United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Claimants	MR THOMAS LINDEN (One of Her Majesty's Counsel) and MS L PRINCE (of Counsel) Instructed by: UNISON Legal Services 1 Mabledon Place London WC1H 9AJ
For the Respondent	MR ADRIAN LYNCH (One of Her Majesty's Counsel) MR R HIGNETT (of Counsel) Instructed by: Messrs Weightmans LLP Solicitors Peat House 1 Waterloo Way Leicester LE1 6LP


 


SUMMARY

TRANSFER OF UNDERTAKINGS: Acquired rights directive

TRANSFER OF UNDERTAKINGS: Varying terms of employment

As a matter of construction of TUPE Reg 5(1), a contractual term entitling employees to pay "in accordance with collective agreements negotiated from time to time by [the NJC]" is protected on a TUPE transfer to the private sector so as to give a right to pay increases negotiated post-transfer. See Whent v Cartledge. This construction is unaffected by the subsequent construction of the Business Transfers Directive by the ECJ in Werhof holding that the Directive did not require such protection. The limitation to one year, or the earlier expiry of the relevant collective agreement, in Art 3(2) of the Directive was not transposed into TUPE Reg 6 and so UK treatment is, as is permitted by Art 7, more favourable than that in the Directive.

Employment Tribunal reversed. Permission to appeal.


 


HIS HONOUR JUDGE McMULLEN QC

1. This case is about the rights of public sector employees to protection of their conditions on competitive transfer to the private sector of local authority services and thence to further private sector employment. The particular point is the extent to which obligations into the future must be honoured in UK law as affected by European Union Directives. In substance, the claim is for unauthorised deductions said to have been made from the appropriate rate of pay of a group of 23 employees. We will refer to them as the Claimants and to Parkwood Leisure Limited as the Respondent, as they were at the Employment Tribunal.

   Introduction

2. It is an appeal by the Claimants in those proceedings against a judgment of an Employment Tribunal chaired by Employment Judge Taylor sitting at London South, registered with reasons on 16 July 2008. The parties were legally represented and today Mr Thomas Linden QC and Ms Prince appear on behalf of the Claimants and Mr Adrian Lynch QC and Mr Hignett for the Respondent. Only Mr Hignett of them was present at the Employment Tribunal and he has assisted us with one point of detail orally, in addition to the many which he raised in his skeleton argument with Mr Lynch.

3. Essentially, the dispute arose out of obligations said to arise under TUPE; that is the Transfer of Undertakings (Protection of Employment) Regulations 1981 ("TUPE"). Collaterally there is an affinity with Article 11 of the European Convention on Human Rights. The Respondent contended it was not obliged to make payments after a certain period following the inheritance of the contracts of employment of the Claimants on the transfer of an undertaking, initially from Lewisham Borough Council to a private sector employer and thence to the current Respondent. The Tribunal decided in the Respondent's favour, dismissing the Claimants' claims. The Claimants appealed. Directions sending this appeal to a full hearing were given in chambers by HHJ Ansell.

   The legislation

4. First, the Business Transfers Directive 77/187 is the one to which reference is made, although there are subsequent amendments in 1998 and 2001 which are immaterial for our purposes (Article 3(2) becoming 3(3)). The relevant provisions are as follows:

   Article 3

   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.

   …

   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 I shall not be less than one year

   Article 8

   This Directive shall not affect the right of Member States to apply or introduce laws, regulations or administrative provisions which are more favourable to …."

5. That Directive is transposed by TUPE which provides, in relevant part:

   "5 Effect of relevant transfer on contracts of employment, etc.

   (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 competed by or in relation to the transferor or 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.

   [4A) Paragraphs (1) and (2) above shall not operate to transfer his contract of employment and the rights, powers, duties and liabilities under or in connection with it if the employee informs the transferor or the transferee that he objects to becoming employed by the transferee.

   6 Effect of relevant transfer on collective agreements

   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."

6. There are certain exceptions to the applicability of Regulations 5(1) and 5(2), so that Regulation 9 deals with trade union recognition; Regulation 7 excludes the transfer of so much of the contract of employment as relates to occupational pensions; Regulation 5(4) excludes the transfer of criminal liability and Regulation 4(b) applies to those who object to such a transfer.

