In Parkwood Leisure Ltd v Alemo-Herron and others, the Supreme Court held that there should be a reference to the ECJ to establish whether the Acquired Rights Directive (ARD) precludes national courts from giving a ‘dynamic’ as opposed to a ‘static’ interpretation when determining the contractual rights which transfer, including those in collective agreements.
The central issue in this case is whether a new employer, post-TUPE transfer, can continue to be bound by collectively-agreed terms to which they are not a party. A ‘static’ interpretation means the new employer is only bound by collectively-agreed terms that apply at the date of transfer. A ‘dynamic’ interpretation would give transferring employees the right to benefit from future pay rises or other changes agreed between the unions and the old employer, or an employer’s body, which form part of a collective agreement incorporated into their contractual terms, after the transfer.
The employees were originally employed by the London Borough of Lewisham in its leisure service department. Their contracts provided that their “terms and conditions of employment will be in accordance with collective agreements negotiated from time to time by the National Joint Council for Local Government”. The employees were eventually TUPE transferred to a contractor, Parkwood Leisure Ltd, who were not a party to the yearly pay negotiations and who did not award the resulting pay increases for the period 31 April 2006 to 31 March 2008.
An employment tribunal dismissed the claims applying a ‘static’ interpretation, but the EAT preferred the ‘dynamic’ approach. The Court of Appeal (CA), however, agreed with the tribunal ruling that transferees are not bound by any collective agreement made after the transfer. The Supreme Court has decided that there should be a reference to the ECJ to establish whether the ARD precludes national courts from giving a ‘dynamic’ interpretation to transferring contractual rights. In the meantime, the CA judgment remains as the prevailing precedent.
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