European Commission

Anna Diamantopoulou

Commissioner

Employment & Social Affairs Directorate

European Commission

Brussels

Belgium


We attended a meeting with the Commission’s Services in Brussels on the 1st April regarding our formal complaint to the Commission and the United Kingdom’s letter of response to the Director-General’s letter identifying aspects of our complaint that were problematic for the operation of the Directive. The response from the UK authorities effectively said that the United Kingdom was removed from the field of application of Article 3[2] of Directive 77/187 on the basis that collective agreements were presumed not to be legally enforceable in the United Kingdom.
Our complaint stated that, in the United Kingdom the legal status of collective agreements renders entirely ineffective all those aspects of the ARD that relate to collective agreements, even where such agreements are given legal force through their incorporation in individual contracts of employment. We invited the Commission to consider whether in permitting such a state of affairs to develop and to continue, the United Kingdom is complying with its obligations under the ARD and with the general duty of co-operation imposed upon it by Article 10 EC (ex Article 5).
Regardless of this very serious and obvious problem with the operation of the Directive in the United Kingdom, the Commission’s Services stated that before any action could be taken we would have to overcome two hurdles.
1. We would have to show that the United Kingdom courts had, wrongly applied the Directive or its Domestic law counterpart, the Transfer of Undertakings Protection of Employment Regulations [1981].
2. We would have to show that the United Kingdom had failed to properly transpose the Directive.
The Commission’s Services added the rider that one example of the misapplication of the Directive would not be sufficient ground for the Commission to take action against the United Kingdom. So although Ralton & Others v Havering College of F&HE [2001] was a test case, affecting the rights of around 100,000 workers in the UK, it would not suffice as an example of the incorrect application of Community Law by the United Kingdom courts.
We asked the Commission’s Services how many instances of the incorrect application of the Directive would satisfy them that a problem of the application of the Directive existed. It was stated that we would need to identify at least half a dozen High Court cases in which the Directive had failed to protect workers contractual entitlements contained in collective agreements, following a transfer of employer. For good measure, it was added that the Commission’s Services would then want to see a similar number of High Court cases where Community Law had been correctly applied. In effect we were given a Catch 22 situation, in which we were asked to identify negative instances of the application of Community Law in a transfer situation, and then to cancel these out by identifying a similar number of positive instances.
Hurdle [1] is in our view completely unnecessary for the following reasons:–
The Misapplication of Community Law by the United Kingdom Courts
1. The non-binding nature of collective agreements is enshrined in Section 179 Trade Union & Labour Relations [Consolidation] Act 1992. If a transferee employer wished to end collectively agreed terms following a transfer, no court in the United Kingdom would be in a position to say that the new employer could not end the collective agreement. The courts would unquestionably adhere to Section 179 of the Trade Union and Labour Relations [Consolidation] Act [1992].

