February 13, 2017
The Advocate General has provided an opinion in two joined cases referred from the German Labour Court on the issue of whether a transferee can be compelled to apply the provisions of a collective agreement adopted after the transfer. Essentially a revisiting of the static/dynamic issues in Alemo-Herron.
Arts 3(1) and 3(3) provides:
1. The transferor’s rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer shall, by reason of such transfer, be transferred to the transferee.
Member States may provide that, after the date of transfer, the transferor and the transferee shall be jointly and severally liable in respect of obligations which arose before the date of transfer from a contract of employment or an employment relationship existing on the date of the transfer.
3. Following the transfer, the transferee shall continue to observe the terms and conditions agreed in any collective agreement on the same terms applicable to the transferor under that agreement, until the date of termination or expiry of the collective agreement or the entry into force or application of another collective agreement.
The employees were employed by a public authority until 1997 when they transferred to a private company, KLS. KLS ageed that the employees employment would continue to be governed by a collective agreement (known as the BMT-G II) to which it was not a party and by any subsequent collective agreements that supplemented, amended or replaced it.
In 2008 the business of KLS was transferred to another company in the same group, Asklepios. Asklepios is also not party to the BMT G II agreement or to the collective agreement that replaced it (the TVöD) or another collective agreement that supplemented the TVöD (the TVÜ-VKA).
The employees sought a declaration that Asklepios was was bound by the terms of the two collective agreements (TVöD and TVÜ-VKA). Asklepios on the other hand argued that having regard to the Directive and to Article 16 of the Charter of Fundamental Rights of the European Union.
The AG’s Opinion
The AG first revisited Werhof and Alemo-Herron. The AG observed that although the end result was the same in both cases (rights under collective agreements remained static) the reasoning was different in each case. In Werhof the ECJ applied Art 3(1) and held that the provisons of the collective agreement transferred and are to be observed after the transfer. However, this is only the position until there is a new collective agreement. The transferee is not bound by a new agreement to which he was not a party. In Alemo-Herron this reasoning was built on by the application of Article 16 of the Charter, which provided for the freedom to conduct a business, one component of which is the freedom of contract.
The AG then held:
The starting point is that as at the date of transfer the employee should work for the transferee on the same terms and conditions as with the transferor. There can be no derogation from this principle and in effect the transferee is subrogated to the transferor’s rights and obligations.
The AG then addressed the argument that where a contractual clause contains a dynamic provision to the effect that the parties agree to be bound by future collective agreements then it must follow that the employee is entitled after the transfer to the rights contained in any future collective agreement. In his opinion this did not follow because Art 3(3) has a limiting effect. Arts 3(1) and (3) represent the interaction of two rules. First, the general rule that the rights and obligations arising from a contract of employment in existence on the date of transfer within the meaning of that directive must be transferred to the transferee. Second, the degree to which the transferee remains bound by terms and conditions agreed under a collective agreement applicable to the transferor on the date of the transfer.
So far as terms and conditions provided for in a collective agreement are concerned, Art 3(3) operates to limit the scope of the obligations on the transferee . It follows from that provision that it is only the terms and conditions provided for in the collective agreement in force on the date of transfer that must continue to be observed by the transferee.
Art 3(3) provides a compromise intended to reconcile the interests of the transferee and those of the employees affected by the transfer of the undertaking. It strikes a balance between competing interests: on the one hand, the employee has a right to benefit from the specific terms and conditions previously agreed with the transferor, while, on the other hand, the transferee has a legitimate right to know the extent of its future obligations and, therefore, not to be bound by new terms and conditions defined at the end of a collective bargaining process in which it will not or cannot participate.
The AG opined that:
the dynamic reference clause ceases to have effect in the situations provided for in Article 3(3) that is to say where [the collective agreement] expires, terminates or is replaced and, if the Member State has so provided, where at least one year has passed since the undertaking was transferred. Those clauses do not therefore apply to collective agreements concluded after the date of transfer, unless the new employer expresses a different wish.
The AG did not feel it necessary to consider Art 16 of the Charter because the issue could readily be resolved by a proper application of Arts 3(1) and 3(3).
Link to Judgment