C-164/00

OPINION OF MR ALBER — CASE C-164/00

OPINION OF ADVOCATE GENERAL ALBER delivered on 13 December 2001 1

I — Introduction II — Legal background

(1) Provisions of Community law

1. This reference for a preliminary ruling concerns the interpretation of the term 'old-age benefits' within the meaning of 2. Directive 77/187 Article 3(3) of Council Directive 77/187/EEC of 14 February 1977 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 businesses. 2 If the disputed benefits claimed by the applicant are not 'old-age benefits' but are dependent on dismissal, Article 1 the question arises whether they constitute obligations of the employer within the meaning of Article 3(2), and are thus to be paid by the transferee in the event of a transfer of the undertaking, which would not be the case if they were old-age benefits. A preliminary issue is whether this directive is applicable in the case of the privatisation of public institutions. '1. This Directive shall apply to the transfer of an undertaking, business or part of a 1 — Original language: German. business to another employer as a result of 2 — OJ 1977 L 61, p. 26. a legal transfer or merger.'

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(1) ... a relevant transfer shall not operate or on behalf of the transferor with a trade so as to terminate the contract of employ- union recognised by the transferor in ment of any person employed by the trans- respect of any employee whose contract of feror in the undertaking or part transferred employment is preserved by Regulation but any such contract which would other- 5(1) above, then: wise have been terminated by the transfer shall have effect after the transfer as if originally made between the person so employed and the transferee.

(a) ... that agreement, in its application in relation to the employee, shall, after (2) Without prejudice to paragraph (1) the transfer, have effect as if made by above, ... on completion of a relevant or on behalf of the transferee with that transfer 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 — all the transferor's rights, powers, deemed to have been done by or in duties and liabilities under or in con- relation to the transferee ... nection with such a contract shall be transferred by virtue of this regulation to the transferee; and

7. Exclusion of occupational pension — anything done before the transfer is schemes completed by or in relation to the transferor in respect of that contract or a person employed in that under- taking or part shall be deemed to have been done by or in relation to the transferee ... (1) Regulation 5 and 6 above shall not apply:

(2) For the purposes of paragraph (1 ) above any provisions of an occupational pension scheme which do not relate to benefits for 7. Section 46 of the GWC conditions of old age, invalidity or survivors shall be service sets out the terms of the Collective treated as not being part of the scheme.' Agreement on Premature Payment of Superannuation and Compensation Bene- fits (hereinafter 'the PPSCB' agreement). In the event of early dismissal it provides for immediate payment of a retirement pension and compensation. Section 46(12) provides that the provisions of Section 46 are to be implemented by regulations of the UK Parliament. Accordingly, the PPSCB was (3) National provisions on collective agree- implemented by the National Health Ser- ments vice Compensation for Premature Retire- ment Regulations 1981 (hereinafter 'CPRR').

5. The General Whitley Council conditions of service must be taken into account in addition to the statutory provisions in the present case. The contract of employment concluded between the applicant in the 8. At the time of Mrs Beckman's dismissal, main proceedings and the North West the early retirement pension and compen-

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sation payments to which eligible dismissed a period equal to the period with which employees were entitled were governed by he is credited under Regulation 5 were the National Health Service Pension added to his reckonable service (CPRR Scheme Regulations 1995 (hereinafter 'the Regulation 4(3), CPRR Regulation PSR') 3and the CPRR cited above. Provi- 5(2) providing for the crediting of sion is made for the following specific additional years in accordance with benefits: GWC conditions of service Section 46.10;

(c) compensation consisting of an annual allowance at a rate equal to the rate by which his [ERP] would be increased, if 10. Under these provisions qualifying employees who receive the maximum enhancement of 10 years have no entitle- 3 — The claimant in the main proceedings describes these ment to the lump sum payment provided regulations as the Superannuation Scheme Regulations for by GWC Section 45. Where the 1995 and uses the abbreviation SSR. However, according to Part A, A1, of the regulations, the official designation of enhancement is between 6 2/3 and 10 years, the statutory instrument is 'National Health Service Pension Scheme Regulations 1995'. Hereinafter the abbreviation there is a pro-rata reduction in the amount 'PSR', used by the referring court and the other parties to proceedings apart from Mrs Beckman, will therefore be of the redundancy payment (GWC con- used. ditions of service Section 45.7 and 46.13).

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III— Facts transfer is precluded by the provisions of Article 3(3) of Directive 77/187 and the corresponding provisions of the TUPE.

