MATRIX TUPE SEMINAR
15 MARCH 2012
THE EFFECTS OF A TRANSFER – JAMES LADDIE
1.
This paper considers recent caselaw and live issues in respect of two
aspects of the law relating to transfers of undertakings:
1.1 Who transfers?
1.2 What transfers?
A. Who Transfers?
2.
Regulation 4 (“Effect of relevant transfer on contracts of employment”)
provides as follows, so far as is material:
“(1)
Except where objection is made under paragraph (7), a
relevant transfer shall not operate so as to terminate the
contract of employment of any person employed by the
transferor and assigned to the organised grouping of
resources or employees that is subject to the relevant transfer,
which would otherwise be terminated by the transfer, but any
such contract shall have effect after the transfer as if originally
made between the person so employed and the transferee.
(2)
Without prejudice to paragraph (1), but subject to paragraph
(6), and regulations 8 and 15(9), on the completion of a
relevant transfer(a)
all the transferor’s rights, powers, duties and liabilities
under or in connection with any such contract shall be
transferred by virtue of this regulation to the
transferee; and
(b)
any act or omission before the transfer is completed, of
or in relation to the transferor in respect of that
contract or a person assigned to that organised
grouping of resources or employees, shall be deemed
to have been an act or omission of or in relation to the
transferee.
(3)
Any reference in paragraph (1) to a person employed by the
transferor and assigned to the organised grouping of
resources or employees that is subject to a relevant transfer, is
a reference to a person so employed immediately before the
transfer, or who would have been so employed if he had not
1
been dismissed in the circumstances described in regulation
7(1), including, where the transfer is effected by a series of
two or more transactions, a person so employed and assigned
or who would have been so employed and assigned
immediately before any of those transactions.”
3.
Regulation 2(1) provides that “assigned” means “assigned other than on a
temporary basis”.
4.
The basic rule is that a relevant transfer has the effect of statutorily
novating a relevant contract of employment. One may safely assume that
this will occur unless one or more of the following exceptions applies:
4.1 the person concerned is not an ‘employee’ as defined by TUPE 2006;1
4.2 the person concerned is regarded as being employed on a contract
that would not otherwise be terminated by the transfer;
4.3 the person is not employed by the transferor “immediately before”
the transfer;
4.4 the person is not “assigned” to the undertaking being transferred;
4.5 the person makes a valid objection to the transfer.
This paper will only address the fourth of these points, the others having
thrown up no particular recent issues.
The General Rule on Assignment
5.
TUPE 2006 provide little help in ascertaining who is assigned to the
undertaking or part transferred. Indeed, “assignment” is not defined at
all, save by way of a somewhat delphic exclusionary definition at reg.2(1)
(see above and below). This is unfortunate, since the question of
assignment i.e. the practical question of precisely which employees
transfer, may be very difficult to determine, especially where parts of a
business are transferred, or where individuals perform roles across a
number of functions.
6.
“Assignment” is not a term found in the ARD. Art.3(1) provides that the
transfer is of “The transferor’s rights and obligations arising from a
contract of employment or from an employment relationship existing on
the date of a transfer”. Plainly, it could not have been contemplated that
all of the transferor’s employees should transfer on the date of transfer,
without regard to the degree of their connection with the part of the
undertaking transferred. Yet it is equally plain that the types of
employment relationship that would transfer would ordinarily be a
matter for national law – see Art.2(2).2
See the extended definition of “employee” at reg.2(1).
Art.2(2) provides that the ARD shall be “without prejudice to national law as regards the
definition of contract of employment or employment relationship”.
1
2
2
7.
The key European decision remains Botzen v. Rotterdamsche Droogdok
Maatschappij BV [1986] 2 CMLR 50 ECJ. This case concerned a shipping
company that got into financial difficulties. Some parts were sold to a
new company, but other parts were retained. The claimant employees
were mainly employed in the retained departments, but all performed
some duties for the transferred parts. Were they entitled under the
Directive to be transferred, in accordance with Art.3(1)?
8.
The Advocate General proposed a test that an employee should be
“wholly engaged” in the transferring business (subject to de minimis
exceptions). This formulation has the advantage of clarity and simplicity.
