Landmark judgment extends scope of public sector agreements

A far-reaching judgment by the Employment Appeal Tribunal in January 2009 potentially extends the reach of public sector collective agreements into the private sector following a transfer of employees. The case involved 23 local government employees, who issued a claim for lost pay after the employer to which they were transferred refused to recognise their trade union for collective bargaining and to follow pay changes that had previously been agreed.

Workers transferred from public sector organisations when their services are outsourced to the private sector often face markedly different environments in terms of the determination of their pay and conditions of employment, given the virtual collapse of trade union recognition and collective bargaining there. However, a January 2009 decision by the Employment Appeal Tribunal (EAT) in the case of Alemo-Herron and others versus Parkwood Leisure (111Kb MS Word doc) could extend the reach of public sector collective agreements into the private sector following a transfer of employees.

Background

The Alemo-Herron and others versus Parkwood case highlights the volatile circumstances encountered by public sector workers who are transferred to the private sector and the difficulties they face in preserving their rights to collective bargaining. The case was brought by 23 local government employees, who were initially working in the leisure department in the London Borough of Lewisham. Their employment was subsequently transferred on two occasions – first as a consequence of outsourcing to CCL Leisure and then to Parkwood Leisure when the latter company acquired CCL in 2004. CCL initially provided pay increases in line with amendments made to National Joint Council (NJC) agreements for local government workers. Parkwood Leisure, however, did not recognise the employees’ trade union, Unison, for collective bargaining and refused subsequently to follow changes in pay agreed for NJC staff.

Both transfers were covered by the Transfer of Undertakings (Protection of Employment) Regulations (TUPE Regulations), as revised in 2006. Broadly, these provide that employees subject to transfer should benefit from collective agreement terms in force at the point when their employment changed, ‘as if the transferee were a party to the agreement’. The Parkwood Leisure employees therefore brought a claim for pay lost since 2006 when their employer severed the connection with changes to NJC agreements.

Outcome of case

The employees’ claim was initially rejected by an employment tribunal, which followed the precedent established by the European Court of Justice (ECJ) in the case of Hans Werhof versus Freeway Traffic Systems. In the latter case, the ECJ ruled that the agreement in force at the time of transfer had been superseded by a wholly different one to which the new employer was not party and to which it was therefore not bound.

However, when the Alemo-Herron case was appealed, the EAT distinguished the case from the Werhof one. It held that in reaching its relatively ‘static’ view of protected agreements, the ECJ had been guided by Article 3 of the Acquired Rights Directive (Council Directive 77/187), which provides for the possibility that Member States might limit the duration of protected agreements to periods of no less than one year. While German law relevant to Werhof does that, the TUPE Regulations provide no such qualification in UK domestic law, and this permits a more ‘dynamic’ view of the protection provided. Employees may continue to benefit from collectively agreed changes in pay, until and unless their employer formally withdraws from the relevant agreement, or varies the individual contracts of employment to that effect.

Commentary

The legal significance of the EAT judgment lies in the purposive construction placed on the TUPE Regulations, which unusually are seen to provide stronger employment rights than those existing elsewhere in Europe – at least in relation to this specific case. In doing so, it augments other tribunal decisions emanating from equal pay litigation, confirming the ongoing rights of employees to pay increases specified by public bodies. In dismissing the assumption that new employers should not be bound by agreements to which they are not a direct party, the EAT also refers to the beneficial potential of collective bargaining. As Judge McMullen of the EAT outlined in the Alemo-Harron case (paragraph 14):

It is not uncommon for an employer to agree with employees or a trade union that it will abide by wages set in a different forum by a third party, here a local authority bargaining structure. For many years, for example, the governing body of Lincoln’s Inn agreed to pay to its own porters and gardeners the same wages as were paid to those people engaged in similar pursuits in Lincoln’s Inn Fields by Camden London Borough Council, the wages of whose staff were regulated by the same NJC as in this case. It is convenient and common, because small employers do not have the resources of large employers for research and skilful bargaining and the employees may not be so well organised in putting forward claims.

In practical terms, the judgment adds to the growing array of mechanisms available to workforces wanting to preserve their existing employment rights on transfer to another employer. The outcome remains contentious, however, and is likely to be challenged at the Court of Appeal.

Trevor Colling, IRRU, University of Warwick