Parkwood Leisure Ltd v Alemo -Herron and others

Factual and Procedural Background

The Plaintiffs were originally employed by The Council and enjoyed terms and conditions negotiated by the National Joint Council for Local Government Services (“the NJC”). In 2002 their department was outsourced to Company A; in May 2004 that undertaking was acquired by the Defendant, Company B. Both transfers were governed by the Transfer of Undertakings (Protection of Employment) Regulations 1981 (“TUPE”).

After the second transfer, the NJC concluded a new three-year pay settlement covering 1 April 2004–31 March 2007. Because the Defendant did not recognise the relevant union and was ineligible for NJC membership, it declined to pay the increases due from 1 April 2006 and 1 April 2007. The Plaintiffs issued unlawful-deduction claims under the Employment Rights Act 1996.

• The Employment Tribunal dismissed the claims (July 2008).
• The Employment Appeal Tribunal allowed the appeal and remitted for remedy (January 2009).
• The Court of Appeal reversed the EAT and restored the tribunal’s dismissal (January 2010).
• The present opinion arises on a further appeal, addressing whether a reference to the Court of Justice of the European Union (“CJEU”) is required.

Legal Issues Presented

1. Whether regulations 5(1) and 5(2) of TUPE oblige a transferee to apply future pay increases negotiated by a collective bargaining body to which the transferee does not belong (the “dynamic” interpretation) or only those in force at the date of transfer (the “static” interpretation).
2. Whether, in light of the CJEU judgment in Werhof v Freeway Traffic Systems GmbH & Co KG, national courts are precluded from adopting a dynamic interpretation, or may nevertheless do so because article 7 of the underlying Directive permits member states to confer more favourable rights on employees.

Arguments of the Parties

Plaintiffs’ Arguments

• The contractual clause expressly incorporates NJC terms “from time to time,” so domestic contract law enforces subsequent pay increases.
• Domestic authorities (BET Catering; Whent) recognise that a private-sector employer can bind itself to public-sector pay rates negotiated by others.
• Article 7 of the Directive allows member states to provide more generous protection; therefore TUPE can legitimately go beyond the minimum required by EU law.
• Werhof is factually distinguishable: German law required employers to belong to an employers’ federation, whereas UK law relies purely on contractual incorporation. Thus the freedom-of-association rationale in Werhof does not apply.

Defendant’s Arguments

• Werhof establishes that article 3(1) of the Directive protects only those collective rights “in force on the date of transfer”; dynamic rights are excluded.
• Regulation 5 merely implements article 3(1); it was not intended to enlarge employees’ rights. Domestic case law to the contrary should no longer be followed.
• Because Parliament’s purpose was alignment with the Directive, the national court must construe TUPE consistently with Werhof under the principle of conforming interpretation.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court begins by reviewing domestic authority, noting that earlier Employment Appeal Tribunal decisions endorsed a dynamic interpretation consistent with ordinary contract principles and the common-law freedom of contract.

It then analyses the interpretive obligation lying on domestic courts when legislation was enacted to implement an EU Directive. Authorities such as Pickstone, Litster and von Colson confirm that national courts must construe implementing measures consistently with EU law—but may go further if the Directive permits more favourable treatment (article 7).

The Court asks whether regulations 5(1)–(2) of TUPE were designed to exceed article 3(1) of the Directive. It concludes that, save for some areas where TUPE is expressly more generous (e.g., sea-going vessels, insolvency cases), nothing in the wording of regulation 5 necessarily grants additional protection beyond the Directive.

Turning to Werhof, the Court distinguishes the German statutory context (which required employer association membership) from UK contractual practice. It observes that Werhof held only that article 3(1) did not require dynamic protection; it did not expressly forbid member states from providing it. The Court also notes that the freedom-of-association rationale in Werhof has no direct domestic counterpart, because UK employers are not compelled to join negotiating bodies.

Given these uncertainties, the Court considers it unclear (not acte clair) whether EU law positively precludes a dynamic reading. Because of this doubt, and mindful of the importance of the issue to many employees in collectively-bargained sectors, the Court resolves to seek authoritative guidance from the CJEU.

Holding and Implications

ORDER: The proceedings are stayed and a preliminary reference will be made to the Court of Justice of the European Union.

Parties are invited to submit written proposals within 28 days on the precise questions to be referred. Until the CJEU answers those questions, the substantive issue—whether TUPE binds a private-sector transferee to future NJC pay awards—remains unresolved. The outcome will have significant implications for employees transferred out of the public sector and for employers inheriting collectively-bargained workforces; it may clarify the permissible scope for member states to extend employee protection beyond the EU baseline.