It has the disadvantage of strictness and fails to reflect the flexible and
varied nature of much modern employment.
9.
The ECJ held as follows:
“An employment relationship is essentially characterised by the link
existing between the employee and the part of the undertaking or
business to which he is assigned to carry out his duties. In order to
decide whether the rights and obligations under an employment
relationship are transferred under Directive [2001/23/EC] by reason
of a transfer within the meaning of Article [3.1] thereof, it is therefore
sufficient to establish to which part of the undertaking or business the
employee was assigned.”
10.
Botzen proceeds on the assumption that it will be possible to determine a
particular part of the undertaking to which the employee was assigned.
This assumption has leached into domestic law, even where it is obvious
that an employee may be assigned, as a matter of ordinary language, to
more than one part of an undertaking. It is as well, though, to bear in
mind the sometimes artificial nature of the test which applies.
11.
There are two preliminary observations to be made about the nature of
the assignment issue.
11.1
First, it is a question of fact to be determined by a tribunal
considering all the relevant circumstances of the particular
case: Buchanan-Smith v. Schleicher and Co International Ltd
(EAT/1105/94, unreported, per Mummery J) as endorsed by
the Court of Appeal in Jones v. Darlows Estate Agency [1998]
EWCA Civ 1157.
11.2
Second, it may well overlap with the question of whether
there has been a relevant transfer at all. This phenomenon is
amply illustrated by the facts in Eddie Stobart v. Moreman and
others, UKEAT/0223/11, unreported. A PHR was listed to
consider the transferee’s application to strike out on the
ground that there were no reasonable prospects of the
claimants succeeding in proving that they had been assigned
3
to a transferred part of the business. However, at the PHR,
the case was determined on the basis that there had been no
relevant transfer. The putative transferor’s appeal was
introduced on the basis that its witness evidence had been
shaped by its understanding that it was “assignment” that had
to be determined, and not the “undertaking” question. This
was not so much a ground of appeal as an introductory
argument. In any case it was rejected by Underhill P: “I accept
that the issues of whether there existed an organised grouping
satisfying the requirements of regulation 3(3)(a)(i) and of
whether, if so, all or any of the Claimants were assigned to
that grouping are analytically distinct, and that the evidence
before the Judge was addressed only to the latter issue. But
the two points nevertheless self-evidently overlap to a very
considerable extent, since for the purpose of considering who is
assigned to a putative “organised grouping” it is necessary to
identify what that grouping consisted of.”3
Assigned to the Undertaking – the domestic approach
12.
There has been no shortage of appeal cases on the assignment issue,
largely owing to the infinite number of ways that an employer has of
allocating functions to an employer. In the circumstances it is not
possible to provide a one-size-fits-all guide to assignment, but certain
trends may be observed in certain common situations.
13.
Three relatively common situations were identified by Morison P in
Duncan Web Offset (Maidstone) Ltd v. Cooper [1995] IRLR 633:
13.1
X has a business employing several people and transfers part
of that business to Y.
13.2
X employs A to work in Y’s business and Y transfers that
business to Z.
13.3
X is part of a group of companies. The employee, A, works
partly for X and partly for other companies in the group.
14.
Part-only transfer. Per Morison P, some of the factors that might be
relevant to determine assignment in such a case include: the amount of
time spent by the employee on one part of the business or another; the
amount of value given to each part by the employee; the terms of the
contract of employment showing what the employee could be required
to do; how the cost to the transferor of the employee’s services was
allocated between different parts of the business. On the whole, these
3
See Eddie Stobart, at para.16. Counsel for Eddie Stobart was unable to identify any other
evidence that her client might have wished to deploy had the “undertaking” issue been
identified in advance of the hearing. Of course, there may be other cases where there is a
genuine evidential difference between the issues.
4
are unremarkable factors. However, it is questionable whether tribunals
place any significant weight on the possibilities available to the employer
under the contract – in this writer’s experience, tribunals are more
interested in how the contract was actually operated than in how it could
be operated.4
15.
