The European Court of Justice is currently hearing a case that could impact on the remuneration employers provide to employees as part of a transfer covered by transfer of undertakings (protection of employment) (Tupe) regulations.
The case, Parkwood Leisure versus Alemo-Herron and others, involves a private sector organisation that took over a contract from Lewisham Borough Council’s leisure department in 2004, where pay increases for employees were negotiated on a collective-term basis by a third party, rather than set out in employees’ contracts.
The main issue of the case is whether public sector workers are entitled to pay increases negotiated in the public sector after they have been transferred to the private sector.
According to law firm Eversheds, the case raises the question of whether the Tupe regulations require that pre-transfer employee rights are dynamic and can continue to change in the hands of the transferee, or are static and fixed at the point of transfer.
Tim Wragg, principal associate at Eversheds, said: “If the European court proceeds as expected and declines to interfere with national law or supports the dynamic approach, it will be regarded as bad news by the private and third-sector providers of services in those sectors where sector or industry-wide collective bargaining is in place.
“Transferee organisations may again find themselves required to honour employment terms of transferred employees, which are negotiated by third parties and over which they have no say, long after a transfer has completed.”
