Whether an employee can benefit from changes under a collective agreement post TUPE transfer will depend upon whether the agreement is incorporated into their contract of employment. There have been differing opinions in case law as to whether changes to a collective agreement post transfer have a ‘dynamic’ or ‘static’ effect i.e. whether the incoming employer will be bound to accept changes to collective agreements after the transfer.
In the 2006 ECJ case of Werhof v Freeway Traffic Systems, it was decided that collective agreements could only have a ‘static’ effect meaning that incoming employers would not be liable for any changes to collective agreements post transfer. Following this decision, the Court of Appeal held in Parkwood Leisure Ltd v Alemo-Herron, that an incoming employer was not bound by any terms negotiated as part of a collective bargaining process after the relevant transfer. On appeal, the Supreme Court concluded that if an incorporated term had a dynamic effect in the contract with the outgoing employer then this would also be the case with the incoming employer. The Supreme Court referred the case to the ECJ to rule on whether the Acquired Rights Directive (the Directive) (being the EU law which TUPE implements) actually requires national courts to adopt a static interpretation approach and prohibits the transfer of dynamic contract rights or whether the UK was free to construe a dynamic approach provided it was not precluded by EU law.
The Advocate General has now published his opinion on this referral stating that responsibility for introducing national legislation to implement the Directive and interpretation of that legislation rests with individual member states. He has confirmed that member states are not precluded from implementing more generous provisions nor from interpreting their national laws more generously than the Directive requires. This suggests that the Directive does not prohibit dynamic interpretation and incoming employers should be aware that they may be bound by the terms of any collective agreement incorporated into contracts of employment. Careful due diligence will therefore need to be carried out as dynamic interpretation will largely depend on the wording of contracts and collective agreements.
The Advocate General’s opinion whilst valued, is not binding on the ECJ but it is likely that this will be followed. Whilst we are still awaiting judgment from the ECJ, the static interpretation remains good law and the matter will not be concluded until the decision is handed down and the Supreme Court has applied this to UK law. The debate about the dynamic or static approach has already been raised in the UK consultation on TUPE and therefore it may prompt the UK, in advance of the judgment, to narrow the scope of the TUPE Regulations. This could involve limitations on the protection of collective agreements or restricting the period for which TUPE protection lasts.