Service/holding companies. The issue in this case is whether reg.4 applies
at all. In Duncan Web Offset, Morison P considered that on its face, there
would be no transfer where the employee is employed by a service or
holding company to work in Y’s business and Y’s business is then
transferred to Z. This is because it is a requirement that the employee be
employed by the transferor: Askew v. Governing Body of Clifton Middle
School [2000] ICR 286. Although Morison P warned that courts and
tribunals will be astute to ensure that holding and service companies
should not be used as a device to avoid the protection of TUPE, there is
precious little evidence that tribunals have taken up his suggestions of
piercing the corporate veil in appropriate cases.5
16.
Employees with global or group-wide responsibilities. These are highly
fact-sensitive situations. A good example of a possible outcome is found
in Michael Peters Ltd v. (1) Farnfield (2) Michael Peters Group plc [1995]
IRLR 190. Here, the group was the holding company for some 25
subsidiaries. The claimant was employed as the group’s chief executive
and was responsible for overseeing the financial management of all of the
subsidiary companies. Four of the largest subsidiaries were based at the
same headquarters as the holding company. These subsidiaries were sold
to another business and the claimant was made redundant. The question
of assignment only arose on appeal, and the EAT held that the ET had
made a crucial finding of fact that the claimant was responsible for the
running of the group as a whole and was therefore to be taken to have
been assigned to the group rather than any of the subsidiaries. See also
Jones v. Darlow Estate Agency [1998] EWCA Civ 1157.
17.
Assignment “immediately before the transfer”. There is currently an
open question as to whether, under TUPE, the relevant employee must
be assigned to the organised grouping of resources or employees
immediately before the transfer. (It is important to distinguish this
argument from the uncontroversial position that the relevant employee
must be employed, or deemed to be employed, immediately before the
4
For further examples of this type of case, see: Buchanan-Smith v. Schleicher (supra); MRS
Environmental Services v. Dyke, EAT/93/0096 – here the EAT upheld an ET decision based
solely on the time spent by the employee in the two different parts of the transferee’s
business; CPT Distribution Ltd v. Todd [2003] IRLR 28; Williams v. Advance Cleaning
Services Ltd, EAT/0838/04 (in this case, the work conducted by the claimant project leader on
the transferred part of the business took between 50% and 70% of his time, but the EAT
declined to interfere with the ET’s ruling that he was insufficiently integral to that part of the
business to have been assigned to it).
5 E.g. Brookes v. Borough Care Services [1998] ICR 1198.
5
transfer.) This argument is based on the fact that the “immediately
before the transfer” requirement in the first part of reg.4(3) only relates
to employment, and not to assignment. However, this somewhat literal
construction is undermined by the remainder of reg.4(3) and the
definition of “assigned” in reg.2(1).6
18.
It is fair to note that this argument may be important in reverse “poison
pill” cases, where high-performing employees are de-assigned from the
transferring entity relatively shortly before the transfer so that the
transferor is able to retain those employees’ valued services. In such a
case, either the employee himself or the transferee may be able to argue
that the mere fact that the employee was not assigned immediately prior
to the transfer should not defeat the operation of reg.4(1).
19.
Temporary Assignment. As indicated above, assignment does not include
assignment on a “temporary basis” (reg.2(1)). What does this mean? As
a matter of ordinary language, temporary assignment means assignment
for a relatively short period only. However, two decisions of the EAT and
Court of Appeal suggest that things might not be quite so simple:
19.1
Securiplan v. Bademosi, EAT/1128/02, unreported. C worked
as a security guard at a site operated by T for 21 years. After
suffering an accident at work, he was assigned to work at
Marylebone magistrates’ court, but he was unhappy there. He
worked at the court for almost 12 months. He was told in
December 2001 that he could return to work at the original
site in January 2002, but shortly after that, the contract to run
security at the court was abruptly terminated and the contract
was awarded to a third party, X. T declined to continue
employing C and argued that his employment had transferred
to X. The EAT upheld the decision of the ET that his
assignment to the court was only temporary and that his
employment had not transferred to X. Unsurprisingly, this was
on the basis that his assignment at the court was due to end
shortly in any event.
19.2
Marcroft v. Heartland (Midlands) [2011] IRLR 599. M was
employed by PMI under a contract with restrictive covenants.
