The scope of Art 3(3) of the Directive which is concerned with the rights under collective agreements following a transfer
The Austrian Chamber of Commerce (ACC) responsible for transport had entered two collective agreements on behalf of Austrian Airlines with the Austrian Confederation of Trade Unions (‘the TU’) One collective agreement was with the parent company and one was with a subsidiary company. The terms of the collective agreement with the subsidiary were inferior to those of the collective agreement with the parent.
On 30 April 2012 the parent company transferred its operations to the subsidiary. This was a transfer to which the Austrian equivalent of TUPE and the Directive applied. The aim was to reduce costs by making employees subject to the terms of the collective agreement with the subsidiary.
The relevant part of Austrian law provided that the terms of a collective would continue after termination in respect of employment relationships existing immediately before termination unless a new collective agreement came into effect in respect of the employment relationships or a new agreement was concluded with the employees.
On the date of transfer the ACC rescinded the parent company collective agreement and the TU rescinded the subsidiary company collective agreement. The subsidiary then unilaterally imposed its own terms and conditions on the transferred employees which reduced some employees’ salaries by as much as 50 per cent.
The ACC’s case was the provisions under Austrian law that provided for the continuation of the effect of a collective agreement after its termination did not apply on transfer because the provisions relating to transfer of collective agreements in Austrian law did not apply to agreements that had been terminated and nor did Art 3(3).
The TU’s case was that as there was no longer in force a collective agreement the terms of the collective agreement with the parent company remained in force and it argued that this was consistent with Art 3(3) which provides:
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 Austrian labour court referred to the CJEU for a preliminary ruling the question of whether Art 3(3) should be interpreted to cover terms and conditions in a collective agreement which have continuing effect under national law even though the collective agreement has been terminated. The ACC submitted the case was inadmissible because it concerned an issue of national law only.
Judgment of the CJEU
The CJEU applied a purposive construction to Art 3(3) and held that
“Article 3(3) …must be interpreted as meaning that the terms and conditions laid down in a collective agreement, which, pursuant to the law of a Member State, despite the rescission of that agreement, continue to produce their effects as regards the employment relationship which was governed by them before the agreement was terminated, constitute ‘terms and conditions agreed in any collective agreement’ so long as that employment relationship is not subject to a new collective agreement or a new individual agreement is not concluded with the employees concerned.”
In reaching this conclusion the CJEU made a number of observations about the purpose of Art 3(3):
(i) The Directive is intended to achieve only partial harmonisation in this area, essentially by extending the protection guaranteed to workers independently by the laws of the individual Member States to cover the case where an undertaking is transferred. It is not, however, intended to establish a uniform level of protection throughout the Community on the basis of common criteria.
(ii) Art 3(3) of Directive not intended to maintain the application of a collective agreement as such but to maintain the ‘terms and conditions’ put into place by such an agreement. This requires the terms and conditions put in place by a collective agreement to continue to be observed, without the specific origin of their application being decisive.
(iii) It follows that the terms and conditions put in place by a collective agreement fall within, in principle, the scope of Art 3(3) irrespective of the method used to make those terms and conditions applicable to the persons concerned.
(iv) Accordingly, terms and conditions laid down in a collective agreement cannot be regarded as being excluded from the scope of that provision on the sole ground that they apply to the persons concerned by virtue of a rule maintaining the effects of a collective agreement
(v) The objective pursued is to prevent workers subject to a transfer from being placed in a less favourable position solely as a result of the transfer.
(vi) The rule maintaining the effects of a collective agreement is intended, in the interests of the employees, to avoid a sudden rupture of the standard framework of the agreement governing the employment relationship. If the terms and conditions subject to that rule were excluded from the scope Art 3(3) the transfer alone would have the effect which that rule seeks to avoid.
(v) In addition, that interpretation complies with the objective the Directive which is to ensure a fair balance between the interests of the employees, on the one hand, and those of the transferee, on the other and from which it is clear that the transferee must be in a position to make the adjustments and changes necessary to carry on its operations (see, to that effect, judgment in Alemo-Herron and Others, C‑426/11, EU:C:2013:521, paragraph 25).
The law relating to collective agreements in the UK is different from Austrian law. There is no statutory provision which has the effect of continuing the terms of a collective agreement followings its termination. (Although Reg 5 of TUPE substitutes the transferor for the transferee as the party to the collective agreement it does not have any effect if the collective agreement is terminated.) However, where the terms of the collective agreement are incorporated, as they often are, into individual employment contracts then the result is that they continue in force following the transfer whether or not the collective agreement is still in force.