2. In the circumstances described in the above paragraph, the United Kingdom courts would be bound by the case law of the Higher courts. In British Fuels v Baxendale and Wilson v St Helen’s Borough Council [1998] Lord Slynn stated that the purpose of the Directive was “not” to alter the rights and obligations after a transfer. It follows that, as collective agreements were not binding before the transfer, they could not be regarded as binding after the transfer. There is absolutely no doubt whatsoever that every court in the United Kingdom would be bound to apply Slynn’s ruling.
3. Any employer who wished to end a collective agreement following a relevant transfer, would be able to do so while comfortably escaping the protections intended by Community Law or TUPE, its national law derivative. Instead of Article 3[2] of the Directive placing a mandatory obligation upon the transferee employer to observe collective agreements following a transfer, the new employer is lawfully able to end such collective agreements containing terms and conditions of employment; including provisions for collective bargaining, disciplinary procedures, redundancy agreements and pension entitlements etc.
4. In the United Kingdom, Lecturers’ pre-transfer terms and conditions of employment were wholly contained in the collective agreement known as the Silver Book. The collective agreement did not supplement their contracts of employment – it was their contract of employment. The Silver Book collective agreement represented the entirety of the Lecturer’s employment contract. The collective agreement was therefore, in fact and in law, the contract of employment of the Lecturer.
Hurdle [2] Incorrect Transposition of Directive 77/187 EC
The United Kingdom’s Failure to Properly Transpose Directive 77/187EC
The Relevant Provisions of Community Law
Directive 77/187
Article 1
1. This Directive shall apply to the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger.Article 3
1. The transferor’s rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer within the meaning of Article 1(1) shall, by reason of such transfer, be transferred to the transferee. 2. Following the transfer within the meaning of Article 1(1), 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.Provisions of national law
Regulations 5 and 6 of the TUPE provide the relevant points:
5. Effect of relevant transfer on contracts of employment etc.
(1) A relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor in the undertaking or part transferred but any such contract which would otherwise have been terminated by the transfer shall have effect after the transfer as if originally made between the person so employed and the transferee. (2) Without prejudice to paragraph (1) above..... on completion of a relevant transfer.....
All the transferor’s rights, powers, duties and liabilities under or in connection with such a contract shall be transferred by virtue of this regulation to the transferee; and.....
Anything done before the transfer is completed by or in relation to the transferor in respect of that contract or a person employed in that undertaking or part, shall be deemed to have been done by or in relation to the transferee.....
6. Effect of relevant a transfer on collective agreements
Where at the time of a relevant transfer there exists a collective agreement made by or on behalf of the transferor with a trade union recognised by the transferor in respect of any employee whose contract of employment is preserved by Regulation 5(1) above, then: That agreement, in its application in relation to the employee, shall, after the transfer, have effect as if made by or on behalf of the transferee with that trade union, and accordingly anything done under or in connection with it, in its application as aforesaid, by or in relation to the transferor before the transfer, shall, after the transfer, be deemed to have been done by or in relation to the transferee.
The recent case of the European Commission v Italy (Case C-65/01) provides important information on the matter of the correct transposition of Community Law.
The case was heard on the 10th April 2003 and the court ruled as follows on the matter of the correct transposition of directives.
“ In relation to the transposition of a directive into the legal order of a member state, it was essential for national law to guarantee that the national authorities would effectively apply the directive in full, that the legal position under national law should be sufficiently precise and clear, and that individuals were made fully aware of their rights and, where appropriate, might rely on them before the national courts”.
The Court’s ruling, summarised above, impacts directly upon our formal complaint to the Commission in regard of the status of the Acquired Rights Directive in the United Kingdom and its application by the United Kingdom courts, as well as in regard of questions relating to the correct transposition of the Directive.
a] The Acquired Rights Directive is not applied in full by the UK as the Court of Justice says it must.
b] The legal position of the Acquired Rights Directive and the Transfer of Undertakings Regulations is not sufficiently precise and clear as they purport to afford protection to employees subject to a relevant transfer, but fail to do so.
c] Individuals’ are not made fully aware of their rights under the Directive because of the confusion between Article 3[2] and Section 179 TULRA [1992].
d] Where, as was the case with Lecturers employed by Further Education institutions in the United Kingdom, the collective agreement was expressly incorporated and consequently was in fact and law their contract of employment, the ability of the transferee employer to lawfully end a collective agreement runs counter to Regulation 5[1] TUPE which states - “a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor”.
e] The United Kingdom has failed to properly transpose Directive 77/187 EC by failing to amend the Trade Union & Labour Relations Act and ensuring that the Directive was effectively applied in full – see case C- 65/01 – and case C-165/82 – in which the Commission successfully charged the United Kingdom with having only partially implemented the Equal Treatment Directive.