   The facts

7. The Claimants have a standard form for the reduction of the particulars of their employment:

   "Terms and Conditions of Employment:

   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. These documents are available for reference at your Personnel Section. However, in the case of doubt, inconsistency or ambiguity the terms of this Contract shall prevail."

   Salary:

   The salary scale for your post will be as for Scale 3 of the National Joint Council for Local Government Services pay scales, currently £14,748 to £15,600 per annum inclusive of London Weighting (spinal column points 14 to 17). Your appointment will be at £14,748 per annum (spinal column point 14)."

8. The Employment Tribunal found that the following facts were agreed:

   "2. The Claimants were employed by the London Borough of Lewisham where they all worked within the Council's Leisure Department. In 2002 their contracts of employment were transferred under the Transfer of Undertaking Regulations 1981 ('TUPE') from the London Borough of Lewisham to CCL Limited. In May 2004 CCL Limited was taken over by the Respondent and, it was agreed, that their contracts of employment were transferred to the Respondent pursuant to TUPE also.

   4. After the transfer, the Claimants were awarded pay increases in line with the NJC pay settlements for the period 1 April 2002 until 31 of March 2004, by CCL Limited. In the year 2005, the Respondent paid a sum equivalent to the pay increases awarded in line with the NJC pay settlements, but without the acknowledgement of liability to make payments by reference to the NJC settlements.

   5. JNC negotiations surrounding new rates of pay that would be applicable from 1 April 2004 to 31 March 2007 commenced in June 2004 (the Council entering into negotiations with more than one trade union) and were finally advised by circular dated 14 July 2004 (252).

   6. These negotiations commented on a date after the transfer to the Respondent was effected. The Respondent does not recognise the trade union, UNISON, and were not party to the pay negotiations with UNISON or the other unions. Relying on Regulations 5, 6 and 12 of the 1981 TUPE Regulations, the Claimants contend that the Respondent is legally obliged to comply with the terms of the contract of employment with regard to the benefit of pay increases negotiated under the same collective agreement and set out in the Green Book, for the period 31 April 2006 to 31 March 2008. The Claimants claim that the Respondent is bound by the clause relating to pay, because it has been continuously in force since the date of the original transfer of contracts to CCL Limited."

9. With those facts in mind, it came to the following conclusions on the Claimants' case:

   "9. Having considered all of the circumstances, the Tribunal finds that the collective agreement negotiated in July 2004 was a new agreement, the NJC having negotiated a comprehensive revision of terms relating to pay, training and development and other aspects concerning working arrangements. (We were also satisfied that this was a collective agreement as defined by Section 178 of the Trades Union and Labour Relations Act 1992.)

   11. In arriving at our judgment we had regard to Article 3 of Council Directive 1977 (replaced by 2001 EC Directive), safeguarding employees' rights upon transfer. Article 3 provides that the collective agreement relating to pay applies only 'until the date of termination or expiry of the collective agreement' or until it is replaced by another collective agreement. The collective agreement existing between 2001 and 2004 having expired and having been replaced by the agreement commencing 2004, we find the Claimants are no longer entitled to the protection by Regulation 4 and 5 that they enjoyed upon transfer. We conclude therefore that the Claimants are not entitled under the terms of their employment contracts to be remunerated in accordance with the 3 year National Joint Council for Local Government Services (NJC) pay settlement applying in relation to the period from April 2006 until 31 March 2008.

   12. The Tribunal is satisfied that the Claimants do not have any entitlement, pursuant to the contracts of employment, to pay rises agreed in the collective agreement that expired in 2004 against the Respondent."

10. The Employment Tribunal directed itself by reference to the Directive and to TUPE and to the two principal cases which have informed the argument before us: Whent & Others v T Cartledge Limited [1997] IRLR 153 EAT, and Werhof v Freeway Traffic Systems Gmbh & Co KG [2006] IRLR 400 ECJ.

    Discussion and conclusions

11. We will consider the arguments of both teams of counsel at the same time as we examine the relevant authorities to which we have been referred. It is common ground that the law as set out in Whent v Cartledge represents the application of legal principles correctly decided without reference to the Business Transfers Directive. Whent v Cartledge deals with a term very similar to the term in the present case, what the European Court describes as the tension between the static and the dynamic approaches. In a nutshell, a relevant transfer operates to preserve and safeguard wages payable at the time of the transfer. That is the static position.

