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'Bad news' for employers as Supreme Court refers TUPE case to Europe

20 June 2011

The Supreme Court has referred the Parkwood Leisure case on interpretation of the TUPE regulations to the ECJ for a preliminary ruling.

Martin Warren, head of the HR practice group at Eversheds, said the move was “bad news” and would result in up to two years of uncertainty before the ECJ made its decision.

Warren said he believed the judgment from Europe, when it came, would favour the ‘dynamic’ approach to interpretation favoured by the unions.

He said the ECJ might have sympathy for the argument that this approach would be “doing no more than allowing what the parties to the original pre-transfer contract had agreed”.

The Court of Appeal unanimously backed Parkwood Leisure’s arguments that staff who previously worked for Lewisham Council’s leisure services department could not continue to benefit from a national pay agreement after they were outsourced (see, 22 June 2010).

Following the transfer, Parkwood refused to award the workers pay increases in accordance with collective agreements. The rises were agreed by the National Joint Council for Local Government Services, which includes the workers’ union, UNISON, but not private employers.

Delivering judgment on behalf of the court in Parkwood Leisure v Alemo-Herron and others [2011] UKSC 26, Lord Hope said there was no doubt that domestic TUPE regulations were in some respects more generous than the relevant European directive.

However, he said it was open to domestic courts to give the 1981 TUPE regulations their “ordinary and natural” meaning, so long as there was nothing in the leading ECJ case of Werhof v Freeway Traffic Systems indicating otherwise. Lord Hope said the way in which the ECJ framed its ruling in Werhof did not answer the question that needed to be resolved in Parkwood Leisure.

“There are various reasons for thinking that, when TUPE was originally being framed, it was thought that employment contracts such as those which the appellants entered into which provided for a dynamic approach to be taken to collective agreements were permitted by the directive,” Lord Hope said.

“The aim of the directive was to promote approximation of laws among the member states, not their harmonisation.

“None of the recitals in the preamble refer to a need to balance protection for employers against the protection given to employees in the event of a change of employer.”

Lord Hope said article 7 of the directive made it clear that the right of member states to introduce laws which are more favourable to employees was unaltered.

He referred to the ECJ the question of whether article 3(1) of council directive 77/187/EEC precluded domestic courts from giving a dynamic interpretation to the TUPE regulations. Lords Walker, Brown, Kerr and Dyson contributed to the judgment.

UNISON general secretary Dave Prentis said the Supreme Court’s decision was a “victory for fairness”.

He went on: “This decision has wide-ranging implications for the hundreds of thousands of other workers already transferred out of the public sector, or due to be outsourced. They may now have the right to wages and conditions they would have enjoyed at their old employer – despite being contracted out.

“We are confident that the European court will uphold the Supreme Court’s decision.”

Categorised in:

Contracts & Rights Discrimination