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Supreme Court refers TUPE case to ECJ

15 June 2011

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

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.

“And it was stated in article 7 of the directive that it was not to affect the right of member states to introduce laws which are more favourable to employees.”

Lord Hope said our domestic employment law was “entirely different” from German law in its approach to collective agreements.

He said that under domestic law the matter depended on the law of contract, “under which parties are at liberty to agree to abide by agreements arrived at by a process in which they do not, and are not required to, participate”.

Lord Hope said there was no question of Parkwood being forced to participate in collective pay negotiations.

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.”

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Contracts & Rights Costs ADR