TUPE law on Union agreements overturned in welcome news for many employers

Published: 1st February 2010

In a decision which will be welcomed by many employers, the Court of Appeal has overturned previous UK authority on TUPE and collective agreements. The Court have decided that when staff transfer they do so only with the benefit of any collectively agreed terms at the time. The new employer is not bound to honour changes to terms and conditions and pay increases collectively agreed after the transfer (by bodies to which they are not a party). This decision is particularly important for private sector employers with staff who have transferred from local government or the NHS.

Parkwood Leisure v Alemo-Herron concerned staff who had transferred from Lewisham Borough Council on a contract which said their terms and conditions would be in accordance with collective agreements "negotiated from time to time" by the NJC for local government services. When new pay arrangements and revised terms were collectively agreed, the company who then employed these staff and who were not a party to NJC negotiations refused to apply the revised terms. Previous UK case law had held that TUPE meant that an employer in this situation was obliged to comply with later agreed terms even though they were not (and even where they could not be) a party to the negotiating body. However this employer has successfully changed the law by arguing that a decision of the European Court (Werhof) meant that the previous UK cases were wrong and TUPE only meant the employer must apply the terms and pay agreed at the time of the transfer, not what was agreed after the staff had transferred to them.

This is good news for those of you who have staff transferred to you whose pay and conditions are collectively agreed by bodies to which you are not a party. Under TUPE, you are not now obliged to "honour" pay increases or terms and conditions changes agreed by others. For example, you do not need to pay ex-local government employees the same pay increases as those paid to current Council staff. Similarly, if staff transfer with pay and conditions negotiated with an employer's federation, you do not need to make the same pay increases as may be negotiated after they transfer to you if you are not a member. You will need to pay increases which were pre-determined when the staff transferred even if these are to be paid over a period and, clearly, you may have industrial relations or staff retention issues if you do not mirror what the Unions agree with other employers. Some of you may also be subject to contractual constraints in your agreement with the public body, written in an attempt to avoid a two tier workforce developing. However under TUPE you are not bound to mirror pay increases or contractual changes and employees cannot bring unlawful deduction from wages claims against you if you do not do so.

Care should always be taken when considering whether or not to follow collective agreements and we would always recommend taking legal advice on the precise terms of the agreements in place and circumstances you face. If you would like to discuss any situations which apply to you please speak to your usual contact in the Mace & Jones employment and HR team in Liverpool: 0151 236 8989 or Manchester: 0161 214 0500.