On 15 September 2009, he handed in his notice (6 weeks). On
25 September 2009, PMI informed him that the commercial
insurance business in which he predominantly worked would
be sold to H, and that, because there was little work to do, M
need not attend work but should be on call at home. Between
6
Reg.4(3) provides that the employee must have been assigned immediately before the
transfer where the transfer takes place over a series of transactions. Reg.2(1) excludes
cases where the assignment is temporary. This implies that the assignment should have
lasted at least until the date of transfer.
6
25 September and 2 October, when the transfer occurred, M
did no more than field a few phone calls. M subsequently
began working for a new employer, allegedly in breach of his
restrictive covenants.
H brought breach of contract
proceedings against M. M argued, unsuccessfully, that his
employment did not transfer to H because he was only
temporarily assigned to the department upon handing in his
notice (and did no significant work thereafter). The Court of
Appeal held that the judge was entitled to reject that
submission
“on the basis of the evidence about the work that Mr
Marcroft continued to do after handing in his notice
and on the basis that it cannot be right in principle,
that an employee is automatically assigned on a
temporary basis, thereby losing the protection of TUPE,
simply as a result of handing in his notice.”7
The principle may be correct – handing in one’s notice (which
may be for an extensive period of time) ought not to have the
“automatic” effect of disapplying TUPE. But it is wrong to say
that the employee would therefore lose the protection of
TUPE – it would simply mean that he would not transfer, but
would see out his employment with the transferor. It is also
hard to see how the supposed statement of principle is
consistent with the plain words of reg.2(1): after all, as a
matter of ordinary language, an individual who is working out
his notice is only working in that role temporarily. The Court
of Appeal (and the judge below) appeared to be influenced by
the fact that M had undertaken some work over the relevant
period. It is possible that had M been placed on garden leave
and undertaken no work at all, a different result might have
been reached.
20.
7
Absences at the time of transfer. How is the assignment question to be
determined where the employee is absent at the time of transfer? The
general rule is that, whatever the reason for absence, the question is
whether, upon the employee’s assumed return to work, he or she would
have been assigned to the undertaking or the part transferred. See
Fairhurst Ward Abbotts Ltd v. Botes Building Ltd [2004] ICR 919 CA. It
should be noted that there is ET authority on this point in the case where
the employee is suspended for disciplinary reasons. A more unusual
disciplinary case arose in G4S Justice Services (UK) Ltd v. Anstey [2006]
IRLR 588. Here, on the date of the transfer, the claimants had been
dismissed for gross misconduct and were awaiting the outcome of their
Per Mummery LJ, at para.36.
7
appeal. When the appeal succeeded, the transferee refused to reinstate
them. The EAT held that the successful appeal hearing had the effect of
expunging the original dismissals and so the employees should be treated
as having been employed by the transferee from the date of transfer. (It
is questionable whether the transferee would subsequently have enjoyed
the benefit of any defence to the claims for unfair dismissal.)
21.
Bogus assignments. It is not unknown for a transferor to use the occasion
of a forthcoming transfer to assign an unwanted employee to the
transferring part of the undertaking, or to assign a valued employee from
the transferring part to the retained business. In Carisway Cleaning
Consultants v. Richards EAT/629/97, the EAT held that a particularly clear
example of the former practice was “fraudulent” and the consequent
assignment void and of no effect. The result is convincing, but not the
reasoning. Whatever the employer’s reasons for assignment are arguably
immaterial provided that there is a power to assign. In the view of this
writer, a better approach to this sort of question would be to adopt the
policy-driven narrative of the Court of Appeal in Marcroft and contend
that an assignment (in or out) whose purpose is to discharge unwanted
employees or retain valued ones, is temporary for the purposes of
reg.2(1) and so not an assignment for the purposes of reg.4.
B. What Transfers?
22.
The law on what transfers following a relevant transfer is relatively
settled, with the exception of complications in relation to collective
agreements.
Rights and Liabilities relating to the Individual
23.
As cited above, the general rule is that all of the transferor’s rights,
powers, duties and liabilities under or in connection with any such
contract shall be transferred to the transferee: reg.4(2)(a). The
transferor’s acts and omissions in respect of the contract will be deemed
to have been an act or omission of the transferee: reg.4(2)(b).
