Transfer of Undertakings Directive – employer’s right to conduct business

The employees did not accept the pay reduction, claiming that they should continue to be paid at the higher pay rate applicable when they transferred.

The EFTA Court disagreed. It stated that it was consistent with the Directive if the pay of transferred employees under the collective agreement with the transferor is replaced by pay laid down by an agreement in force with the transferee after the expiry of the transferor’s collective agreement. The reason for the drop in pay was not the transfer; it was the termination of the national agreement which had applied to the employees prior to the transfer, the notice for which had been given two months before the transfer date. Therefore the loss of the entitlement to higher pay was not linked to the transfer but to the expiry of the collective agreement.

This case follows the same principle as that in the Alemo-Herron decision of the CJEU, which held that the Transfer of Undertakings Directive was designed to ensure a fair balance between the interests of employers and employees and not just to protect the interests of employees where a transfer takes place.

This legal update is provided for general information purposes only and should not be applied to specific circumstances without prior consultation with us.

For further details on any of the issues covered in this update please contact Gemma Ospedale, Partner in Employment on 020 7583 2222.