Principle of EU Law?
Transfers of Undertakings and the Protection of Employer
Rights in EU Labour Law
CASE C-426/11 ALEMO-HERRON AND OTHERS V PARKWOOD LEISURE LTD,
JUDGMENT OF 18 JULY 2013
Since its inception in 1977, the Acquired Rights Directive (Council Directive (EC)
23/2001 on the approximation of the laws of the Member States relating to the
safeguarding of employees’ rights in the event of transfers of undertakings, businesses
or parts of undertakings or businesses [2001] OJ L82/16, ‘ARD’, ) and its domestic
implementation measures, the Transfer of Undertaking (Protection of Employment)
Regulations 2006 (SI 2006/246, ‘TUPE’) have given rise to much protracted litigation
– frequently on highly technical and fact-specific points. At first glance, the recent
decision by the Court of Justice of the European Union (‘CJEU’) in Alemo-Herron
could be seen in that light, albeit with significant implications for several hundred
thousand
employees
(E.
Craven,
‘Case
Comment’
UKSC
blog
http://ukscblog.com/case-comment-parkwood-leisure-ltd-v-alemo-herron-ors-2011uksc-26 (last accessed 1 August 2013)). It clarifies whether so-called ‘dynamic’
clauses incorporating future collective agreements into individual employment
contracts could bind the transferee of a business by falling within the scope of Article
3(3) of the Directive.
Upon closer consideration, however, its impact is potentially much more farreaching, presenting domestic labour law across the Union with a challenge
potentially akin to the Court of Justice’s highly controversial decisions in Viking
(Case C-438/05 International Transport Workers’ Federation v Viking Line ABP
[2007] ECR I-10779) and Laval (Case C-341/05 Laval un Partneri Svenska
Bygganadsarbetareförbundet [2007] ECR I-11767): worker protective standards are
to be balanced against employers’ interests, in particular freedom of contract as
embodied in Article 16 of the Charter of Fundamental Rights (‘CFR’). That standard
of protection is furthermore to be understood as a firm ceiling on Member State
attempts at gold-plating workers’ rights.
In exploring the judgment and its implications, this note is structured as
follows. An initial section briefly sets out the relevant statutory and factual
background in the run-up to the UK Supreme Court’s reference for a preliminary
ruling, before addressing key elements of the CJEU’s judgment, and contrasting them
with the opinion delivered by Advocate General Cruz Villalón. Section two analyses
the decision on its own terms, suggesting with respect that it represents a significant
departure from the original scheme and subsequent judicial development of the
Acquired Rights Directive. Section three critiques the interpretation of freedom of
contract as a core component of Article 16 of the Charter. Section four, finally, places
the judgment in the larger context of EU Labour Law and its relationship with
national industrial relations systems: despite an explicit provision to the contrary in
Article 8 of the Acquired Rights Directive, Member States no longer seem able to lay
down standards which are more favourable to employees.
1. THE END OF DYNAMIC INCORPORATION CLAUSES?
1
The regulation of transfers of undertakings has its origins in the Acquired Rights
Directive of 1977, as implemented in the United Kingdom four years thereafter (P.
Davies and M. Freedland, Towards a Flexible Labour Market: Labour Legislation
and Regulation since the 1990s (OUP 2007) 92). A series of politically controversial
amendments and re-enactments followed (S. Hardy and R. Painter, ‘Revising the
Acquired Rights Directive’ (1996) 25 ILJ 160, 165); the provisions in force today are
set out in the Acquired Rights Directive of 2001 on a European level, to which the
2006 TUPE Regulations give domestic effect. The relevant provisions are
substantively identical for present purposes (Case C-426/11 Mark Alemo-Herron and
others v Parkwood Leisure Ltd, Judgment of 18 July 2013 (‘CJEU’) [21]; Parkwood
Leisure Limited v Alemo-Herron and others [2011] UKSC 26 (‘SC’) [13]).
Once the regulatory regime applies, contracts of employment will not
terminate upon a transfer of the business or part thereof. Instead, the transferor’s
rights and obligations will be transferred to the transferee (Article 3(1)). Article 3(3)
of the ARD specifically extends this protection to collective agreements,
Following the transfer, the transferee shall continue to observe the
terms and conditions agreed in any collective agreement on the same
terms applicable to the transferor under that agreement, until the date
of termination or expiry of the collective agreement or the entry into
force or application of another collective agreement.