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(c) the annual allowance and the lump 18. On the transfer of the undertaking in sum compensation (PSR Regulation June 1995, Mrs Beckman's membership of D2(3)(d)). the health service pension scheme came to an end in that DWM could no longer make contributions to the NHS Pension Scheme in order to increase the benefits which Mrs Beckman receives from the scheme. Mrs Beckman is entitled to pension benefits from the scheme from the statutory age of 15. Further, according to the referring retirement. court, the NHS Superannuation Scheme (hereinafter 'NHS Pension Scheme') is an occupational pension scheme as defined in TUPE Regulation 7(1). The PSR, from which the ERP and the lump sum on retirement are derived, are the principal regulations governing the scheme. They 19. In its order the referring court cites the were issued by the Secretary of State for judgment of the Employment Appeal Health in exercise of powers contained in Tribunal in London of 2 September 1998 Section 10 of the Superannuation Act 1972, in Frankling and Others v BPS Public in respect of the pensions of workers in the Sector Limited, which concerned the same health service. problems and issues of law as the present case. 4The Employment Appeal Tribunal (hereinafter EAT) came to the conclusion that the benefits under Section 46 of the GWC conditions of service are not trans- ferred to the transferee on the transfer of an undertaking but that the entitlements of the employee end when she leaves the NHS on 16. The CPRR, from which the annual the transfer of the undertaking. In reply to allowance and the lump sum compensation a question by the Court of Justice, the are derived, were issued by the Secretary of parties in the case stated that this judgment State for Social Services pursuant to Section is the only judgment of the English courts 24(1) of the Superannuation Act 1972. which deals with the legal classification of That Act allows regulations to be made for the benefits under Section 46 of the GWC the payment of pensions, allowances or conditions of service. gratuities by way of compensation to workers in the NHS who suffer loss of office or employment.

'1. Is the employee's entitlement to early payment of pension and retirement lump sum and/or to the annual allow- ance and lump sum compensation, a right to an old-age, invalidity or sur- vivors' benefit within the meaning of Article 3(3) of Council Directive 21. It also emerges from this judgment that 77/187/EEC? the benefits under Section 46 of the GWC conditions of service cover the period between dismissal and the attainment of the (normal) retirement age of 60. On reaching retirement age employees receive the usual pension payments under the NHS 2. If and to the extent that the answer to Pension Scheme. 7 In the event of death the Question 1 is "no", is there an obli- benefits are payable to the employee's gation of the transferor arising from survivor. 8The entitlements under Section the contract of employment, the employment relationship or the collec- tive agreement within the meaning of 5 — l'. 358 of the EAT judgment. 6 — P. 3 5 7 , paras 5 to 7 of the EAT judgment. 7 — P. 357. para. 6 of the EAT judgment. 8 — P. 359 of the EAT judgment 9 — P. 360 of the EAT judgment.

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Article 3(1) and/or 3(2) which transfers they are old-age benefits. Entitlement by reason of the transfer of the under- begins long before entitlement to old-age taking and renders the transferee liable benefits, up to 15 years earlier where the to pay the benefits to the employee retirement age is 65. upon dismissal?'

25. This interpretation is in line with the spirit and purpose of the benefit. It is not paid because a given age has been reached V — Arguments of the parties but because of a dismissal.

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classification. Frequently an employee who that the relevant age has been reached but has reached an advanced age has no option on the ground of dismissal before that age but to retire, as he will not find another job was reached is not an old-age benefit on account of his age. The heading under within the meaning of Article 3(3) of the which a benefit is paid is equally irrelevant. Directive. The benefits under Section 46 of What is important is the legal nature of the the GWC conditions of service fit that benefit and not the source from which it is description. financed. However, it is of crucial import- ance that the transferor, in this case the NHS, was under an obligation to pay the benefit. 30. DWM, however, takes the view that the benefits under Section 46 of the GWC conditions of service are covered by the exception in Article 3(3) of the Directive. They are old-age benefits within the mean- ing of that paragraph. 28. The United Kingdom Government shares the views of Mrs Beckman. Article 3(3) of the Directive should be construed narrowly, as it is an exception to the rule. It covers only benefits which are 31. DWM contends that the fact that these paid on account of old age. On the other benefits were paid early does not alter their hand, benefits which are merely calculated character as old-age benefits within the by reference to age or years of service are meaning of Article 3(3) of Directive not covered. The Court of Justice took that 77/187. The claimant in the main proceed- view in Roberts v Tate & Lyle in which a ings seeks to define the character of the distinction was made between benefits paid benefit on the basis of the point in time at on attainment of a given age and those paid which it is payable. This is fallacious as on dismissal. Pensions which are paid on old-age benefits could be paid before the dismissal were not held by the Court to be usual time, for instance in the event of early old-age benefits. 11 retirement; in the present case at 50 instead of 60. Bringing forward the time at which the benefit is paid does not, however, alter the character of the benefit.

