UKSC 26
On appeal from:  EWCA Civ 24
Parkwood Leisure Limited (Respondent) v Alemo-Herron and others (Appellants)
Lord Hope, Deputy President
JUDGMENT GIVEN ON
15 June 2011
Heard on 13 and 14 April 2011
Thomas Linden QC
(Instructed by Unison)
Adrian Lynch QC
(Instructed by Freeth Cartwright LLP)
"During your employment with the council your terms and conditions of employment will be in accordance with collective agreements negotiated from time to time by the National Joint Council for Local Government Services, set out in the scheme of conditions of service (commonly known as the Green Book) supplemented by agreements reached locally through the council's negotiating committees."
Among the terms and conditions collectively agreed by the NJC were rates of pay for employees of local authorities.
"…there is simply no reason why parties should not, if they choose, agree that matters such as remuneration be fixed by processes in which they do not themselves participate."
"Whereas it is necessary to provide for the protection of employees in the event of a change of employer, in particular, to ensure that their rights are safeguarded;
Whereas differences still remain in the Member States as regards the extent of the protection of employees in this respect and these difference should be reduced;
Whereas these differences can have a direct effect on the functioning of the common market;
Whereas it is therefore necessary to promote the approximation of laws in this field …."
No mention was made in the recitals of any need to protect employers in the event of a change in employer as against the rights that were to be safeguarded for the protection of the employees.
"1.The transferor's rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer within the meaning of article 1(1) shall, by reason of such transfer, be transferred to the transferee.
Member States may provide that, after the date of the transfer within the meaning of article 1(1) and in addition to the transferee, the transferor shall continue to be liable in respect of obligations which arose from a contract of employment or an employment relationship.
2. Following the transfer within the meaning of article 1(1), the transferee shall continue to observe the terms and conditions agreed in any collective agreement on the same terms applicable to the transferor under that agreement, until the date of termination or expiry of the collective agreement or the entry into force or application of another collective agreement.
Member States may limit the period for observing such terms and conditions, with the proviso that it shall not be less than one year."
"This Directive shall not affect the right of member states to apply or introduce laws, regulations or administrative provisions which are more favourable to employees."
In that connection it should be noted that the Directive did not apply to sea-going vessels: article 1(3). Nor, according to consistent decisions of the Court of Justice, did it apply to transfers of undertakings in the context of insolvency proceedings unless the undertaking had continued to trade or was expected to continue to trade: see Transport and General Workers' Union v Swissport (UK) Ltd (in administration) and another  ICR 1593, paras 56-58.
"(1) Except where objection is made under paragraph (4A) below, a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor in the undertaking or part transferred but any such contract which would otherwise have been terminated by the transfer shall have effect after the transfer as if originally made between the person so employed and the transferee.
(2) Without prejudice to paragraph (1) above, but subject to paragraph (4A) below, on the completion of a relevant transfer –
(a) all the transferor's rights, powers, duties and liabilities under or in connection with any such contract shall be transferred by virtue of this regulation to the transferee; and(b) anything done before the transfer is completed by or in relation to the transferor in respect of that contract or a person employed in that undertaking or part shall be deemed to have been done by or in relation to the transferee."
A "relevant transfer" is a transfer to which TUPE applies, that is to say a transfer from one person to another of an undertaking situated immediately before the transfer in the United Kingdom: regulation 3, read with regulation 2(1). Regulation 5(4A), which was inserted by section 33(4)(c) of the 1993 Act, provided that paragraphs (1) and (2) were not to operate to transfer the employee's contract of employment and the rights, powers, duties and liabilities under or in connection with it if he informs the transferor or the transferee that he objects to becoming employed by the transferee.