This is subject only to the termination, expiry or renewal of existing agreements, and
an optional limitation period of 12 months, though neither option is relevant in the
UK; incorporation takes place via an explicit contractual bridging term, and the
limitation period has not been taken up in domestic implementing legislation,
respectively. Employers are furthermore subject to a reasonably wide range of
information and consultation duties.
A. Domestic Proceedings
Mark Alemo-Herron and his colleagues were employees of the Lewisham London
Borough Council, working under contracts of employment which incorporated a
range of terms and conditions (including notably pay) set externally by the National
Joint Council for Local Government Services (‘NJC’), a national negotiating body for
local authority employers and trade unions. The Council’s leisure department
activities were sold to a private sector undertaking, CCL Ltd, in 2002, and
subsequently transferred over to Parkwood Leisure Ltd in 2004. The applicability of
TUPE to both transactions was never contested.
Following the expiry of the collective agreement in force at the time of transfer,
Parkwood refused to recognise the outcomes of subsequent NJC negotiations. In the
ensuing litigation for unauthorised wage deductions (earlier rounds of which had been
settled), the company relied on the then recent CJEU decision in Werhof v Freeway
Traffic Systems (Case C-499/04 [2006] ECR I-2397) to challenge domestic law giving
full force to so-called ‘dynamic’ clauses, i.e. those incorporating externally negotiated
terms settled subsequently to a relevant TUPE transfer, rather than just those in force
at the time of transfer (Whent v T Cartledge Ltd [1997] IRLR 153 (EAT)).
The Employment Tribunal’s dismissal of the employees’ claim on this basis was
affirmed by the Court of Appeal ([2010] IRLR 298 (CA). See C Wynn-Evans,
‘TUPE, Collective Agreements and the Static-Dynamic Debate’ (2010) 39 ILJ 275).
2
On appeal to the Supreme Court, the key issue was whether the ‘common ground’
position permitting the transfer of dynamic clauses in domestic law could still stand in
the light of the CJEU’s decision in Werhof. There, the Court had held that ‘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 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’ ([34] (emphasis supplied).
The Supreme Court found that this enquiry was to be broken down into two
distinct steps: should Werhof’s reading of article 3(1) of the Directive be interpreted
as prohibiting the transfer of dynamic clauses? And if that was the case, what leeway,
if any, was there for national law to be more generous in its interpretation of the
equivalent domestic provisions in regulation 5 of TUPE? The ‘way in which the Court
of Justice [had] framed its ruling in Werhof’ meant, however, that these questions
could not be answered without recourse to the preliminary ruling procedure under
Article 267 TFEU ([44]).
B. The Advocate General’s Opinion
Despite oral representations from the European Commission and the UK Government
in support of a static interpretation of the ARD (M Rubenstein, ‘”Dynamic”
Interpretation of TUPE Precluded’ http://blog.rubensteinpublishing. com/dynamicinterpretation-of-tupe-precluded/ (last accessed 1 August 2013)) AG Cruz Villalón
concluded that ‘in the context of the transfer of an undertaking, there is no obstacle to
Member States allowing the transfer of dynamic clauses referring to future collective
agreements on the basis of Directive 2001/23.’ (Opinion [20]). Whilst the main aim of
the Directive was to protect workers in the event of a change of employer, these were
sufficiently counterbalanced by several employer protective-elements: from the
possibility of joint and several transferor and transferee liability to the potential for
member states to limit the applicability of certain provisions to one year post-transfer
(Opinion [21] – [22]).
The AG’s view was that the Court’s decision in Werhof was to be understood
as primarily driven by the specific circumstances of that case: Mr Werhof had tried to
rely on the ARD to claim dynamic protection even though his contract contained no
such clause referring to an on-going collective bargaining process or to future
collective agreements (Opinion [19]). On this basis, Cruz Villalón noted, ‘it [was] not,
therefore, surprising that the Court of Justice gave a negative response to Mr
Werhof’s claim. [... In so doing, it] did not make a general ruling to the effect that it is
incompatible with the Directive to preserve the effects of dynamic clauses referring to
future collective agreements’ (Opinion [28], [31]).
