In a two day hearing on 13 and 14 April 2011, the Supreme Court will hear an appeal on the extent to which council workers who become the employees of private companies are protected by the Transfer of Undertakings (Protection of Employment) Regulations 1981.

Background Facts

The Appellants were employed in the leisure department of a local authority, before their employment contracts were transferred to a private sector employer (“C“) in 2002 and subsequently to the Respondent in 2004. 

The employment contracts provided for pay in accordance with collective agreements negotiated by the National Joint Council for Local Government and C awarded pay increases in line with these pay settlements.

A dispute arose when the contracts were transferred to the Respondent, who was not party to the NJC negotiations and refused to recognise the Collective Agreements.

Employment Tribunal

Following Whent v T Cartledge Ltd, BET Catering Services Ltd v Ball and Glendale Managed Services Ltd v Graham, the Appellants claimed that Regulation 5 of TUPE obliged the Respondent to comply with the Collective Agreements and it had therefore made unauthorised deductions from their pay in not doing so.

The Tribunal dismissed the claims.  The negotiations resulted in a new agreement and, following the ECJ’s static interpretation of article 3(1) of the Acquired Rights Directive 77/187/EC in Werhof v Freeway Traffic Systems GmbH & Co KG, the Applicants were no longer entitled to the protection under TUPE that they had enjoyed on transfer and therefore, were not entitled to the rates of pay agreed under the Collective Agreements.

Employment Appeal Tribunal

The Appellants’ appeal was allowed on the basis that article3(1) of the Directive was manifested in domestic law under Regulation 5 of TUPE but article 3(2) was not.

The limitation of worker’s rights in article 3(2) provides that a transferee is only obliged to observe any collective agreement until its termination date, or until another collective agreement enters into force but as it does not appear in domestic law, the application of Werhof was incorrect and TUPE provided employees with wider rights.

Court of Appeal

The Respondents submitted that Werhof conclusively provided that TUPE should be read in a manner consistent with the static interpretation and scope of the Directive.  The Appellants argued that Werhof did not preclude the provision of wider domestic rights to employees through TUPE.

The appeal was allowed and the decision of the Employment Tribunal restored.  In Werhof, it was inferred from article 3(2) that the Directive did not intend a transferee to be bound by any collective agreement other than that in force at the time of the transfer, and that article 3(1) had always borne that meaning.

Therefore, when implementing TUPE only a limited burden had to be incorporated onto transferees and while a greater obligation could have been imposed, as suggested by the Appellants, reading Regulation 5 in the context of TUPE as a whole did not support this assertion.  The duty of the domestic courts was to interpret Regulation 5 consistently with article 3(1), and the meaning of that provision was as set out in Werhof.

Supreme Court

Many employers may be hoping that the Court of Appeal’s decision is upheld but other commentators have contended that if it does stand, it may have wide repercussions and could mark the beginning of an unravelling of TUPE.  It is also possible that the Supreme Court will feel it necessary to refer questions to the European Court, which will result in further unwelcome delay before the legal position can be clarified.