Collective Agreements post-TUPE

[Thanks to Daniel Tivadar of 3 Hare Court for preparing this case summary]

Is it contrary to the Acquired Rights Directive 2001 for transferee employers to be bound by collective negotiations after the date of transfer under TUPE?

No, as long as the employer's fundamental right to run a business is not breached, according to the Opinion of the Advocate General in Alemo-Herron and ors v Parkwood Leisure Ltd.

The employees worked in a Council leisure department. Their contract of employment contained a 'dynamic clause' incorporating existing and future collective agreements by the National Joint Council ('NJC') for Local Government Services. Their department transferred under TUPE to a private-sector employer first in 2002 and again in 2004 to Parkwood. After the TUPE transfer to Parkwood the NJC agreed pay increases. Parkwood refused to honour these agreements noting that it was not, and could not have been, privy to the NJC negotiations. The Supreme Court asked the CJEU whether dynamic clauses could in principle transfer under the Acquired Rights Directive.

The Advocate General considered that it was up to individual member states to decide whether to allow dynamic clauses to transfer; the Directive did not prescribe either way. National courts, however, had to ensure that the transferee's freedom to conduct business was not breached by the dynamic clause being unconditional and irreversible. There was unlikely to be a breach in the case of the UK, where collective agreements have their legal basis in the individual employment contracts which can be renegotiated.

The opinion of the Advocate General is not binding on the CJEU, but is - as a matter of practice - usually followed.