The Opinion then turned to the third question referred by the Supreme Court,
viz as to the compatibility of Directive 2001/23 with the employer’s negative freedom
of association under Article 11 of the European Convention of Human Rights (and
thus, by extension, Art 12 CFR). Again, however, this was held to be an issue specific
to the German context of Werhof, where the transferee would have found itself under
an obligation to join a representative council. Such a duty was by definition
impossible in the United Kingdom: it was simply not open to Parkwood, a private
sector employer, to join the NJC.
As a result, the AG suggested that ‘the fundamental right at issue [was] not the
negative aspect of the employer’s freedom of association but rather the employer’s
3
fundamental right to conduct a business’, as recognised by Article 16 CFR (Opinion
[46]). Whilst ‘freedom of contract [was to be understood as] one of the component
parts of the freedom to conduct a business’ in the absence of extended rulings on the
matter (Opinion [54]), the lack of legally binding force of collective agreements in the
United Kingdom meant that Article 16 CFR had not been violated (TULRCA 1992,
section 179).
C.
The CJEU Judgment
Rather than following the Advocate General’s guidance, the Third Chamber of the
Court of Justice rephrased the questions put to it by the Supreme Court,
whether Article 3 of Directive 2001/23 must be interpreted as
precluding a Member State from providing, in the event of a transfer
of an undertaking such as that at issue in the main proceedings, that
dynamic clauses referring to collective agreements negotiated and
agreed after the date of transfer are enforceable against the transferee.
([20]).
In answering that question in the affirmative, the judgment relied on two strands of
reasoning: first, that the ARD regime required a balance between employee and
employer interests, and second, that due weight was to be given to the principle of
freedom of contract as a result of Art 16 CFR. As regards the former, the Directive
was said to seek a fair balance between the interests of employees and transferee
employers – in particular by ensuring that ‘the transferee [was] in a position to make
the adjustments and changes necessary to carry on its operations’ ([25]).
The provisions were furthermore to be read in the light of Article 16 of the
CFR, which lays down the freedom to conduct a business:
That fundamental right covers, inter alia, freedom of contract […] it is
apparent that, by reason of the freedom to conduct a business, the
transferee must be able to assert its interests effectively in a
contractual process to which it is party and to negotiate the aspects
determining changes in the working conditions of its employees with
a view to its future economic activity.’ [As the transferee would be
unable to participate in NJC deliberations, its] contractual freedom is
seriously reduced to the point that such a limitation is liable to
adversely affect the very essence of its freedom to conduct a business’
([32] – [33], [35]).
Article 3 of the Acquired Rights Directive was therefore to be interpreted as
precluding the enforceability of dynamic incorporation clauses against transferees,
where the latter could not participate in the relevant negotiation processes posttransfer.
2. BALANCING EMPLOYER AND EMPLOYEE INTERESTS?
The earlier strand of the Court’s reasoning is potentially problematic on two accounts:
it is, first, not clear that the ARD should have an explicit balance between employer
and employee interests read into it at all. Even if that were the case, second, the
4
Court’s interpretation of the factual scenario does not lead to a careful balance
between the competing objectives.
The Acquired Rights Directive is not premised on an internal balance. To the
contrary, it is explicitly worker-protective, designed as a counter-weight to the impact
of earlier market liberalisation. Part of the 1974-6 Social Action Programme, the
ARD’s aim was to protect employees in response to measures encouraging the growth
of a Common Market in general, and the resulting increase in business structure
changes in particular (R. Upex and M. Ryley, TUPE: Law and Practice (Jordan 2006)
4-5). This approach is evident in the Directive’s preambles two and three, which note
that ‘[e]conomic trends are bringing in their wake, at both national and Community
level, changes in the structure of undertakings [… and that it is therefore] necessary to
provide for the protection of employees in the event of a change of employer, in
particular, to ensure that their rights are safeguarded.’ As Lord Hope noted in the
Supreme Court, ‘[n]o mention was made in the recitals of any need to protect
employers in the event of a change in employer as against the rights that were to be
safeguarded for the protection of employees’ ([14]).