12. The dynamic position concerns a clause which links future pay increases to either an event occurring or negotiations conducted in a collective bargaining forum. As to that dynamic position, in Whent v Cartledge HHJ Hicks QC for the EAT says this:

    "9. Once it is accepted, as it is, (i) that Regulation 5(1) and (2) applied, and (ii) that there has been no relevant subsequent variation in the contract of employment, the issue becomes simply one of the true meaning of clause 1, quoted at the outset of this judgment. Leaving aside for the moment the opening phrase, to which we shall return, the relevant words are "your rate of remuneration .... will be in accordance with the [NJC Agreement]". There is no dispute that until the transfer to the respondent that, on its true construction, incorporated the result of the annual round of negotiations. There is no apparent reason why the transfer should cause any change in the meaning of the words. Our initial conclusion, therefore, is that Mr Whent and his colleagues are right and their employer wrong.

    16. The tribunal's next reason is that it "cannot be right that an employer is bound ad infinitum by the terms of a collective agreement negotiated by bodies other than themselves". In our view that is fallacious for a number of reasons. In the first place the employer is not in any event bound "ad infinitum". It can at any time, without breach of contract, negotiate variations of contract with individual employees, as its letter of 21 April 1994 professes it as being eager to do, or terminate their contracts on due notice and offer fresh ones. The latter course may no doubt lead to its incurring obligations to compensate for unfair dismissal, but that is a matter for it to weigh commercially. The words "ad infinitum" are in truth no more than colourful surplusage; the question is simply whether the employer is still bound by the NJC Agreement, so far as incorporated in individual contracts of employment, notwithstanding its "withdrawal" from collective participation. The second reason why this argument is fallacious is that if correct there seems to be no reason why it would not have applied from the moment of transfer, whether or not the respondent had "withdrawn", since there is no finding, and little likelihood, that it had any representation on the management side of the NJC. The third is that 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. The tribunal themselves accept that that is true of some employers who are not local authorities. It must, on the agreed facts set out near the beginning of this judgment, equally be true of non-union employees."

13. That is substantially consistent with a different division of the EAT, presided over by Lindsay J, President, in BET Catering Service Ltd v Ball & Others EAT 637/96, again an illustration of the effect of a dynamic clause in a contract of employment:

    "Turning from the general to the more particular, we see no conceptual or legal difficulty in an employer agreeing (or being treated as if having agreed) a system under which he agrees to pay his own employees wages which are determined, directly or indirectly, by some third party or by a reference to the awards of third parties purporting to be directed to categories other than his own employees. Contrary to BET's argument, we do not see that to be commercially unreasonable and the experience of the members suggests that it is not uncommon. Nor is it the case, either for reasons of law or of business, that that would only occur where the employer could or might influence the third party. We have no difficulty in contemplating a contract by BET that has the effect that it should pay its employees NJC rates. It is not as if the reference in the Employees' terms and conditions to NCJ terms was frozen in time so as to relate only to those terms as they were at the date of the commencement of employment or as at the date of the transfer; Mr Napier very sensibly accepts that the reference is to the terms as they should from time to time be. We have been unable to see any reason, either, why a private sector employer should not be able to bind himself or to be taken to have bound himself to pay public sector rates, nor any reason why Regulation  5(1) should not operate so as to have the effect that he had so bound himself. Nor can we see any reason why NJC rates should not be payable by BET simply because the rates are addressed to a category - public sector employees - within which, after the transfer, the Employees, of course, ceased to be included. It is not as if the manner of the incorporation of NJC rates or terms and conditions made any reference such as 'If and so long only as the employee shall be in the public sector' or 'If and so long only as the employee is within a category to which the NJC terms and conditions purport to refer'. To revert to the passage we have cited from Adams above, the parties (who, after the transfer, must be taken to be BET and the Employees) said that the Employees' terms and conditions are the NJC terms and conditions and the starting point is that they said what they meant and meant what they said. That meaning is clear and the factual setting will have little or no bearing on the construction of the contract which Regulation 5(1) deems there to have been made."

