Collective pay rises must be honoured in staff transfers after TUPE ruling

Collective pay deals affecting former public sector employees who have been transferred under TUPE regulations must be honoured according to a recent Employment Appeal Tribunal (EAT) ruling.

The EAT recently ruled in the case of Alemo-Herron and others v Parkwood Leisure that collective pay deals, including ones negotiated after staff transfers under TUPE (Transfer of Undertakings (Protection of Employment) Regulations), agreed by their previous employer, the London Borough of Lewisham, must be honoured by their new employer.

The 23 claimants, who were represented by their union Unison, were employed by Lewisham’s leisure department until 2002 when their contracts were transferred to private company CCL, under the 1981 TUPE regulations. In 2004, they were then transferred to Parkwood Leisure.

Following the 2002 transfer, CCL awarded the claimants pay rises in accordance with collective pay agreements struck between unions and local government employers. After the transfer to Parkwood, the claimants did not get the annually negotiated pay rises and brought a claim against Parkwood for unlawful deductions from wages.

When the case was heard at employment tribunal, it decided that, in line with a European Court of Justice ruling that the right to collective pay deal increases was “static”. This meant that Parkwood Leisure was bound by the terms of a collective agreement at time of transfer but not by subsequent collective agreements to which it was not a party.

But the EAT decided a 1987 ruling in Whent v Cartledge, which said that such pay increases were “dynamic”, applied. It held that national collective pay increases transferred to the transferee (new employer) under TUPE.

This means that employees who transfer continued to be entitled to annual pay increases negotiated under a collective agreement, even though their new employer was not a party to the deal.

Pam Loch, founder of employment law firm Loch Associates, said: “This decision confirms there is no one year limitation in the UK on the application of collective agreements post a TUPE transfer. With the current economic climate this is an important decision for many employers who have inherited collective agreements.

“For those employers who may have been hoping that the demise of a collective agreement post transfer would enable them to have more control over wage negotiations their hopes are dashed. Instead, many private sector employers, such as Parkwood, will have to continue to accept collectively negotiated wages over which they have little or no control or input.”

The EAT gave Parkwood Leisure leave to appeal to the Court of Appeal.