In this regard, the ARD might admittedly be characterised as an outlier in EU
labour law today: its ‘simple focus on worker protection from the 1970s does not sit
easily with the current focus of EU labour law on flexicurity’ (A Davies, EU Labour
Law (Elgar 2012) 234). A slow turn away from its original exclusive focus on worker
protection can be discerned both in legislative reforms (Hardy and Painter, 164) and
judicial interpretation (S O’Leary, Employment Law at the European Court of Justice
(Hart, 2002) 286). The Directive’s reinterpretation in Alemo-Herron, on the other
hand, cannot be seen as a continuation of these gradual changes: it constitutes a
radical break with the existing regime.
The decision is, first, far from a straightforward application of Werhof, where
Article 3(1) of the Directive had been interpreted as not precluding the fact that the
transferee was not bound by subsequent collective agreements ([37]). Once these
double negatives are disentangled, the difference from the reading in the present case
becomes obvious: there is nothing in Werhof to suggest that the ARD does preclude
an interpretation which could see the Transferee bound by a dynamic incorporation
clause.
Second, even if the Directive were now to be read as requiring an internal
balance, the Court’s language is surprisingly one-sided, despite initial talk of ensuring
a fair balance. This is evident, for example, in the supposed need to ensure that the
transferee can make all ‘adjustments and changes necessary to carry on its operations’
([25]). Employer flexibility is said to be particularly important in the context of public
to private sector transfers, ‘given the inevitable differences in working conditions that
exist’ ([27]). Taken at face value, this suggests that the higher the disparity in working
conditions is in any given business transfer, the less protection workers will enjoy.
The assertion that dynamic clauses would deny transferees necessary ‘room
for manoeuvre’ ([28]) is, finally, difficult to sustain in the light of the Daddy’s Dance
Hall line of cases: the operation of the ARD does not mean that a transfer freezes
employment conditions in all eternity (Case C-324/86 Foreningen af Arbejdsledere I
Danmark v Daddy’s Dance Hall [1988] ECR 739). As the Advocate General notes,
’there is nothing to prevent [the parties] from renegotiating the clause in the contract
that refers to the collective agreement’ (Opinion [36]). The first strand of the Court’s
reasoning in Alemo-Herron is thus significantly flawed, even when read on its own
terms: the Directive was never designed internally to balance employer and employee
5
interests, and its reading on the facts of the case tilts the balance too far in favour of
transferee protection.
3. FREEDOM OF CONTRACT AS A GENERAL PRINCIPLE OF EU LAW?
From the broader perspective of EU labour law, the decision raises several additional
concerns as regards the Union’s involvement in the setting and application of labour
law standards. Once upon a time, EU law might have been seen by UK labour lawyers
as a white knight of sorts, operating as the ‘main countervailing force’ to ensure the
protection of basic labour standards (Davies and Freedland 576). The opposite is now
in fact the case. This is due to two fundamental, and historically not always fully
acknowledged, problems. EU employment law, first, does not exist in a normative
vacuum. Its development has always drawn on a wide range of sources with different
‘rationes and objectives’ (A. Lo Faro, Regulating Social Europe (Hart 2000) 17-19);
worker-protective norms thus end up increasingly conditioned by the general
normativity of EU Law (P. Syrpis, EU Intervention in Domestic Labour Law (OUP,
2007). The balance struck at EU level is then to be applied throughout the Member
States, regardless of pre-existing domestic structures.
The former tension has thus far been brought out most clearly in the CJEU’s
decisions pitching collective action against free movement provisions (Viking; Laval;
see also Case C-346/06 Dirk Rüffert v Land Niedersachsen [2008] IRLR 467; Case C319/06 Commission v Luxembourg [2009] IRLR 388). Alemo-Herron can be seen as
going several steps further. The preference for EU internal market values in earlier
cases was not necessarily illegitimate. As Anne Davies has noted, ‘the structure of the
Treaty does not lend itself to a more worker-protective decision’ (Davies 101; citing
A. Davies, ‘One Step Forward, Two Steps Back? The Viking and Laval cases in the
ECJ’ (2008) 37 ILJ 126). The present instance, on the other hand, is not one of
conflict between labour rights and the fundamental economic freedoms laid down in
the Treaty (S. Deakin, ‘Regulatory Competition after Laval (2008) 10 CYELS 581):
instead, the application of labour law norms is limited by explicit reference to the
EU’s fundamental rights instrument.