14. We add our own observation to that recorded by the President as being the experience of the Members in that case. It is not uncommon for an employer to agree with employees or a trade union that it will abide by wages set in a different forum by a third party, here a local authority bargaining structure. For many years, for example, the governing body of Lincoln's Inn agreed to pay to its own porters and gardeners the same wages as were paid to those people engaged in similar pursuits in Lincoln's Inn Fields by Camden London Borough Council, the wages of whose staff were regulated by the same NJC as in this case. It is convenient and common, because small employers do not have the resources of large employers for research and skilful bargaining and the employees may not be so well organised in putting forward claims. So it is the experience of this Tribunal, too, that such arrangements are not uncommon and have advantages for all concerned.

15. Those two cases representing the position in the United Kingdom have been supplemented by other authorities to the same effect: Glendale Managed Services v Graham & Ors [2003] ICR 465, and by implication, Ackingclose v Gateshead MBC [2005] IRLR 79 and Glendale Grounds Management v Bradley EAT/485/97. Essentially, the legal proposition set out in BET was accepted, disputes arising as to the construction of the particular linking clause in each case.

16. Thus, Mr Linden submits that represented the law, applying Regulation 5(1), and, as he observed in reply, there was no substantial dispute as to that position, until the Court of Justice descended upon Werhof. In that case, the Court summarised the facts of a German metalworker in the following way:

    "8. On 1 April 1999 that company was converted into Siemens DUEWAG GmbH. On 1 October 1999 Siemens DUEWAG GmbH transferred to the defendant part of its business, in which the Claimant was employed. The defendant is not a member of any employers' association which concludes collective agreements.

    9. By works agreement concluded on 2 August 2001, the defendant agreed with the works council a grid for the grading of employees on the basis of the provisions of the abovementioned collective agreement. On 13 August 2001 the defendant concluded a further works agreement providing for a one-off wage payment.

    10. By letter of the same date, the Claimant declared that, in return for the one-off payment, he irrevocably waived as against the defendant all individual rights that he might be able to claim to wage increases pursuant to a collective agreement applicable to the period before the works agreement came into force. On 29 August 2001, the defendant concluded with the Claimant a supplement to the contract of employment according to which the Claimant was to receive basic pay under salary bracket 8 and a performance bonus.

    11. IG Metall and the AGV concluded a new collective agreement for the North Rhine-Westphalia metal and electrical industry on 23 May 2002, which provided for an increase in the wage rate of 2.6% and an additional payment from 1 June 2003.

    12. The Claimant brought an action before the Arbeitsgericht Wuppertal (Labour Court, Wuppertal) claiming, with effect from 1 June 2003, payment by the defendant of the difference between his basic salary and the sum provided for under the collective agreement of 23 May 2002, and the additional payment provided for by that agreement. That action was dismissed by judgment of 7 January 2004."

17. The Court received a question from the Arbeitsgericht in North Rhine-Westphalia which it summarised in the following way:

    "17. By its first question, the national court asks, essentially, whether Article 3(1) of the Directive must be interpreted as meaning that, where an undertaking is transferred and a contract of employment refers to a collective agreement to which the transferor is a party but not the transferee, the transferee is not bound by collective agreements subsequent to the one in force at the time of that transfer."

18. It recorded the observation submitted to it by the interested parties. It is clear, as Mr Lynch submits, that the issue in the case concerned contractual terms emanating from collective agreements. The Court said this, and because so much attention has been given to this we include it in its substantial form:

    "23. First, the general point should be made that a contract is characterised by the principle of freedom of the parties to arrange their own affairs, according to which, in particular, parties are free to enter into obligations with each other. Under that principle, and in a situation such as the one in the main proceedings where the defendant is not a member of any employers' association and is not bound by any collective agreement, the rights and obligations arising from such an agreement do not therefore apply to it, as a rule. Otherwise, as the Advocate General noted in point 52 of his Opinion, the principle that contracts cannot impose obligations on third parties would be infringed.

    24. However, in respect of the transfer of an undertaking and its consequences on employment relationships, unconditional application of the above mentioned principle could result in erosion of the rights which the employee has under his contract of employment and the collective agreement to which the employer transferring the undertaking was party, but not the transferee. That is why the Community legislature sought to ensure that, on transfer of an undertaking, employees enjoy special protection designed to prevent the erosion which could result from application of that principle.