36. The Commission points to the scheme of the directive, which reveals the reason for the exception in Article 3(3) of Direc- 34. The fact, too, that an employee under tive 77/187. It lies in the great variety of 50 is not entitled to the benefits under occupational supplementary pension Section 46 of the GWC conditions of schemes which made it impossible to service supports this argument. In such enshrine in the directive a general obli- cases and in all others in which there is no gation on the transferee to assume liability entitlement to benefits under that section, for such benefits on the transfer of an employees will receive benefits under Sec- undertaking. tion 45 of the GWC conditions of service. Conversely, the benefits paid under Section 46 of the GWC conditions of service are taken into account in the calculation of the benefits under Section 45 of the GWC conditions of service. In an extreme case 37. As, in its view, the referring court has the benefits under Section 45 of the GWC provided incomplete information, the conditions of service are simply not payable Commission proposes that the first ques- if, for example, an employee meets the tion should be answered on the basis of the conditions for the maximum enhancement following criteria: method of financing, of his pension benefits of 10 added years nature and purpose of benefits, conditions under the terms of Section 46 of the GWC for grant of benefits and method of calcu- conditions of service. It is thus clear that lation of benefits. the benefits under Section 46 of the GWC conditions of service are not compensation for the loss of a job like the benefits paid under Section 45 of the GWC conditions of service, but old-age benefits, payment of which is merely linked to the loss of a job. 38. On the basis of those criteria it pro- poses that the ERP and the lump sum on retirement should be considered to be benefits which fall within the exception in Article 3(3) of Directive 77/187. They are 35. The Commission takes the view that based on a collective agreement, only apply the answer to the first question cannot be to employees in a specific sector, namely found in the wording of Article 3(3) of the NHS, are based on NHS membership Directive 77/187 alone. Rather, the extent and financed by contributions from both

39. However, the Commission leaves the question of the annual allowance and the lump sum compensation open. It is not 41. Moreover, they derived from a collec- even clear whether those benefits are also tive agreement, the PPSCB, so that the paid out of the NHS supplementary Pen- obligation to pay benefits was also trans- sion Scheme. Nor is the purpose of the ferred to the transferee under Article 3(2) payments clear. They could be benefits of Directive 77/187. The fact that various intended to guarantee a sufficient income statutory instruments were enacted to or compensation for dismissal. Moreover implement those rights is as irrelevant as these benefits have to be offset against the the fact that they are paid by the Secretary benefits under Section 45 of the GWC of State and reimbursed by the NHS. conditions of service. Similarly, it is not made clear, whether, in the event of the death of the person entitled to these benefits, they are to be paid to his survivor. As regards their financing, the Commission points out that it appears that the employee 42. In that connection Mrs Beckman points does not have to make any contribution but out that, under English law, there must be that they are calculated on the basis of the statutory authority for obligations to make number of years of service. payments to workers in the public sector. That is why the PPSCB, a collective agree- ment between the NITS and the unions, had to be implemented by statutory instrument.

(2) The second question 43. DWM bases its opposing view on the latter two factors. The benefits under Section 46 of the GWC conditions of service are based, as required by Section 40. On the second question Mrs Beckman, 46.12, on statutory instruments. However, the United Kingdom Government and the Section 45.12 of the GWC conditions of Commission are of the view that the service provides that the benefits are paid

46. The referring court has assumed that the transfer of the NWRHA, in which Mrs 44. The dispute concerns the legal classifi- Beckman was employed, to DWM was a cation of the benefits provided for by transfer of an undertaking within the Section 46. The parties to the main pro- meaning of Directive 77/187. It has there- ceedings are in dispute over the extent to fore assumed that the Directive is appli- which the benefits contained in it can be cable. No further reasons are given for this viewed as 'old-age benefits' within the assumption in the order for reference. meaning of Article 3(3) of Directive 77/187 and a transfer to the transferee of the undertaking of the obligation to pay the benefits can be ruled out. In the event that the conditions of Article 3(3) are not met, they are in dispute over the legal basis for these benefits, that is to say, whether they 47. The parties to the proceedings did not are derived from a contract of employment go into this preliminary issue in their or employment relationship or a collective written observations. At the request of the agreement and are thus transferred to the Court they explained at the hearing that transferee on transfer of the undertaking there were no specific employment law pursuant to Article 3(1) or (2) of Directive regulations for employees in the public 77/187, or whether they have a statutory sector. Employees in the NHS were there- basis and a transfer is therefore ruled out. fore protected by national employment law

