New Judgment: Parkwood Leisure Ltd v Alemo-Herron & Ors  UKSC 26
15 Wednesday Jun 2011
On appeal from:  EWCA Civ 24
The issue in this appeal was whether, where there had been a transfer of employees to which the then Transfer of Undertakings (Protection of Employment) Regulations 1981 applied, the new employer was bound by a term of an employee’s contract of employment that provided that terms and conditions of employment would be in accordance with collective agreements negotiated from time to time. UK courts have previously held that reg 5 of the 1981 Regulations renders such a ‘dynamic’ clause enforceable against the new employer in respect of collective agreements entered into after the transfer. This appeal considers whether that approach was wrong in light of Werhof v Freeway Traffic Systems GmbH & Co KG (C-499/04). The CoA held that Werhof provided that Directive 77/187/EEC (the Business Transfers Directive), did not bind the transferee to any collective agreement made after the transfer and that reg 5 did not indicate any intention to provide employees with greater protection.
Held: The Supreme Court unanimously holds that there should be a reference to the CJEU for a preliminary ruling to establish whether art 3(1) of the Directive precludes national courts from giving a ‘dynamic’ interpretation to reg 5. Parliament must be taken to have intended to do no more in enacting reg 5(1), (2) of the 1981 Regulations than implement art 3(1) of the Directive. However, it is open to a national court to extend the scope of national legislation implementing a Directive to areas not included within the scope of the Directive, provided that no other provisions of EU law preclude that. The Court distinguished Werhof on the grounds that German law provides that collectively agreed rules become part of the employment contract with the content that they possess at the time when the business is transferred and are not updated after the transfer. It therefore adopts a ‘static’ approach. The CJEU held such an approach was not precluded by art 3(1) of the Directive. It was not possible to infer from Werhof how the CJEU might have answered the question in this case and a reference was therefore necessary.