The Court of Justice of the European Union (‘CJEU’) has handed down judgment in this case today (18 July 2013).
The CJEU has held where a transferee does not have the right to participate in the negotiating process relating to the collective agreement in question they cannot be bound by any agreement concluded after the date of the transfer. (I.e. a static interpretation on the facts).
The employees were originally employed by the London Borough of Lewisham. Their pay was determined by a collective agreement between the employer and the National Joint Council for Local Government (the “NJC”). Following two TUPE transfers, Parkwood became the new employer. Subsequently, a new collective NJC agreement was negotiated without any participation by Parkwood who were not able to participate as they were a private sector employer. The new agreement increased pay scales. Parkwood refused to implement these increases. The employees claimed to be entitled to the new collective agreement. Parkwood won in the ET, lost in the EAT and won in the Court of Appeal. The Supreme Court referred the matter to the CJEU. The Advocate General was of the opinion that a dynamic interpretation is permissible. The CJEU has held it is not.
The CJEU Judgment
The judgment makes a number of important points:
(I) The Directive does not solely have the purpose of safeguarding employees’ rights in the event of a transfer but seeks to ensure a fair balance between the interests of those employees on the one hand and the transferee on the other (Para 25) Werhof makes it clear that the transferee must be in a position to make adjustments and necessary changes to carry on its operations.
(2) Transfers from the public to private sector require significant adjustment and changes given the inevitable difference in the working conditions between the two sectors. A collective agreement negotiated after the transfer in which the private sector employer has played no part limits the ability to make such changes and adjustments.
(3) The Directive must be interpreted in accordance with Charter of Fundamental Rights of the EU. Article 16 of that Charter provides for the freedom to conduct business and encompasses the freedom to contract has to be taken into account. The transferee must be able to assert its interests in the contractual negotiating process to which it is party. In this case it has no means of doing so nor of protecting its interests nor to negotiate working conditions for its own employees with a view to its future economic activity.
(1) The narrow point is clear. If the transferee cannot participate in the negotiating body it cannot be bound by any collective agreement reached after the transfer. If the negotiating process of a collective agreement allows for participation by transferees then a dynamic interpretation is possible.
(2) There are potentially wider ramifications: It is possible to detect a marginal change in emphasis in respect of the interpretation of the Directive from pure protection of workers’ rights to some recognition of the real practical difficulties of transferring from the public to private sectors.