    25. Furthermore, according to the case-law of the Court, the Directive is intended to safeguard the rights of employees in the event of a change of employer by allowing them to continue to work for the new employer on the same conditions as those agreed with the transferor (see, inter alia, Case 324/86 Daddy's Dance Hall [1988] ECR 739, paragraph 9, Case C-362/89 D'Urso and Others [1991] ECR I-4105, paragraph 9, and Case C-399/96 Europièces [1998] ECR I-6965, paragraph 37).

    26. It is also settled case-law that the rules of the Directive must be considered to be mandatory, so that it is not possible to derogate from them in a manner unfavourable to employees (see Martin, paragraph 39). It follows that the contracts of employment and employment relationships existing, on the date of the transfer of an undertaking, between the transferor and the workers employed in the undertaking transferred are automatically transferred to the transferee by the mere fact of the transfer of the undertaking (see, to that effect, D'Urso and Others, paragraph 20, and Case C-305/94 Rotsart de Hertaing [1996] ECR I-5927, paragraph 18).

    27. Here, the contract of employment of the Claimant in the main proceedings refers, as regards wages, to a collective agreement. That clause in the contract of employment is covered by Article 3(1) of the Directive. By virtue of the Directive, the rights and obligations arising from a collective agreement to which the contract of employment refers are automatically transferred to the new owner, even if, as in the main proceedings, the latter is not a party to any collective agreement. Accordingly, the rights and obligations arising out of a collective agreement continue to bind the new owner after the transfer of the business.

    28. In respect of the interpretation of Article 3(1) of the Directive, a clause referring to a collective agreement cannot have a wider scope than the agreement to which it refers. Consequently, account must be taken of Article 3(2) of the Directive, which contains limitations to the principle that the collective agreement to which the contract of employment refers is applicable.

    29. First, the terms and conditions under that collective agreement are to continue to be observed only until the date of its termination or expiry, or the entry into force or application of another collective agreement. Thus the wording of the Directive does not in any way indicate that the Community legislature intended that the transferee be bound by collective agreements other than the one in force at the time of the transfer and, consequently, that the terms and conditions be subsequently amended through the application of a new collective agreement concluded after the transfer. Such an assessment is, moreover, consistent with the objective of the Directive, which is merely to safeguard the rights and obligations of employees in force on the day of the transfer. On the other hand, the Directive was not intended to protect mere expectations to rights and, therefore, hypothetical advantages flowing from future changes to collective agreements.

    30. Secondly, the Member States may limit the period for observing the terms and conditions arising from a collective agreement, provided that that period is not less than one year. In a way, this limitation is subsidiary, since it is applicable if none of the above mentioned situations, that is, termination or expiry of the existing collective agreement, or entry into force or application of a new collective agreement, arises within a period of one year after the transfer.

    31. In addition, although in accordance with the objective of the Directive the interests of the employees concerned by the transfer must be protected, those of the transferee, who must be in a position to make the adjustments and changes necessary to carry on his operations, cannot be disregarded."

19. In forming its opinion as to the scope of the Directive, this time the original Directive, the Court also paid attention to Article 11 of the Convention, which it acknowledged was one of the fundamental rights within the European Union. It was referred to two authorities of the European Court of Human Rights: Sigurjonnson v Iceland [1993] 16 EHRR 462 and Gustafsson v Sweden [1996] 22 EHRR 409, at paragraph 45, and said this:

    "34. If the 'dynamic' interpretation, supported by the Claimant, of the contractual reference clause mentioned in paragraph 18 of this judgment were applied, that would mean that future collective agreements apply to a transferee who is not party to a collective agreement and that his fundamental right not to join an association could be affected."

20. It thus came to the conclusion that the answer to the question would be as follows:

    "It follows from the foregoing that the answer to the first question must be that 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 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."

