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EU law does not prohibit "dynamic" interpretation of TUPE concerning collective agreements

In the Advocate General's view, the EU Acquired Rights Directive does not preclude UK courts from giving a "dynamic" as opposed to a "static" interpretation to TUPE. That is, where transferring employees' contracts provide that their terms are to be determined in accordance with collective agreements negotiated by certain parties from time to time, it is not contrary to the Directive for TUPE to entitle those employees to benefit from post-transfer collectively agreed terms even where the transferee is not involved in the negotiating process.

However, the Advocate General stated that this dynamic approach would breach transferee employers' rights under Article 16 of the Charter of Fundamental Rights of the European Union (freedom to conduct a business) if their obligation to accept future collectively agreed terms is "unconditional and irreversible". This is a matter for the national court to decide. Nevertheless, the Advocate General suggested that the obligation is not unconditional and irreversible under UK law, which does not appear to preclude a transferee and transferred employees from agreeing to dispense with clauses in employment contracts binding the parties to future collectively agreed terms.

If the ECJ's eventual decision is in line with the Advocate General's opinion, the Supreme Court might well decide that the dynamic approach to TUPE as currently drafted is correct. This would be highly significant for public sector outsourcing exercises. However, in its recent consultation paper on TUPE the UK government proposed to make changes to the legislation in response to this issue. (Alemo-Herron and others v Parkwood Leisure Ltd C-425/11.)

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