Collective bargaining agreements result in agreed changes to pay and benefits being directly effective for the employees represented in those negotiations. If employees transfer under TUPE to a new employer, is the new employer bound by changes to a collective agreement negotiated by the old employer after the transfer? Lawyer Pulina Whitaker looks at the effect of recent changes to TUPE.
Alemo-Herron v Parkwood Leisure
Whether or not TUPE has the effect of binding new employers to changes agreed by the old employer, under a collective agreement after the transfer, has been the subject of much debate and litigation. The European Court of Justice finally decided, on 18 July 2013 in Alemo-Herron v Parkwood Leisure Ltd, that TUPE had a “static” rather than a “dynamic” effect.
The Court stated that new employers must be free to conduct their business and assert their interests effectively in a contractual process. Therefore, the new employer was not bound by collectively agreed pay decisions made by the old employer, under negotiations to which the new employer was not a party, after the transfer date.
Amendments to TUPE
Amendments to the TUPE Regulations were implemented on 31 January 2014 to reflect the Alemo-Herron decision. New reg.4A provides that TUPE does not operate to transfer any rights under collective agreements where:
- the provision of the collective agreement is agreed after the transfer date; and
- the transferee is not a participant in the collective bargaining for that provision.
However, if the new employer does participate in the collective bargaining following the transfer, the agreed changes will be binding on the new employer under the terms of the collective agreement.
These amendments to TUPE apply to transfers taking place after 31 January 2014, and give certainty to the approach that collective agreements have a static effect on employees’ contracts. For transfers that took place before 31 January 2014, the old TUPE rules and the UK courts’ application of the decision in Alemo-Herron will still be relevant.
For prospective new employers, the below questions should be raised in due diligence or otherwise with the old employer about the extent of collective bargaining terms:
- What is the scope of the collective bargaining agreement?
- Which employees are affected by the collective bargaining agreement?
- Are changes to terms and conditions agreed under a collective bargaining process directly effective for these employees, or is further consent needed from the employees before the changes are effective?
- Will the new employer have any rights to participate in the collective bargaining process after the transfer date (for example, does it have a collective agreement with the same union and for the same terms)?
- Can the new employer negotiate rights to join the collective bargaining process after the transfer date if it chooses to do so?
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Old employers should take steps to understand the new employer’s intentions regarding collective bargaining by asking:
- Does the new employer recognise the same union and, if so, does it have a similar collective bargaining agreement?
- Does the new employer have proposals to continue the collective bargaining arrangements?
- Does the new employer have intentions to form a new, or use its existing but different, collective bargaining arrangement?
If the new employer does not intend to participate in the same bargaining arrangements as the old employer following the transfer, this information should be included in the measures information from the new employer. The old employer must communicate this information during its information and consultation process with the affected employees.
The amended TUPE rules give new employers certainty that they will not be affected by decisions regarding their employees’ terms and conditions, made after the transfer, unless they themselves have been involved in those decisions. Both the new and the old employers will need to obtain relevant information about collective bargaining arrangements before TUPE transfers take place and ensure that information and consultation obligations are completed.