How to deal with collective employment agreements and TUPE

In our blogpost of November 20th, 2014, we outlined the European TUPE-regulations (Transfer of Undertakings – Protection of Employment) as laid down in the European Transfer of Undertakings Directive (2001/23/EC) (TUD) and implemented in legislation of EU Member States.

The TUPE-regulations – in a nutshell – require a company that buys “an undertaking” (i.e. a distinguishable business) of another company, to also employ the employees that are working with the acquired business. There is already a transfer of an undertaking in the meaning of the TUD when the buying company (the transferee) gains control over the assets, contracts, customers, etc., required to run the acquired business. Thus, there is not only a transfer in the situation where the transferee buys the share capital of the selling company (in which case the employees would legally remain in the service of the selling company).

The TUPE-regulations also require the transferee to respect the employment conditions of the transferred employees. The transferee must therefore employ the employees of the acquired business under equal or better employment conditions (e.g. equal or better salary, working hours, overtime compensation, holidays, etc.).

This rule is unfortunately not as simple as it sounds, especially when the transferred employees, before the transfer, used to fall under the scope of a collective employment agreement (an agreement between employers and labor unions). Should the transferee also continue to respect the terms of that specific collective employment agreement? Even when the transferee was not a party to the collective employment agreement? The TUD states that 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” (article 3.3 TUD). So the answer is yes, the transferee should respect the terms of a collective employment agreement, though only for the duration of that specific collective employment agreement. The transferee is therefore not bound to future collective employment agreements agreed between employers and labor unions, unless of course the transferee decides to become a party to this collective employment agreement.

The European Court of Justice recently came to an important decision on the applicability of a collective employment agreement after a transfer when a) the individual employment agreements state that future collective employment agreements apply and b) a collective employment agreement is agreed upon after the transfer but with retrospective effect (before the transfer). In our next blogpost we’ll explain the Court’s decision!