ECJ Decision—Compensation for Termination of Employment Due to Detrimental Change in Working Conditions

The Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE") implemented EC Directive 2001/23/EC (the "Directive") in the United Kingdom. Article 4(2) of the Directive states that where an employee resigns without notice because a transfer involves a substantial change in working conditions to the employee's detriment, the employer is liable for the termination. However, Article 4(2) does not state what the employee is entitled to receive in the event of such a termination.

The European Court of Justice (ECJ) held in Mirja Juuri v Fazer Amica Oy (C-396/07) that Member States were not required to provide employees who resign in such circumstances with the equivalent compensation to that which they would have received if their employment was unlawfully terminated. Confusingly, however, the ECJ has stated that national courts must at the very least make sure that the incoming employer "bears the consequences that the applicable national law attaches to [the] termination ... such as the payment of the salary and other benefits relating, under that law, to the notice period".

The ECJ decision seems to imply that Article 4(2) requires employers to pay employees who resign in such cases their contractual notice pay and other benefits that relate to their notice period. This does not sit comfortably with TUPE since it is clear from Regulation 4(10) of TUPE that the employer is excluded from liability for wages in respect of a notice period that the employee has failed to work. The ECJ decision has added further confusion to what has been recognised as being a difficult set of provisions and it is unclear how this will be interpreted in the United Kingdom going forward.