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Continuous service for notice pay preserved on transfer

28 February 2017

An Advocate General (“AG”) of the European Court of Justice has handed down an advisory opinion on an interesting TUPE issue concerning continuous service, arising in a case referred by the Swedish Labour Court

The dispute centred on the notice periods to which a number of employees were entitled on termination. The applicable notice was derived from collective agreements and based on the individual’s length of continuous service. The employees had transferred to the respondent employer under the Swedish equivalent of TUPE some years previously, with the bulk of their service having been with the transferor. Whether their service with the transferor counted for these purposes made a significant difference to the notice payments due. 

Swedish law contains a similar principle to the one in the UK allowing a transferee to make changes to terms derived from collective agreements after one year from the date of transfer, provided the changes are no less favourable overall (regulation 4(5B) of TUPE). The relevant terms of the transferee’s collective agreement in this case were in fact identical to the terms of the transferor’s collective agreement, but both were silent as to whether the employer was required to take into account service with a previous employer.

The transferee employer argued that the EU Directive on the transfer of undertakings did not require service with the transferor to be taken into account in determining notice rights under a collective agreement. Further, the transferee argued that, as more than one year had elapsed since the transfer, it was no longer bound by the transferor’s collective agreement. 

Unsurprisingly, the AG gave both arguments short shrift, the starting point of his analysis being that the Directive’s objective is to safeguard the rights of employees on a transfer by ensuring their employment continues on the same terms previously enjoyed. Although length of service is not a right as such, the AG pointed out that it is used to determine certain rights of employees (including financial rights on termination). Those rights must be maintained by the transferee in the same way as the transferor and to fail to take into account previous service would defeat that principle. 

The AG added that, while EU law recognises that rights can be changed in some circumstances, this is subject to the strict proviso that the transfer itself may never constitute the reason for the change. In this case, the reason the employees received much shorter notice periods than they otherwise would have done, had their previous service been counted, must necessarily have been the transfer. There had been no separate renegotiation or alteration of the continuous service-based rights.  

The AG considered that the fact the transferee was no longer bound to adhere to terms derived from the transferor’s collective agreement - one year having passed since the date of transfer - was immaterial because the terms of the two agreements were identical. In any event, the AG noted that any change between the collective agreements could not have imposed conditions that were less favourable overall than those which had applied before. 

Unionen v Almega Tjänsteförbunden ISS Facility Services ABAG’s opinion available here

 

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25 May 2017

This session will provide an update on all key TUPE developments over the past year or so.

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