Employment Flash - 15th July 2010

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Perils of collective agreements, pension and redundancy provisions in TUPE transfer waters...

Worrall & others v Wilmott Dixon Partnerships Ltd [2010] UKEAT 0521 09 DM

These were combined claims of which W's was selected as a test case. The claim concerned the enforceability of a provision in a collective agreement which provided that W, electing to take voluntary redundancy, would be entitled to an increase of 5 years service in calculating his pension.WDP said that they had no discretion to provide for such an increase as the term in the collective agreement had not been incorporated into the contract and in any event due to legislative changes made subsequent to the collective agreement the term had been abolished. The ET had dismissed the claim but had held the term was incorporated by reference into W's contract of employment.

The collective agreement was entered into in 1996 between the first of 3 previous employers of W whose employment to subsequent employers was TUPE transferred and the employers given "Admitted Body Status" to the Local Government Pension Scheme. The relevant term: "3.2 In respect of employees who are made voluntarily redundant, the City Council will, in exercising its discretion in accordance with the Superannuation Regulations award at least five added years." The phrase "added years" it was established in evidence was agreed by the parties to be the same as the concept of "credited period" in the Local Government (Early Termination of Employment)(Discretionary Compensation)(England and Wales) Regulations 2000, SI 2000/1410. The provision for awarding a credited period was removed by The Local Government (Early Termination of Employment)(Discretionary Compensation)(England and Wales) Regulations 2006, SI 2006/2914 which instead provided for a limit of 104 weeks pay. The right to the credited period was abolished from 1st April 2007, therefore the right to the added years was also effectively abolished as from that date.

Silber J agreed with WDP that the term had not been incorporated into W's contract. The Personnel Handbook may have contained a suitable reference to the relevant agreement but there was no evidence that W had ever received the handbook, "...it cannot be right that a party is bound by a contractual document which he has not received merely because it was a document available to him. The fact that a document was available to [W] does not show that he had notice of its terms or that he had agreed to them." A letter written in 2001 when the first transfer occurred and which listed the collective agreement as one of over 100 such agreements and policies, and which gave no details of its contents, stating that it will transfer to the new employer did not satisfy the test of incorporation by reference.

The lack of incorporation disposed of the appeal, but Silber J briefly dealt with some of W's other arguments: (1) W relied on Parkwood Leisure v Alemo-Herron [2010] IRLR 298 to establish that his rights crystallised at the date of the first transfer, April 2001, and therefore the statutory change could be ignored. Parkwood decided (after Werhof v Freeway Traffic Systems GmbH [2006] IRLR 400) that a transferee was only bound by those collective agreements in force at the time of the transfer and the EC Business Transfers Directive 71/187 was not intended to protect expectations to rights and hypothetical advantages flowing from future changes to collective agreements. However, the critical aspect of the present claim was whether the provision in issue survived the repeal of the 2000 regulations, Parkwood does not support ignoring statutory provisions; (2) W also contended he could benefit from the enhancement of the length of pensionable service contained in the Local Government Pension Regulations 1997, SI 1997/1612 which were in force at the time of the transfer and re-enacted in the Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations 2007, SI 2007/1166. But those regulations were about augmentation and were commonly used for recruitment and retention. The "added years" were used when terminating employment for efficiency savings by way of voluntary redundancy, a quite different matter.

Reminder: TUPE, pitfalls and practice by Simon Anderson and Catherine Knowles