21. It did not find it necessary to deal with the second question addressed to it.

22. The Court's juxtaposition of the static and the dynamic approach is the one which engages the dispute in the present case. Mr Linden QC contends that, as a matter of domestic law, the contractual provision in our case is regulated by the four authorities to which we have referred, starting with the BET. There is nothing offensive about a contractual clause which entitles a worker to have his or her wages fixed according to an external benchmark set by collective bargaining. As a matter of domestic law, under TUPE those rights are preserved just as much as any substantive right. Thus, not only is the transferee obliged to pay the rate of pay in force at the time of the transfer, here from CCL to the Respondent, but is obliged to pay into the future in accordance with the dynamic clause for regulating future wages. So long as there is an NJC which sets the rate of pay for this particular worker, that is the rate of pay which the transferee is required to pay. That principle of the English law of contract is not affected, nor could be affected, by the Directive.

23. Mr Lynch QC substantially accepts the correctness of the domestic law but says that everything has changed as a result of the judgment in Werhof, for why else would the Court be asked to deal with this matter? Unless effect is given to Werhof by the Employment Tribunal and by ourselves, the Court's judgment would be stultified and have no effect. The Court was not dealing with a peculiarly European concept of collective agreements legally enforceable, between the collective parties (for example as arose in Germany in Werhof) but its language is apt to deal with contracts on the Anglo-Saxon model.

24. We have already accepted Mr Lynch's proposition that the Court was addressing contractual terms. Counsel accept the Anglo-Saxon approach to collective bargaining and labour law: collective agreements are not legally enforceable by the collective parties, see the Trade Union and Labour Relations (Consolidation) Act 1992, section 179. The way in which collective bargaining has an effect on individual wages is via a term in the contract of employment where each employee agrees to the incorporation of a particular term in a collective agreement or of a mechanism for setting terms. That is what happened in the instant case.

25. The express submission of Mr Linden is that the handling by the European Court of a reference for a preliminary judgment under the Directive cannot take away an established right under English law. The Member States are free to either apply their own law or to introduce laws which are more favourable to the workers within its scope than are exigible under the Directive. So, the established position, at least since BET, for workers in the United Kingdom, could not be reduced by the subsequent interpretation of the Directive by the European Court in Werhof. Mr Linden further submits that that is clear from the language of the holding in Werhof. It is in negative terms as the Directive "not precluding" a certain state of affairs.

26. The approach to TUPE has been made clear by the House of Lords in Litster v Forth Dry Dock Co Limited [1989] ICR 341 where Lord Templeman said at page 350G: that Regulation 5(1) is "in conformity with Article 3 of the Directive". Thus it is clear that Article 3(1) of the Directive finds life in the UK through TUPE Regulation 5(1).

27. There is no provision corresponding specifically to that in Article 3(2). Mr Linden is correct when he submits that the transposition of the obligations relating to collective agreements into UK law pays specific attention to what we have described as the Anglo-Saxon model. That takes the form of TUPE Regulation 6, which covers matters which are not within the scope of Regulation 5(1). Obvious terms in 5(1) are terms relating to pay, and in Regulation 6 are procedural matters such as grievances and discipline. Regulation 9 deals with trade union recognition and imposes a qualification on its continuation.

28. Those regulations are the UK's way of adapting the Directive to the UK system of industrial relations. There is a specific reference to the non-binding nature of collective agreements by statute unless the parties specifically agree, in a prescribed form. Thus, the second paragraph of Article 3(2) is not transposed into TUPE. It is clear that that limitation on a worker's rights in the Directive does not appear in domestic law.

29. Other examples have been drawn to our attention where improvements have been made in the UK model, although not precisely in relation to Regulation 5(1). See, for example Oakley Inc v Animal Limited, Secretary of State for Trade and Industry Intervening [2006] Ch 337 and TGWU v Swissport (UK) Ltd & Aer Lingus EAT, albeit in the context of insolvency provisions which are dealt with specifically by Regulation 4.

30. The issue as to whether or not a dynamic obligation is imposed on an employer was the subject of the Court's judgment in Werhof. We accept Mr Linden's submission that a judgment of the Court of Justice, on a preliminary reference, as to the scope Europe-wide of the Directive is not capable of changing the established position under domestic law which, as he submits, provides for protection of a dynamic wage-fixing clause. The Employment Tribunal was wrong not to follow the domestic interpretation of TUPE, preferring to follow the European Court's judgment in Werhof.