The Judgment of the Court of Justice in the case of the European Commission v Italy (Case C-65/01) is reinforced by the judgment in European Commission v Greece Case C-365/93 [1995] ECR I-499 and the European Commission v Netherlands Case C-144/99 [2001] ECR I-3541.
In a judgment of the European Court of Justice of the 8th November 1983 - case C-165/82 Commission v United Kingdom, the Commission charged the United Kingdom with only partially implementing the Equal Treatment Directive, in so far as it has failed to amend and supplement the Sex Discrimination Act 1975.
The Government of the United Kingdom considered the complaint to be unfounded. It argued that by virtue of Section 18 of the Trade Union and Labour Relations Act [1974] any collective agreements made before 1st December 1971 or after the entry into force of that Act, are to be presumed not to have been intended by the parties as legally enforceable unless they are in writing and contain a provision in which the parties express their intention that the agreements are to be legally enforceable.
The Court of Justice held that the Directive covers all collective agreements without distinction as to the nature of the legal effects that they do or do not produce. Following this reasoning we argue that Article 3[2] of Directive 77/187 places a legal obligation on the transferee of an undertaking to observe the terms of a collective agreement, irrespective of the non-enforceability of the agreement under UK domestic law.
The Commission succeeded in its claim that the United Kingdom had failed to fully transpose the Equal Treatment Directive by failing to amend related domestic legislation. Accordingly we say that the case law of the European Court of Justice supports our contention that the Acquired Rights Directive is not properly transposed for the reasons given in the case of the European Commission v Italy [Case C-65/01] and European Commission v United Kingdom [Case 165/82].
Further, the Transfer of Undertakings [Protection of Employment] Regulations [1981] clearly preserves the non-enforceability of collective agreements as against the transferee of an undertaking. In keeping with the case law of the Court of Justice, case C-165/82, Section 179 Trade Union and Labour Relations [Consolidation] Act must therefore be amended to allow the full and proper operation of the Directive.
It cannot be correct or reasonable to allow the situation as described in our complaint to continue unchecked. Indeed, in the initial complaint, our counsel questioned whether or not the obligations conferred on Member States by Article [10] EC, were being met by the United Kingdom.
Under Article [10] EC, Member States must take all appropriate measures, whether general or particular, to ensure the fulfilment of the obligations arising out of the Treaty or resulting from action taken by the institutions of the Community. They must also facilitate the achievement of the Community’s tasks. Moreover, Member States are required to abstain from any measure that could jeopardise the attainment of the objectives of the Treaty.
We very much hope that the Commission will now conclude that the UK is in breach of Community Law on the matter of non-binding collective agreements, and conclude that Lecturers in Further Education establishments have been unlawfully victimised for the reason that they sought the protection of the Acquired Rights Directive.
The Commission’s letter to the UK asked for the UK’s observations on actions taken against Lecturers following the transfer of employer. Those questions did not receive a substantial or meaningful answer, nor were these matters properly addressed, or at all, at the meeting of the 1st April 2003.
The questions concerned:
1] The 10-year pay freeze [penalty] waged uniquely against those who sought the protection of the Directive.
2] The 10-year freeze on career/promotion prospects directed uniquely against those who sought the protection of the Directive.
3] The removal by way of Regulation of contractual entitlements to pensions and lump sums from those that sought the protection of the Directive and managed to remain employed on the pre-transfer Silver Book contracts.
Points 1] & 2] turn on the concept of employment relationship, in addition to the collective agreement being regarded as binding. The entitlement to career progression and, at least, cost of living pay increases, are not expressly or overtly contractual issues but represent what one would understand as being connected to the ‘employment relationship’.
We have no doubt that a clear case for Infringement proceedings exists on the matter of the non-binding nature of collective agreements, and we look to the Commission to use its authority to rectify this entirely unacceptable position. Indeed, Lecturers’ contractual entitlements to their pension, in the event of redundancy, turns upon the Commission ensuring that such collective agreements are legally binding. Moreover, there appears to be an unlawful victimisation against those Lecturers who have suffered a 10 year long freeze on their pay and career prospects as a consequence of seeking to uphold their Community Law rights. We now look to the Commission to exercise the necessary authority to ensure that UK citizens are not short-changed in regard of their Community Law rights.
We now demand that the Commission bring proceedings against the United Kingdom on the basis of our formal complaint. The case law of the Court of Justice as stated in this letter clearly supports our contentions.
Your response to this letter is required within the time frame specified by the Code governing administrative responses. We are entitled to a reasoned response that relates directly to our complaint. A response that does not provide reasoned and transparent grounds for the Commission’s decision will not be regarded as acceptable.




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