Moving Target or Standing Still?
TUPE obligations: dynamic or static?
Damian Brown QC
16th January 2013
What will be covered
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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
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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
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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