31. Mr Linden contended it was open to the UK Parliament, in passing TUPE, to recognise the position under contract law and indeed to make more favourable provision for employees than was forthcoming under the Directive. Objection was taken by Mr Lynch during the course of his response (but not before) to this, since it appeared to be a new point of law. The jurisprudence of the EAT, approved by the House of Lords in Celtec Ltd v Astley C-478/93 [2006] IRLR 635 at para 100 is that new points of law should be taken only in exceptional circumstances and will very rarely be taken if there is a requirement for remission to an Employment Tribunal for it to make findings of fact.

32. We accept from Mr Hignett, who was there, that there was no express reference by counsel then appearing for the Claimants to this argument. It may well be that it is implicit in the conflict between the authorities which the Tribunal was asked to adjudicate that that was the conclusion, but the Tribunal cannot be criticised if it did not pick that point up.

33. If it is indeed a new point, we turn then to consider whether we should consider it. Mr Lynch objects and suggests that it would require a remission to the Employment Tribunal for material to be produced on evidence as to what was the intention in passing the TUPE Regulations in 1981. In our judgment this is simply a matter, as Laws LJ put it in Glennie v Independent Magazines (UK) Ltd [1999] IRLR 719 at para 17, of pure hard-edged law. The primary source is the wording of the regulations themselves. We are able to look at this without the necessity for any evidence to be adduced, and we will therefore allow the point to be argued. As we have said, the conclusion is clear.

34. We then turn to the second matter which exercised the attention of the European Court. This is the relationship between the Directive, if construed in favour of Mr Werhof, and the Article 11 ECHR rights of the Respondent employer. It must be borne in mind that no direct breach of the article has been advanced on behalf of the Respondent. Mr Lynch submits, however, that the approach is to look at the policy, which was indeed the approach of the European Court, and to consider whether or not the construction of the Directive offended the obligations of the European Union under the Convention.

35. The two authorities relied on by the Court point in different directions. We are satisfied that the choices available to the Respondent in our case are such that it does not have its rights infringed under Article 11 to abstain from joining an employers' association if it so chooses. The options were the same as in Gustafsson; that is, to negotiate a separate agreement, and in other ways to abstain from the collective bargaining structure from which, as Mr Lynch points out, it was in any event excluded by virtue of its being a private sector employer.

36. But other methods were available to it: it could give notice to terminate the contract of employment; it could seek to negotiate a variation, which at the distance in time from the transfer with which we are concerned, might well be sufficiently immune from it being connected to the transfer itself. So we consider that there is no danger of such rights as the Respondent has under Article 11 being infringed as a result of the ruling in this case.

37. In those circumstances, the approach we adopt is one of construction. As an aid to our construction we put two propositions to Mr Lynch, the answer to each of which demonstrates that the primary objection in this case is not to the dynamic nature of the obligation under the clause, but to the fixing, by a body to which the Respondent is not a party, of wages for the future. He accepted that a contractual term which said that the employee's wages will increase in line with inflation each year would be capable of being enforced as a matter of contract long into the future. So would an obligation to improve wages if the Prime Minister, as responsible Minister for the Civil Service, announced in Parliament that he would accept a recommendation of the Senior Salaries Review Body. Each of those is dynamic, contractual and outside the control or influence of the Respondent.

38. What makes the case different, however, is the special nature of the linkage to collective agreements. For that submission, Mr Lynch relies upon the statement in paragraph 28 of Werhof. Paragraph 27 which precedes it could be applied directly to TUPE Regulation 5(1). That is the UK model, a contractual term arising out of terms negotiated collectively. But Article 3(2) comes into play, which contains limitations on the principles. As we have indicated, that provision does not take effect as a provision of TUPE. There is no provision corresponding to the second part of Article 3(2) containing the limitation which the Respondent prays in aid here. Therefore it is of no assistance to us.

39. Finally, we bear in mind that TUPE and the Directive are both measures aimed at protection, or safeguarding, of employees' rights, and it would to be odd if those rights which are accepted to be part of the canon in domestic labour law could be taken away by a subsequent interpretation of the Directive, as to which Member States have a margin of appreciation. That is what has happened in this case and, in our judgment, is wrong. We allow the appeal and give permission to the Respondent to appeal to the Court of Appeal.