"Where at the time of a relevant transfer there exists a collective agreement made by or on behalf of the transferor with a trade union recognised by the transferor in respect of any employee whose contract of employment is preserved by regulation 5(1) above, then –
(a) without prejudice to section 18 of the 1974 Act or article 63 of the 1976 Order (collective agreements presumed to be unenforceable in specified circumstances) that agreement, in its application in relation to the employee, shall, after the transfer, have effect as if made by or on behalf of the transferee with that trade union, and accordingly anything done under or in connection with it, in its application as aforesaid, by or in relation to the transferor before the transfer, shall, after the transfer, be deemed to have been done by or in relation to the transferee; and(b) any order made in respect of that agreement, in its application in relation to the employee, shall, after the transfer, have effect as if the transferee were a party to the agreement."
Section 18 of the 1974 Act is now to be found in section 179 of the Trade Union and Labour Relations (Consolidation) Act 1992.
The interpretative obligation in domestic law
"it is the duty of the court to give to regulation 5 a construction which accords with the decisions of the European Court upon the corresponding provisions of the Directive to which the regulation was intended by Parliament to give effect. The precedent established by Pickstone v Freemans plc indicates that this is to be done by implying the words necessary to achieve that result."
Lord Oliver of Aylmerton said at p 559:
"If the legislation can reasonably be construed so as to conform with those obligations – obligations which are to be ascertained not only from the wording of the relevant Directive but from the interpretation placed upon it by the European Court of Justice at Luxembourg – such a purposive construction will be applied even though, perhaps, it may involve some departure from the strict and literal application of the words which the legislature has elected to use."
"the member states' obligation arising from a Directive to achieve the result envisaged by the Directive and their duty under article 5 of the Treaty to take all appropriate measures, whether general or particular, to ensure the fulfilment of that obligation, is binding on all the authorities of member states including, for matters within their jurisdiction, the courts. It follows that, in applying the national law and in particular the provisions of a national law specifically introduced in order to implement Directive 76/207, national courts are required to interpret their national law in the light of the wording and the purpose of the Directive in order to achieve the result referred to in the third paragraph of article 189."
"In cases where no European Community rights would be infringed, the domestic legislation is to be construed and applied in the ordinary way."
"97 It is true that Directive 95/46 allows the member states a margin for manoeuvre in certain areas and authorises them to maintain or introduce particular rules for specific situations, as a large number of its provisions demonstrate. However, such possibilities must be made use of in the manner provided for by Directive 95/46 and in accordance with its objective of maintaining a balance between the free movement of personal data and the protection of private life.
98 On the other hand, nothing prevents a member state from extending the scope of the national legislation implementing the provisions of Directive 95/46 to areas not included within the scope thereof, provided that no other provision of Community law precludes it."
Was regulation 5 of TUPE designed to be more generous?
Is it open to the national court to interpret regulation 5 more generously?
"in Germany, the Bundesarbeitsgericht (Federal Labour Court) has interpreted paragraph 613a of the BGB stating that, under the second sentence, the collectively agreed rules become a constituent part of the contract of employment with the content that they possess at the time when the business is transferred and subsequent amendments are not relevant, because a right to benefit from the advantages of further dynamic development in negotiation cannot be inferred, since the protection granted to the rights of workers is static; the Bundesarbeitsgericht, combining the first sentence of the provision with paragraphs 3 and 4 of the TVG [Law on Collective Agreements: Advocate General, para 10], also considers that subjection of workers to subsequent collective agreements cannot do without the subjection of the employer; otherwise, if the company were transferred, the position of the employees would depend on the concluding of an arrangement for parity of treatment."
The point that the Advocate General was making in the concluding part of this paragraph was that the system of collective bargaining that was in issue in that case was enforceable by statute, which required the employer to be a member of the employer's federation that was a party to the collective agreement. The only way the collective agreement could be rendered enforceable, if the statute did not apply to it, would be by entering into a contract which gave parity of treatment to the employee. Mr Werhof's contract of employment was not of that kind.
". . . Article 3(1) of the Directive must be interpreted as not precluding, in a situation where the contract of employment refers to a collective agreement binding the transferor, that the transferee, who is not a party to such an agreement, is not bound by collective agreements subsequent to the one which was in force at the time of the transfer of the business." [emphasis added]
Is a dynamic interpretation precluded by article 3(1)?