The appellant employees (A) appealed against a decision that their entitlement to pay increases negotiated by collective agreement was not protected under the Transfer of Undertaking (Protection of Employment) Regulations 1981 (TUPE) reg.5 post-transfer of their employment to the respondent employer (B). A had been entitled under their contracts of employment with a local authority to pay increases in accordance with collective agreements negotiated by the National Joint Council for Local Government Services (NJC). Their contracts were transferred under the Regulations to a privatesector employer and then further transferred to P, also a private-sector employer.

P refused to recognise a pay settlement negotiated by the NJC after the transfer. A claimed that P was obliged to comply with the terms of their contracts of employment under reg.5. The employment tribunal dismissed A's claim. The settlement was deemed a new agreement, based on the European Court of Justice's interpretation of Directive 77/187 art.3(1) in Werhof v Freeway Traffic Systems GmbH & Co KG (C-499/04) [2006] E.C.R. I-2397.

The Employment Appeal Tribunal allowed A's appeal. It reasoned that the Regulations gave employees with broader rights than intended by the decision in Werhof. The Court of Appeal held that the effect of Werhof was that P was not obligated under art.3 (1) of the Directive to any collective agreement made post-transfer. It was held that reg.5 of the Regulations was not intended to extend employees' rights beyond the scope of art.3 (1). The issues to consider were whether reg.5 (1) and reg.5 (2) were intended to provide broader rights than the interpretation of art.3 (1) in Warhol. If the answer to this preliminary question was ‘no’, the curt then had to consider whether the national courts were prohibited by art.3 (1) from interpreting reg.5 more broadly. The issue was referred to the ECJ. It reaffirmed that domestic legislation enacted to give effect to the United Kingdom's obligations under EU law must be read in line with those obligations.

The court held reg.5(1) and reg.5(2) to be no more generous than art.3(1), and the intention of Parliament was to do no more than implement art.3(1). The national courts may decide to extend the scope of national legislation implementing the provisions of the Directive to areas not included within its scope, provided that no other provisions of EU law disallowed it. The court noted the difference in the system under national law considered in Werhof and the system and the system considered in this context and that different questions were addressed by the ECJ in each case. It was not possible to infer from the judgment in Werhof whether it was open to the national courts to interpret legislation intended to give effect to the Directive more generously than envisaged by the Directive. http://curia.europa.eu/juris/document/document.jsf?text=&docid=133963&pageIndex=0&doclang=EN &mode=lst&dir=&occ=first&part=1&cid=1350351