Reliance on fundamental rights as General Principles of EU law in the
scrutiny and construction of secondary EU legislation has of course long been
uncontroversial (Case C-29/69 Stauder v Stadt Ulm [1969] ECR 419 [7]). An example
of the resulting balancing exercise could be seen in Werhof itself, were given the very
particular national circumstances in Germany, the transferee’s negative freedom of
association (i.e. the well-established right not to join an organisation) was taken into
account in construing Article 3 of the Acquired Rights Directive (C. Barnard, EU
Employment Law (4th ed, OUP 2012) 706).
Alemo-Herron, on the other hand, constitutes a significant departure from
previous case law. This is not because of its recognition of freedom of contract as a
principle of EU law (S. Whittaker, ‘The Optional Insutrument of European Contract
Law and Freedom of Contract (2011) 7 ERCL 371, 372) or the application of the
Charter as such. It is the aggressive interpretation of the hitherto rarely applied Article
16 of the Charter of Fundamental Rights, the Freedom to Conduct a Business, to
justify the abrogation of employees’ rights that breaks with well-established case law.
Previous attempts at using that article in other contexts, notably the consumer acquis,
had seen little success. In McDonagh v Ryanair (Case C-12/11 [2013] 2 CMLR 32),
for example, a low-cost airline had claimed that its open-ended duty of care under the
6
Passenger Rights Regulation 261/2004 would deprive carriers of ‘part of the fruits of
their […] labour and […] investment’, and was thus in violation of Article 16 of the
Charter. The Court’s short response to that argument simply noted that the freedom to
conduct a business was not absolute and that its scope fell to be determined in
accordance with the clear limitations set out in Article 52(1) CFR. Given the
importance of consumer protection in Article 169 TFEU and the Charter’s own
Article 38, the resulting balancing exercise unsurprisingly came down in favour of the
consumer. The present decision breaks with this approach in two ways: first, by
elevating freedom of contract to a key position within Article 16, and second by then
giving it undue weight in defeating employee protection.
A. Article 16 CFR and Freedom of Contract
In its reading of Article 16 CFR, the Court explicitly links the freedom to conduct a
business to a particularly strong notion of freedom of contract. It relies for this
assertion on guidance in the Explanations Relating to the Charter of Fundamental
Rights (OJ 2007/C 303/17). The relevant passage (page 23) of that document states
that
[Article 16] is based on Court of Justice case-law which has
recognised […] freedom of contract (see inter alia Sukkerfabriken
[…], paragraph 19 of the grounds, and Spain v Commission […],
paragraph 99 of the grounds).
Upon closer consideration of these materials, it is however not clear that freedom of
contract is anywhere near as fundamental a principle of EU law as the guidance
document or the Court suggest. The relevant paragraph in Sukkerfabriken, for
example, merely speaks of freedom to contract (Case C-151/78 Sukkerfabriken
Nykøbing [1979] ECR 1 [20]. The cited paragraph [19] does not contain any relevant
discussion.) Even proponents of the recognition and strengthening of freedom of
contract as a general principle of Union law have noted that the notion does not
currently form part of the EU legal order, and that it ‘has virtually no textual basis in
the Treaties’ (C. Herresthal, ‘Constitutionalisation of Freedom of Contract in
European Union Law’ in K. Ziegler and P. Huber (eds) Current Problems in the
Protection of Human Rights (Hart 2013) 101).
The clear theme emerging from a reading of these and other decisions concerning
freedom of contract, on the other hand, is that the principle may readily be limited by
‘Community rules imposing specific restrictions in that regard’ (Case C-240/97 Spain
v Commission [1999] ECR I-6571 [99]). Such limitations can be seen in operation in
the explicitly referenced recent decision in Case C-281/11 Sky Österreich GmbH v
Österreichischer Rundfunk [2013] ECR I-0000. There, the Court had held that whilst
the challenged provisions of EU law
amount[ed] to inference with the freedom to conduct a business of
holders of exclusive broadcasting rights, […] in accordance with
the Court’s case‑law, the freedom to conduct a business is not
absolute, but must be viewed in relation to its social function.
