TUPE - scope limited by Court of Appeal
Added On: 8th February 2010
Staff who worked for Lewisham Council’s leisure services department before it was outsourced cannot continue to benefit from pay rises negotiated by trade unions under a national collective agreement, the Court of Appeal has unanimously ruled.
The workers’ contracts provided that their terms and conditions were in accordance with collective agreements negotiated by the National Joint Council for Local Government Services.
The question was whether the new employer was bound by an agreement between the National Joint Council and the trade unions concluded in July 2004, after it had become the employer.
Delivering judgment in the case Lord Justice Rimer said the case depended on interpretation of article 3(1) of directive 2001/23/EC and regulation 5 of the Transfer of Undertakings (Protection of Employment) Regulations 2006.
“The effect of regulation 5 of TUPE is, on a transfer of an undertaking, to preserve employees’ contracts and make them enforceable against the transferee as if the transferee were a party to the contracts,” he said.
“Thus the term in question would in principle be enforceable against the transferee just as it would have been against the original employer. The fact that the transferee may have no voice in the negotiation from time to time of the terms provided for by such provision is, from a legal point of view, neither here nor there.
“It may be commercially unfortunate from the transferee’s perspective, but it is one that appears to be visited upon it by regulation 5, one implemented for the purpose of achieving the great objective of the directive, namely the safeguarding employees’ rights on the transfer of an undertaking.”
Rimer LJ said the ECJ’s ruling in Werhof had “put all that in question”. He said the facts of the European ruling were indistinguishable from the one he was considering. He said that the ECJ in Werhof had given article 3(1) a “static” rather than “dynamic” interpretation.
He said the duty of domestic courts was to interpret regulation 5 of TUPE in the light of article 3(1), as interpreted in Werhof. As a result, previous domestic decisions were wrong and should not be followed.
He allowed the appeal and restored the decision of the employment tribunal.
Charles Newman, partner at Beachcroft, said the case would come as a welcome relief for private sector employers who take on outsourced contracts and will now no longer be bound by pay increases negotiated after the transfer.
