In this case two questions were referred to the ECJ:
(i) When a contract of employment refers to a collective agreement (in force at the time of the transfer) to which only the transferor has signed up, is the transferee bound by subsequent collective agreements to that one?
(ii) If the answer is no, is a transferee (who is not party to a collective agreement) bound by agreements which come into force after the transfer for as long as the transferor is bound?
The terms and conditions of Mr Werhof’s employment were governed by a collective agreement between the metal industry trade union and an employers’ federation. His contract was transferred to Freeway Traffic Systems which was not a member of the employers’ federation.
Freeway Traffic Systems introduced a grid for grading employees. Mr Werhof waived his right to any wage increase that applied before the grading system came into force in return for a one-off payment.
Two years later the metal industry trade union and the employers’ federation negotiated a wage increase. Mr Werhof claimed the difference between the amount he had received and the sum negotiated under the new agreement. His claim was dismissed initially and the appellate court made a reference to the ECJ.
The ECJ answered the first question ‘yes’ and so did not need to consider the second question. Under the normal contractual principles, obligations negotiated between two parties cannot be imposed on a third party. However, as this could undermine the rights of employees in the event of a transfer, employees required particular safeguards to protect the terms of their contracts, including the terms and conditions of any collective agreements in their contracts.
The ECJ held: “the rights and obligations arising from a collective agreement to which the contract of employment refers are automatically transferred to the new owner, even if … the latter is not a party to any collective agreement.” However, the ECJ held that the collective agreement only has to be observed until it ends or another one comes into force. The directive could not bind a transferee to collective agreements other than the one in force at the time of the transfer. The court observed that binding transferees to observe future collective agreements would undermine their fundamental right not to join an employers’ association.