[Article 16 may therefore] be subject to a broad range of
7
interventions on the part of public authorities which may limit the
exercise of economic activity in the public interest ([45]-[46],
citing Joined Cases C‑184/02 and C‑223/02 Spain and Finland v
Parliament and Council [2004] ECR I‑7789, [51], and Case C‑
544/10 Deutsches Weintor [2012] ECR I‑0000, [54]).
The Acquired Rights Directive can undoubtedly be characterised as such an
‘intervention’. The provisions of Article 3 furthermore fall squarely within the
definition of permissible restrictions on Charter rights envisaged by Article 52(1)
CFR.
It is therefore surprising that the Third Chamber felt able to conclude that as
Parkwood Ltd could not be directly represented on the NJC, its ‘contractual freedom
[was] seriously reduced to the point that such a limitation is liable to adversely affect
the very essence of its freedom to conduct a business’ ([35]). This stands in stark
contrast with the finding in Sky Österreich that the ‘core content’ of Article 16 was
not affected as long as the relevant Directive had ‘not prevent[ed] a business activity
from being carried out as such’ ([49]). On the facts of Alemo Herron, the transferee
could not be said to have been prevented from carrying out its business activity by a
slight increase in hourly wages. It is furthermore not clear why Parkwood should not
be able to ‘assert its interests effectively in a contractual process to which it is party’.
As noted in section two, above, the ARD regime does not cast pre-transfer terms and
conditions in stone for eternity. Indeed, as Lord Hope noted in the Supreme Court’s
reference, dynamic incorporation clauses are ‘entirely consistent with the common
law principle of freedom of contract’ ([9]).
B. The Charter of Fundamental Rights and EU Labour Law
The decision in Alemo-Herron is thus clearly incompatible with the CJEU’s previous
jurisprudence on the freedom to conduct a business. It nonetheless serves as an
important note of caution as regards the potential of Article 16 to disrupt existing
employment law norms. As part of the Charter of Fundamental Rights, and thus by
extension the general principles of EU law, its impact might be just as powerful as
that of the Union’s internal market logic, if not even more so. As Brian Bercusson
warned, the ‘EU Charter might be exploited to further a very different agenda’ than
that of ensuring a high standard of worker protection (B. Bercusson, European
Labour Law (2nd ed, CUP 2009) 215).
In concluding this section, it should be noted that Alemo-Herron fails to
discuss the implications of Protocol 30 to the Treaty of Lisbon, the much-vaunted
‘opt-out’ granted to Poland and the United Kingdom. Article 1(1) of that Protocol
specifies that ‘The Charter does not extend the ability of the Court of Justice of the
European Union, […] to find that the laws, regulations or administrative provisions,
practices or action […] of the United Kingdom are inconsistent with the fundamental
rights, freedoms and principles that it reaffirms.’ How, then did Article 16 of the
Charter end up as a key argument in the rejection of a well-established line of UK
decisions? One possible account in line with reports from the oral argument is to
suggest that the Protocol point simply was not raised (Rubenstein), as it may well
have hampered the static reading contended for by the UK government. A more
troublesome account would be the suggestion that the Protocol was not applicable, as
8
the Court simply read EU secondary law (which is of course fully binding in the UK)
in light of the Charter, and then applied its interpretation of the Directive against
domestic law: that line of argument would essentially neuter Protocol 30.
4. EU LABOUR LAW STANDARDS: FROM FLOOR TO CEILING?
The supremacy of EU law, including notably a duty on member state courts ‘to
interpret their national law in the light of the wording and the purpose’ of the relevant
Directives is largely uncontroversial today (Case C-14/83 von Colson and Kamann v
Land Nordrhein-Westfalen [1984] ECR 1891 [26]). Alemo-Herron, however, serves
as an important reminder that given the stark differences between national industrial
relation systems and related protective standards, this approach can have difficult
implications in the context of EU Labour Law. Whilst legislative competence in that
field is narrowly circumscribed (see notably Article 153 TFEU), judicial scrutiny of
existing norms in the light of the general principles of EU law, on the other hand, is
much more difficult to limit (S. Weatherill, 'Competence creep and competence
control' (2004) 23 YEL 1). The resulting tensions are particularly evident where the
scope of (supreme) EU law collides with Member State competence to set a higher
level of protection than that fixed at Union level.
