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Alemo-Herron v Parkwood Leisure Ltd

The whole point of the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) is to safeguard the terms and conditions of employees after a relevant transfer. In Alemo-Herron v Parkwood Leisure Ltd, the Employment Appeal Tribunal (EAT) said that transferees have to honour pay increases, even if they were negotiated by the transferor with a union under a collective agreement after the transfer had already taken place.

Basic facts

Mr Alemo-Herron and his colleagues worked for Lewisham’s leisure department under terms and conditions set by various collective agreements negotiated from time to time with the National Joint Council (NJC) for Local Government Services.

In 2002 their contracts of employment were transferred under TUPE to CCL Limited and then again in May 2004 to Parkwood Leisure Limited. They were awarded pay increases in line with the NJC pay settlements by CCL from 2002 to 2004, and again by Parkwood in 2005. In 2007, however, it refused to pay up.

The claimants argued that TUPE protected their contractual right to pay increases from the date of the initial transfer to CCL, including any collective agreements recognized by the transferor which the law deemed “to have been done by or in relation to the transferee”. This meant that Parkwood was liable.

Tribunal decision

But the tribunal disagreed. It relied on the 2006 decision of the European Court of Justice (ECJ) in Werhof v Freeway Traffic Systems Gmbh & Co KG. This said that the European Acquired Rights Directive (on which TUPE is based) did not bind transferees in respect of contractual amendments negotiated post-transfer.

The tribunal pointed out that, in this case, negotiations for new pay rates for the period 2004 to 2007 started in June 2004, before Parkwood took over the contract. It took no part in the negotiations and did not recognise any of the unions involved.

As this collective agreement was effectively a new agreement, “the NJC having negotiated a comprehensive revision of terms relating to pay, training and development and other aspects concerning working arrangements”, the tribunal concluded that the company was not bound by it.

EAT decision

The EAT, however, disagreed. It followed the EAT decision in the 1997 case of Whent & Others v T Cartledge Limited which said that transferees were bound by pay increases negotiated with a union by the transferor under a collective agreement after a TUPE transfer.

This EAT said that neither the decision in Werhof nor the European directive altered this position for the simple reason that TUPE provided more protection under domestic law than the directive.

It pointed out that “…TUPE and the Directive are both measures aimed at protection, or safeguarding, of employees' rights, and it would to be odd if those rights which are accepted to be part of the canon in domestic labour law could be taken away by a subsequent interpretation of the Directive, as to which Member States have a margin of appreciation.”

It concluded that there was “nothing offensive about a contractual clause which entitles a worker to have his or her wages fixed according to an external benchmark set by collective bargaining. As a matter of domestic law, under TUPE those rights are preserved just as much as any substantive right. Thus, not only is the transferee obliged to pay the rate of pay in force at the time of the transfer … but is obliged to pay into the future in accordance with the dynamic clause for regulating future wages. So long as there is an NJC which sets the rate of pay for this particular worker, that is the rate of pay which the transferee is required to pay. That principle of the English law of contract is not affected, nor could be affected, by the Directive”.

The decision is being appealed.