TUPE and Post-Transfer Obligations in the Public Sector

In a case (Alemo-Herron and others v Parkwood Leisure Ltd.) that will be of interest to private sector employers who have taken over, or who are considering acquiring, undertakings that were previously part of the public sector, the Employment Appeal Tribunal (EAT) has held that a contractual term entitling council employees to pay in accordance with collective agreements negotiated by the National Joint Council for Local Government Services (NJC) is protected when there is a transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) so as to give a right to pay increases negotiated post-transfer.

This had been the position until the European Court of Justice held (Werhof v Freeway Traffic Systems) that the objective of the Acquired Rights Directive, which the TUPE Regulations transpose into UK law, is to safeguard the rights and obligations of employees at the date of the transfer but not to protect contractual terms giving them a right to pay increases negotiated after the transfer has taken place.

Article 3(2) of the Directive provides that the transferee shall continue to observe the terms and conditions agreed in any collective agreement until the date of termination or expiry of the agreement or the coming into force of another collective agreement but that Member States may limit the period for observing such terms and conditions provided it is not less than a year. However, the TUPE Regulations have no corresponding provision limiting a worker’s rights.

Member States are free to introduce domestic laws that are more favourable to workers than is required by the Directive they implement. The EAT therefore held that Parkwood Leisure Ltd., which took over a company that had acquired, under a TUPE transfer, employees of the London Borough of Lewisham’s Leisure Department, was bound by pay increases negotiated by the Council with the NJC under a collective agreement reached after the TUPE transfer had taken place. Even though the new employer was not a party to the negotiations, the employees’ terms were still so determined because it was in their contracts of employment.

The EAT gave permission for Parkwood Leisure Ltd. to appeal to the Court of Appeal.