24.
Given the relatively settled nature of this area of the law, it may be
helpful to provide a list of the rights and liabilities that have been held to
transfer:
 Contractual and discretionary rights and benefits, whether express
or implied. Although there is EAT authority to the effect that noncontractual terms should not transfer (see London Borough of
Newham v. Smith EAT/1345/00, in which it was held that noncontractual working practices would not transfer), it is apparent
rights etc which transfer are not just arising “under” the contract,
but extend to those “in connection with any such contract”. See
Bernadone v. Pall Mall Services Group [2001] ICR 197, in which the
8




Court of Appeal determined that tortious liability transferred.
Where does this leave non-contractual working practices? It is
suggested that the best view is that these do transfer, but that the
transferee is as free to change those practices (subject to rules
about notice and consultation) as the transferor would have been.
Continuity of employment is preserved by a transfer. Oddly, it is
not clear whether this is by virtue of TUPE itself or by ERA, s.218,
but the correctness of the rule is not in dispute.
Tortious and other civil liability. See Bernadone (above) and
Hagen v. ICI Chemicals and Polymers Ltd [2002] IRLR 31 (liability
for misrepresentation). The general rule that tortious and other
civil liability transfer is subject to some exceptions, including:
o Vicarious liability towards a third party. So, where an
employee of the transferor injures a third party in the
course of his employment, the third party’s claim against
the transferor will not transfer to the transferee. Oddly,
although this received wisdom is clearly in accordance with
the design of the ARD, the ordinary wording of TUPE does
not seem to prohibit the transfer of this sort of third party
liability. In such a case, it would be difficult to contest the
proposition that a claim brought by a third party is a
transferor’s liability “in connection with” a relevant
employment relationship. This proposition may eventually
become tested where a third party claim is brought and
the transferor is uninsured and/or insolvent.
o Illegal workers of the transferor. Under the Immigration,
Asylum and Nationality Act 2006, a transferee is granted a
grace period of 28 days post-transfer in which to carry out
its own checks on the immigration status of transferred
employees.
Mobility clauses. These do transfer (they are, after all, express
contractual terms), but insofar as the terms of the mobility clause
are fixed to the location of the transferor’s business, they will
remain fixed. See Tapere v. South London and Maudsley NHS
Trust [2009] IRLR 972, in which a mobility clause permitting
relocation “to similar locations within the Trust” was held to allow
the transferee to locate the employee only within boundaries of
the transferor NHS Trust.
Restrictive covenants. These do transfer: Morris Angel and Son
Ltd v. Hollande [1993] ICR 71; Marcroft (above). The transferee
has standing to enforce the restrictive covenant. However, the
covenant must be read in such a way as to ensure that its scope is
no wider than it would have been had it remained with the
transferor. This is achieved by requiring the covenant to be read
between the employee and the transferee, as owner of the
undertaking. Accordingly, a client non-dealing covenant is
effective to prohibit dealing with the clients of the transferred
9


undertaking, but does not cover the other clients of the
transferee.
Profit-sharing schemes and profit-related pay. Although logistical
difficulties arise for transferees in determining the remuneration
for periods during which the employee was employed by the
transferor, the courts have nonetheless held that the benefits of
such schemes do transfer: see Unicorn Consultancy Services v.
Westbrook [2000] IRLR 80 EAT, and Mitie Managed Services Ltd v.
Frnech [2002] IRLR 512 EAT. Mitie, in particular, is authority for
the proposition that where there are significant logistical
difficulties preventing the application of a profit-related pay
scheme based on the transferor’s profits, the transferee must
introduce a scheme of substantial equivalence.
Contractual redundancy schemes. These do transfer. In Jackson
v. Computershare Investor Services plc [2008] ICR 341, the
transferor had no contractual redundancy scheme. The transferee
had a dual scheme where the benefits payable depended on
whether the employee had joined pre-1 March 2002. The
employee had been employed by the transferor since 1999; the
transfer was in 2004. She argued that because her continuity of
service was preserved, she should be treated as a pre-2002
employee. The Court of Appeal disagreed: for the purposes of
the redundancy scheme, the date of her joining the transferee
was an objective fact that was entirely unaffected by the deeming
provisions of TUPE as to continuity of service. This decision does
not clarify what will occur where entitlement under a redundancy
scheme depends on length of service (rather than employment by
a specific date) – would the employee then be able to include
years of deemed service?
