Article 16 - Freedom to conduct a business
Article 12 - Freedom of assembly and of association
Reference for a preliminary ruling: Supreme Court of the United Kingdom - United Kingdom.
Transfer of undertakings - Directive 2001/23/EC - Safeguarding of employees’ rights - Collective agreement applicable to the transferor and to the employee at the time of the transfer.
Outcome of the case:
In the light of the foregoing, I propose that the Court reply as follows to the questions referred by the Supreme Court:
(1) Article 3(3) of Council Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses, must be interpreted as not, in principle, precluding Member States from allowing dynamic clauses referring to existing and future collective agreements that are freely agreed between the parties to a contract of employment to be transferred as a result of the transfer of an undertaking.
(2) European Union law, and in particular Article 16 of the Charter of Fundamental Rights of the European Union, does not preclude national legislation that requires the transferee of an undertaking to accept the existing and future terms and conditions agreed by a collective bargaining body, provided that the requirement is not unconditional and irreversible. It is for the national court to assess whether, in the specific circumstances of the present case and pursuant to national law, the requirement is in fact unconditional and irreversible in nature.
43.)The Supreme Court expresses doubt as to the impact of Article 11 ECHR and, by extension, of Article 12 of the Charter of Fundamental Rights of the European Union, on this case. This article, which states the freedom of association, protects individuals not only against any ban or restriction affecting their ability to join or form associations, but also against being directly or indirectly compelled to join an association. ( 21 ) The referring court is therefore raising the question of whether TUPE, as currently interpreted by the UK courts, is compatible with the negative aspect of the freedom of association of the employer.
44) Although a situation such as that of Parkwood might fall within the scope of Article 12 of the Charter, the fact is that this case has a particular feature that distances it, in my opinion, from the negative aspect of the freedom of association. As pointed out in point 11 of this Opinion, the collective bargaining body to which the contractual term refers, the NJC, is a public body that negotiates terms and conditions of employment of local government staff. Given its public nature and its strict terms of reference, the NJC could hardly be expected to represent or express the interests of Parkwood, even in the context of a transferred undertaking that was once in the public sector. The parties have confirmed that this is the case in their written observations and oral submissions and it is also stated by the referring court in the order for reference.
45) Thus, the issue is not that Parkwood is compelled to join an organisation if it wishes to influence the terms and conditions of its employees (which would indeed give rise to issues of compatibility with Article 12 of the Charter). The objection would be rather that Parkwood has no means of being represented at all on the NJC. The curtailment of rights suffered by Parkwood derives not from being compelled to join an organisation but from the fact that it is required to take on obligations that were undertaken pursuant to agreements over which it is unable to exert any influence.
46) I will now show that, when viewed from this perspective, the fundamental right at issue here is not the negative aspect of the employer’s freedom of association but rather the employer’s fundamental right to conduct a business, which is recognised by Article 16 of the Charter ‘in accordance with Union law and national laws and practices’.
47) As I have already mentioned, it is my view that Directive 2001/23 does not prohibit Member States from adopting employment legislation pursuant to which dynamic clauses referring to collective agreements form part of the transfer of rights and obligations that takes place as a result of the transfer of an undertaking. However, as we know, even where European Union law expressly gives Member States freedom of action, this must be exercised in accordance with that law. ( 22 ) This obligation naturally includes, inter alia, fundamental rights, as expressly provided in Article 51 of the Charter. Accordingly, although the United Kingdom may permit the parties to include dynamic clauses referring to collective agreements in their contracts of employment, this must not result in conduct contrary to the fundamental rights referred to in the Charter, including the freedom to conduct a business mentioned in Article 16.
48) The freedom to conduct a business has a long history in European Union law. ( 23 ) Originally seen as a corollary to the fundamental right to property, ( 24 ) it started to have a separate existence in the 1980s, ultimately achieving the status of a general principle of European Union law. ( 25 ) Today, explanations of the Charter point out that this article is based on the case-law of the Court of Justice recognising not only the freedom to pursue an economic or commercial activity, but also contractual freedom and the principle of free competition. ( 26 )
49) However, despite the fact that the freedom to conduct a business derives from these three sources, to date the case-law has not, in fact, provided a full and useful definition of this freedom. The judgments in which the Court has had occasion to rule in this area have gone no further than either referring to the right to property or simply citing the provisions of Article 16 of the Charter.
50) This does not mean that the basic elements of the right cannot be inferred and, in this, the sources referred to in the explanations of Article 16 of the Charter are of considerable assistance. In effect, the freedom to conduct a business, as stated in that article, acts to protect economic initiative and economic activity, obviously within limits but nevertheless ensuring that there are certain minimum conditions for economic activity in the internal market. Thus, the freedom to conduct a business acts as a limit on the actions of the Union in its legislative and executive role as well as on the actions of the Member States in their application of European Union law.
54) Of course, the right to acquire a particular undertaking does not form part of the freedom recognised under Article 16 of the Charter. Nevertheless, to make acquisitions subject to such draconian requirements that, in practice, they are a strong disincentive to the acquisition or take-over of undertakings, may result in an infringement of this article. The fact that the employer may be indefinitely bound, in the event of the transfer of an undertaking, by terms and conditions of employment to which it did not agree, starts to resemble a restriction on the freedom of contract, which is one of the component parts of the freedom to conduct a business, according to the explanations of Article 16 of the Charter.
58) In the light of these arguments, I therefore propose that the Court of Justice reply to the third question referred for a preliminary ruling to the effect that European Union law, and in particular Article 16 of the Charter of Fundamental Rights of the European Union, does not preclude national legislation that requires the transferee of an undertaking to accept the existing and future terms and conditions agreed by a collective bargaining body, provided that the requirement is not unconditional and irreversible. It is for the national court to assess whether, in the specific circumstances of the present case and pursuant to national law, the requirement is in fact unconditional and irreversible in nature.
59) In the light of the foregoing, I propose that the Court reply as follows to the questions referred by the Supreme Court: