Transferee Employer Only Bound by Collective Agreements in Place on Date of TUPE Transfer

The Court of Appeal has overturned the decision of the Employment Appeals Tribunal in Parkwood Leisure Ltd v Alemo-Herron and others [2010] EWCA Civ 24 and held that regulation 5(1) of the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) 1981 (and it would seem therefore, the equivalent provisions in regulation 4 of TUPE 2006) should be given a "static", rather than "dynamic", interpretation. This means that where employees have a contractual right to pay increases agreed as part of a collective bargaining process, the transferee is not bound by collective agreements reached after the transfer.

The employment contracts of the affected employees specified that their salary would be made "in accordance with collective agreements negotiated from time to time by the National Joint Council for Local Government". The employees transferred to CCL Limited in 2002 and then to Parkwood Leisure Ltd (PL) in May 2004. Both transfers were TUPE transfers. PL was not a party to the collective agreement negotiations on pay which occurred later in 2004 and refused to pay the employees at the revised rate. The employees lodged a claim for unlawful deduction from wages. They argued that the clause in their contracts relating to pay had been continuously in force since their initial transfer to CCL Limited and therefore PL was bound to pay at the revised rate.

The Court of Appeal held that where there is a TUPE transfer and an employee's terms of employment incorporate provisions in a collective agreement, the incoming employer is not obligated to give effect to a pay rise agreed under the collective agreement by the outgoing employer if that pay rise took effect after the TUPE transfer had taken place.