Collective Rights and Liabilities
25.
Provision is made in the ARD and TUPE for collective agreements to
transfer to the transferee.
26.
Regulation 5 (“Effect of relevant transfer on collective agreements”)
provides:
“Where at the time of a relevant transfer there exists a collective
agreement made by or on behalf of the transferor with a trade union
recognised by the transferor in respect of any employee whose
contract of employment is preserved by regulation 4(1) above, then(a)
without prejudice to sections 179 and 180 of the 1992
Act (collective agreements presumed to be
unenforceable in specified circumstances) that
agreement, in its application to the employee, shall,
after the transfer, have effect as if made by or on
10
(b)
behalf of the transferee with that trade union, and
accordingly, anything done under or in connection with
it, in its application in relation to the employee, by or in
relation to the transferor before the transfer, shall,
after the transfer, be deemed to have been done by or
in relation to the transferee; and
any order made in respect of that agreement, in its
application in relation to the employee, shall, after the
transfer, have effect as if the transferee were a party to
the agreement.”
27.
“Collective agreement” is given the same meaning as in TULRA 1992,
s.178.
28.
Trade union recognition also transfers, under reg.6.
29.
Reg.5(a) has the effect of transferring collective agreements only in
respect of employees whose contracts of employment are transferred.
Any employee who joins the transferee after the transfer will not be
automatically covered by a transferred collective agreement.
30.
The mere fact that there is a collective agreement in place does not
necessarily mean that it transfers. As reg.5(a) makes clear, its application
is without prejudice to the presumption that collective agreements are
not legally enforceable. A number of TUPE cases have been litigated on
the issue of whether collective agreements, or terms within collective
agreements, were legally enforceable (see, e.g., Alexander v. Standard
Telephones and Cables Ltd (No.2) [1991] IRLR 286). It is important to be
alive to this issue, but its discussion falls outside the scope of this paper.
31.
I am unclear as to the function of reg.5(b). In particular, what orders are
contemplated? It has been said that this might be a reference to the
possibility that the Central Arbitration Committee might one day have the
power to make orders about the scope of collective agreements. That
may be right, but if so, reg.5(b) is an instance of the cart standing before
the horse.
New Collective Agreements
32.
A theoretical debate with important practical consequences has occurred
in relation to whether a transferee is bound to observe post-transfer
changes to collective agreements where it is not a party to the
negotiations. On the “static” side of the debate are those who argue that
TUPE is intended only to preserve the rights of employees as at the date
of transfer and that the transferee should only be bound to abide by the
terms existing as at that date, whether in a collective agreement or
otherwise. On the “dynamic” side of the debate are those who contend
11
that there is nothing impermissible about requiring a transferee to
comply with post-transfer changes to collective agreements.
Unfortunately, Europe and the UK do not speak with one voice on this
point.
33.
The ARD provides as follows, at Art.3(2):
“Following the transfer within the meaning of Article 1(1), 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.
Member states may limit the period for observing such terms and
conditions, with the proviso that it shall not be less than one year.”
34.
In Werhof v. Freeway Traffic Systems [2006] IRLR 400 ECJ, the ECJ held
that a transferee was not bound to observe the terms of collective
agreements negotiated post-transfer. In that case, the transferee was
not a member of the relevant employers’ association and so could not
participate in relevant negotiations. The ECJ rejected the dynamic
approach on two grounds. First, it held that it was only necessary to
safeguard the rights of the employees as of the date of transfer. Second,
it held that the dynamic approach would unduly interfere with an
employer’s freedom of association (in this case, the right not to join an
association). In the aftermath of the decision, commentators observed
that the domestic authorities, which had hitherto favoured the dynamic
approach, would likely be affected by the decision.
35.
