Employment Eye Alert: Is TUPE 'static' or 'dynamic'?

All those working in the Human Resources and employment field are only too familiar with the fact that the TUPE Regulations rarely stand still.  However, back in 2010, the Court of Appeal characterised the Regulations as 'static', in the case of Parkwood Leisure Limited v Alemo-Herron and others, when it held that Regulation 5 of TUPE 1981 (now regulation 6 of TUPE 2006) should be interpreted so that a private sector transferee is only bound by collectively-agreed terms that apply at the date of transfer.  The contrary argument is that TUPE is 'dynamic' – i.e. transferring employees should have the right to benefit from future pay rises, or other changes to collective agreements incorporated into their contracts, agreed between the unions and the public sector transferor after a TUPE transfer; but the Court of Appeal preferred the 'static' approach.  This decision was appealed to the Supreme Court who, in turn, referred the question of whether TUPE is ‘static’ or ‘dynamic’ to the European Court of Justice.  In February 2013, the Attorney-General handed down an Opinion which said that there was no theoretical reason why ‘dynamic’ clauses, referring to existing and future collective agreements, cannot be transferred as a result of a TUPE transfer – and we have been awaiting a final ruling on this point from the European Court of Justice. 

The European Court of Justice has now handed down its judgment and said that the TUPE Regulations are static. It also held that European law actually precludes Member States, such as the UK, from giving a "dynamic" interpretation to clauses in employment contracts referring to collective agreements, whereby the clause would incorporate changes to the agreement negotiated and adopted after the date of a TUPE transfer, if the transferee does not have the possibility of participating in the negotiation process.   What happens next?  The Supreme Court will now resume its consideration of the case, and will make its decision taking into account the findings of the European Court of Justice.  We will keep you posted on developments but, until the Supreme Court hands down its final judgment on this matter, the Court of Appeal decision will stand, i.e. that the TUPE Regulations are 'static': private sector transferees are only bound by collectively-agreed terms that apply at the date of transfer.