In those circumstances, the question arises whether EU norms should act as a
floor (minimum standards) or ceiling (maximum standards) for national regulatory
choices. There are three options as to what the interaction between EU and domestic
labour law might look like on the facts of the present case, as laid out in the first
question referred ([19]): if member state law recognises the protection of dynamic
contractual rights between employer and transferor, does Article 3 of the Directive (a)
require such protection (b) entitle national courts to find that such rights are protected,
or (c) prohibit national courts from protecting such rights?
The answer to this question seems to be set out in the Acquired Rights
Directive, beginning with its very title: it is a measure aimed at the approximation,
rather than the full harmonisation, of national laws. As the Court of Justice notes, ‘it
is [furthermore] apparent from Article 8 of Directive 2001/23 that that directive does
not affect the right of Member States to apply or introduce laws, regulations or
administrative provisions which are more favourable to employees or to promote or
permit collective agreements or agreements between social partners more favourable
to employees’ ([23]).
However, the Court then goes on to suggest that neither the emphasis on
approximation nor the explicit permission of higher protection standards in Article 8
can stand in the face of general principles of EU law, including notably the Charter of
Fundamental Rights. The judgment is, in this regard, reminiscent of decisions such as
Case C-346/06 Dirk Rüffert v Land Niedersachsen [2008] ECR I-1989, where
national standards exceeding those laid down in the Posted Workers Directive
(96/71/EC) had been struck down. Whereas early commentary optimistically saw that
approach confined to ‘the adoption by the Community of an incoherent piece of
legislation’ (P Davies, ‘Casenote’ (2008) 37 ILJ 293, 295), however, Alemo-Herron
could be a significant step towards a more general reading of EU labour law standards
as limits on member state action, thus potentiating the problems identified in earlier
sections.
5. CONCLUSION
9
The CJEU’s decision in Alemo-Herron v Parkwood Leisure Ltd is deeply
problematic, both when analysed on its own terms and as regards its broader
implications for EU labour law. The contradictions brought to the fore culminate in
the rather counterintuitive position where ‘no more than a conventional application of
ordinary principles of [English] contract law’ would yield significantly better
protection for employees than an application of the EU Charter of Fundamental
Rights (Lord Hope [9], quoting Rimer LJ CA [46]).
As the decision returns to the Supreme Court for final disposition, it is
relatively difficult to envisage how that domestic position, giving full force to
dynamic incorporation clauses, could remain unchanged. Indeed, legal and political
developments coincide in this regard, as the domestic TUPE provisions are currently
undergoing government review with the explicit aim of becoming more employerfriendly, notably through a series of ‘changes to TUPE which [the Government]
believes will remove unnecessary gold-plating’ (BIS, Transfer of Undertakings
(Protection of Employment) Regulations 2006: Consultation on Proposed Changes to
Regulation (London, January 2013) [7.2]; C. Wynn-Evans, ‘In Defence of Service
Provision Changes?’ (2013) 42 ILJ 152).
One possible way of challenging the judgment would be to focus on the
employer’s ‘possibility of participating’ in any negotiations to ensure compliance
with the Charter – for example by exploring the opening up of NJC membership to
private sector transferees. Another option would be for the Supreme Court to return a
further reference to Luxembourg in order to query the Third Chamber’s interpretation
and application of the Charter. This would be less problematic than might appear at
first sight: the interpretation of the ARD frequently leads to repeat references, and the
Supreme Court’s original questions did not include any reference to Article 16 CFR:
the point was first raised in the Advocate General’s opinion.
Given the significant departures in Alemo-Herron from established case law,
both as regards the aggressive application of the Charter of Fundamental Rights in
general and the interpretation of the Acquired Rights Directive in particular, it is
finally not difficult to envisage a more coherent ruling by a differently constituted
Court – whether in a second reference on the facts of Alemo-Herron, or future
proceedings under the Acquired Rights Directive.
JEREMIAS PRASSL*
St John’s College, Oxford
jeremias.prassl@law.ox.ac.uk
*
I am grateful to Michal Bobek, Mark Freedland, Claire Kilpatrick, Phil Syrpis, Steve Weatherill and
Simon Whittaker for comments and discussion. The usual disclaimers apply.
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