The matter was considered in the Supreme Court in Parkwood Leisure Ltd
v. Alemo-Herron [2011] IRLR 696. The facts were that local government
employees transferred into the private sector, and subsequently retransferred within the private sector. The claimants’ contracts provided
for their terms and conditions to be set according to collective
agreements negotiated through the NJC. The NJC does not include
private sector employers. The respondent transferee refused to pay the
claimants wage increases which were agreed in the NJC post-transfer.
36.
The ET found for the respondent; the EAT reversed the decision, only to
be reversed by the Court of Appeal. In the Supreme Court held that it
was necessary to make a reference to the CJEU for a preliminary ruling. It
is apparent from the judgments, however, that the Supreme Court took
the view that national courts were free to adopt a dynamic approach to
collective agreements even if such an approach was not required under
European law. The Supreme Court held that the ordinary and natural
meaning of what are now reg.4(1) and (2) would be that a transferee
would be bound by post-transfer changes. The CJEU is being invited to
12
rule on whether it is open to the UK courts to give reg.5(1) and 5(2) their
ordinary and natural meaning i.e. whether there is anything in Werhof
that precludes the dynamic approach from being adopted.
37.
Any prediction should be treated with caution, but I consider it likely that
the CJEU will determine that it is for Britain to determine whether or not
it wishes to furnish transferring employees with greater rights than those
mandated under EU law.
Scattolon
38.
In Scattolon v. Ministero Dell’Istruzione, Dell’Universita e Della Ricerca
[2011] IRLR 1020, the claimant began work as a cleaner in an Italian state
school. Auxiliary services at state schools were provided in part by State
employees, and in part by local authorities, either through local authority
employees or by subcontracts with private undertakings. The local
authority and state employees were paid on the basis of different
collective agreements. The claimant was a local authority employee. On
1 January 2000, the Italian government transferred all local authority
employees in state schools onto the list of State employees. The
Claimant was moved to the collective agreement covering State
employees. The rules of this collective agreement did not give as much
weight to her 20 years’ service as did the local authority collective
agreement, and she was paid as if she only had 9 years’ service. Mrs
Scattolon accordingly brought proceedings seeking recognition of the
whole of her length of service.
39.
The case came before the Grand Chamber. Having disposed of the Italian
Government’s argument that this was a reorganisation of the public
administration falling outside the ambit of the ARD, the Court turned its
attention to the relevant collective agreements.
40.
It will be recalled that under the Directive, the transferee’s obligation to
observe the terms and conditions of a collective agreement is terminated
by the “entry into force or application of another collective agreement”.
The Italian government contended that that is what occurred in this case,
and thereafter, it was free to pay the claimant in accordance with the
new collective agreement.
41.
The Grand Chamber did not agree. It held that the Italian government
had not recognised length of service in its entirety. The partial
recognition of the length of service potentially meant a substantial
reduction in salary. In those circumstances, it was held to be contrary to
the objective of the Directive not to take account of length of service in so
far as was necessary approximately to maintain the level of remuneration
received by the workers with the transferor.
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42.
So, the Grand Chamber recognised that the principle that a collective
agreement will transfer automatically is effective, but subject to the
transferee having a collective agreement of its own. But the application
of a new collective agreement is itself subject to the principle that
transferred employees should not be materially disadvantaged by reason
of the transfer. It should be noted that the criterion for disadvantage
here is “substantial” (not any disadvantage whatsoever). Further, the
Court suggests that in considering whether there has been substantial
disadvantage, one should assess the “overall” position. C.f. Daddy’s
Dance Hall.
43.
The domestic consequences of this decision are difficult to predict. It
should be stressed that Scattolon reflects the continental industrial
relations landscape where collective agreements are more prominent
than here. Indeed, TUPE does not even make provision for a transferring
collective agreement to be displaced by the transferee’s new collective
agreement. However, it has been suggested that Scattolon may have an
impact upon transferees’ ability to vary contracts. As is well-known, posttransfer variation in the UK is difficult to achieve. It is arguable that
Scattolon opens the door to post-transfer harmonisation provided that
there is no substantial overall detriment to the transferring employees.
This area is one to watch with interest.
JAMES LADDIE
MATRIX CHAMBERS
14 March 2012
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