The European Court of Justice (CJEU) has ruled that collectively agreed pay rises should not survive Transfer of Undertakings (Protection of Employment) (Tupe) regulations.
The decision in the case of Parkwood Leisure v Alemo-Herron brings an end to nearly three years of legal wranglings.
The court ruled in favour of the employer by applying a static interpretation to collectively negotiated pay terms, meaning that employees covered by industry or sector-wide bargaining, which is incorporated into their contracts of employment, are unlikely to remain entitled to increases in pay negotiated after transfer.
The case will return to the Supreme Court for a final decision as to how the CJEU’s conclusions fit with the UK Tupe regulations and the facts of the case.
Tom Bray, principal associate at law firm Eversheds, said: “The court confirmed that the TUPE directive does not solely aim to safeguard the interests of employees in the event of a transfer of an undertaking, but also seeks to ensure a fair balance between the interests of those employees, on the one hand, and those of the transferee, on the other.
“The expression of such an interpretation of the directive by CJEU is new. In the past, court emphasis in the context of business transfers has very much been upon protecting the interests of the employees.”