Collective Agreements Negotiated After A TUPE Transfer Will Not Bind Transferee Employers

The European Court of Justice (the "ECJ") has handed down its judgment in a key, long-running TUPE case – Alemo-Herron v Parkwood Leisure Ltd.

The decision is good news for employers who regularly inherit employees via 'TUPE transfers', especially where those employees were originally employed in the public sector or in sectors that are heavily unionised. Thanks to this ECJ ruling, the new employer will not be bound by the terms of any collective agreement which is negotiated after the transfer and to which it is not a party.

Background

Lewisham Borough Council contracted out its leisure services to CCL Limited, a private undertaking which, two years later, sold this business to Parkwood Leisure Ltd. Both of these transfers constituted relevant transfers for the purposes of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE). Parkwood Leisure therefore 'inherited' employees from CCL Limited, which had itself inherited those employees from Lewisham Borough Council.

In accordance with TUPE, the employees transferred to the new employer each time with their existing terms and conditions. These terms included an express reference to an NCJ collective agreement, meaning that the terms of that agreement were incorporated into the employees' contracts of employment, and were therefore legally enforceable. Any pay rise would be carried out by reference to the collective agreement.

Issues arose

The enforceability of the collective agreement was undisputable when the employees were employed by Lewisham Borough Council. Nor was there any issue when the employees moved to CCL Limited, because at the time of that transfer, the NJC agreement for 1 April 2002 to 31 March 2004 was still in force. The terms and conditions (and pay structures in particular) had been negotiated before the transfer to CCL Limited, and were binding on CCL Limited.

The issue arose, however, once the employees had moved to Parkwood Leisure from CCL Limited in May 2004. The NCJ agreement in question had expired by this point, and a new one had not yet been negotiated. It was not until June 2004, after the transfer of employees from CCL Limited to Parkwood Leisure, that a new NCJ agreement was finally negotiated, to apply retrospectively from 1 April 2004.

Parkwood Leisure was not a party to this new collective agreement, and was not able to participate in its negotiations. It considered that the terms of the agreement were not binding on it, and refused...