Supreme Court decision throws TUPE into confusion

How TUPE applies to contractual collective bargaining arrangements following a transfer has been thrown into confusion today, following a Supreme Court decision in Parkwood Leisure v Alemo-Herron. The point in issue is of great significance to private sector employers who have taken on public sector employees as part of a TUPE transfer. At its heart is this question; are public sector employees, covered by industry or sector wide bargaining, who transfer to the private sector, entitled to the benefits of increases in pay negotiated after they were transferred to the private sector?

In 2010, the Court of Appeal decided that a transferee employer was only bound by collective agreements in force at the time of the transfer and not subsequent agreements. However, the Supreme Court has today rejected that approach and has referred the matter to the Court of Justice of the European Union (CJEU) for clarification.

Mark Hammerton, partner at International law Firm Eversheds comments:

“Whilst the employers’ arguments were always marginal, the Supreme Court is clearly not alone in seeking to scrutinise UK compliance with European requirements. Just last month the Government announced that it would be reviewing the Transfer of Undertakings Protection of Employment Regulations 2006 (commonly referred to as “TUPE”) as part of its pledge to reduce perceived “gold-plating” by UK of European laws.

“There are robust laws in both the UK and at European level which aim to protect the interests of employees in the event their employer is taken over. This ordinarily means that the employment terms and conditions of affected employees must be honoured by the new employer, who effectively “steps in to the shoes” of the former one. This includes employment terms which have arisen through collective-bargaining with trade unions, something which is common place in many industries and sectors but particularly so in the public sector.

“The Courts have been faced with the difficult question of whether our laws do in fact exceed European requirements but, if they do, whether there is anything wrong in that. In the ordinary course, European Directives present a minimum framework for Member States to work from and there is nothing to preclude countries from extending the minimum requirements. However, the Supreme Court has concluded that this issue is not sufficiently clear in the current circumstances and has asked the European Court of Justice for guidance.