No strings attached

Housing associations which inherit local authority staff under the transfer of undertakings regulations (more commonly known as TUPE) may have thought that they were bound to mirror local authority cost-of-living increases when reviewing salaries.

Just as housing association finances are squeezed by the economy, the Court of Appeal has published a judgement in the case of Parkwood Leisure Limited v Alemo-Herron and others which means that associations can now choose whether or not to mirror the rise negotiated between local authorities and unions.

The facts

Mr Alemo-Herron was employed in the leisure services department of Lewisham Council until 2002. Then the department transferred out to a private sector employer, CCL, and later on to Parkwood in May 2004.

Mr Alemo-Herron’s contract of employment stated that his terms and conditions of employment would be in accordance with collective agreements negotiated from time to time by the National Joint Council for Local Government Services. His pay rates for the period 1 April 2002 to 31 March 2004 had already been collectively agreed by the time of the first transfer out to CCL.

Subsequent pay rises were covered in new collective agreements. Parkwood decided not to honour the collectively agreed pay rises for the period 1 April 2006 to 31 March 2008. Mr Alemo-Herron and 23 of his colleagues brought claims in the employment tribunal for underpayment of their wages.

The issue

The employees argued that they were entitled to have their pay increased in line with the pay rises negotiated by the National Joint Council even where these were new collective agreements negotiated after the transfer (to which Parkwood was not party), as TUPE protected their terms of employment. Parkwood argued that it was not obliged to honour changes to terms and conditions (including pay rises) which were negotiated after the first transfer to CCL.

Mr Alemo-Herron pointed to several UK cases which supported his side’s argument. Parkwood pointed to the European Court of Justice case of Werhof v Freeway Traffic Systems. These cases conflicted with one another and so the tribunal had to decide which case it would follow.

The result

The Court of Appeal decided that the UK courts should follow the European Court of Justice case and, therefore, that employers are not required to honour collective agreements which they are not party to and which are negotiated after a TUPE transfer.

This decision is likely to be welcomed by housing associations up and down the country as it will give them much needed discretion over staff pay rises. Local government employers have in fact already decided that they will not offer any cost-of-living increase this coming year (although they will honour contractual increments); but this decision will be important in future years as housing associations look to control costs.

Doug Mullen is an associate at Anthony Collins douglas.mullen@anthonycollins.com

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