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49. In its judgment in Collino and Chiap- pero the Court of Justice held that Directive 77/187 is generally applicable to a transfer of public bodies to a private purchaser. However, only those employees who orig- 52. It should be noted that Mrs Beckman inally enjoyed protection as employees was employed at NWRHA under a under national employment law can take contract of employment. This suggests that advantage of the Directive. According to this judgment, public employees are, as a 15 — Case 105/84 Foreningen af Arbejdsledere i Danmark v rule, not employees within the meaning of Danmols Inventar [1985] ECR 2639, para. 28; Joined Directive 77/187. 14 cases C-173/96 and C-247/96 Hidalgo and Others [1998] ECR I-8237, para. 24; Colino and Chiappero, cited at footnote 13, para. 36. 16 — Conned Directive 98/50/EC of 29 June 1998 amending Directive 77/187/EEC on the approximation of the laws of 13 — Case C-343/98 Collino and Chiappero [2000] HCR the Member States relating to the safeguarding of I-6659. employees' rights in the event of transfers of undertakings, 14 — Colimo and Chiappero, cited above at footnote 13, paras businesses or parts of businesses (OJ 1998 L 201, p. 88). 40 and 4 1 . 17 — Colimo and Chiappero, cited at footnote 13, para. 37.

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her employment relationship is not based nised or the legal nature of the instrument on an instrument of public law such as a which established the employment relation- Civil Service code or regulations, as was ship (contract or appointment). apparently the case in Collino and Chiap- pero. 18

55. In its judgment in Henke, which also 58. Nor is it necessary to limit the scope of concerned the applicability of Directive the Directive in order to fulfil its objective 77/187 to public sector employees, the of protection. The Directive achieves only Court of Justice expressly focused on the partial harmonisation of the rules for the notion of the exercise of public authority. 19 protection of employees in the event of a This functional approach, on the basis of change of employer. 20 By means of such the activities actually carried out, seems harmonisation the Community legislature more appropriate than an approach based intended both to ensure comparable pro- on the way the transferred entity is orga- tection for employees' rights in the different Member States and to harmonise the costs which those protective rules entail for 18 — See para. 40 of the judgment in Collino and Chiappero Community undertakings. 21 (cited at footnote 13). The German translation of this judgment is less clear than the Italian original. The German version reads: 'Status von öffentlich-rechtlich Bediensteten und nicht von Arbeitnehmern', while the Italian version reads: 'soggetti ad uno statuto di diritto pubblico e non al 20 — Case C-382/92 Commission v United Kingdom [1994] diritto di lavoro'. [The English version reads: 'subject to a ECR I-2435, para. 28, and subsequent references. public-law status, not to employment law']. 21 — Commission v United Kingdom, cited at footnote 20, para. 19 — Case C-298/94 Henke [1996] ECR I-4989, para. 17. 15.

60. The current trend for privatisation has brought about a situation in which many areas of activity which were previously considered to belong in the public sector, such as postal services and telecommuni- cations, or the water supply, are now (b) Interpretation of the term 'old-age viewed as economic activities. When these benefits' within the meaning of Article 3(3) activities are privatised and the relevant of Directive 77/187 bodies are transferred, along with their staff, to a new owner, the employees concerned are in a comparable situation to employees affected by a transfer of undertakings in the private sector. It is thus hard to see why employees in that position 63. If Article 3 of Directive 77/187 and the should be considered not to be 'employees' legislation enacted in English law to imple- within the meaning of Directive 77/187. ment it are applicable in this case, the

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question arises as to how the entitlements (aa) Classification of the Early Retirement provided for by Section 46 of the GWC Pension conditions of service are to be classified. In particular, it must be determined whether they are 'old-age benefits' within the mean- ing of Article 3(3) of Directive 77/187 and whether or not they are therefore trans- ferred from the NWRHA to DWM on the transfer of the undertaking.

23 — Barber, cited at footnote 10. 22 — See the argument at paras 18 and 19 on the Internet site 24 — Roberts v Tate Sc Lyle, cited at footnote 11. www.dti.gov.uk/er/tupe/consult.htm. 25 — OJ 1976 L 39, p. 40.

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68. In that connection it must be noted that women in matters of social security, 28 it does not necessarily follow from the which was adopted pursuant to Article 1(2) classification of benefits comparable to the of Directive 76/207 in order to define the ERP as pay within the meaning of substance, scope and arrangements for the Article 141 EC, 26 that the ERP is an application of the principle of equal treat- old-age benefit. Barber clearly dealt with ment. In those proceedings it was simply a an old-age benefit, namely a pension. matter of whether the benefit at issue fell However, that pension derived from an within the scope of the Directive. It was occupational scheme and thus was not one therefore irrelevant whether it was an of the statutory social security schemes to old-age benefit or an unemployment bene- which Article 141 EC did not apply. 27 fit. In that respect this judgment, too, sheds only limited light on the present case.

26 — Barber, cited at footnote 10, para. 28. 28 — OJ 1979 L 6, p. 24. 27 — Barber, cited above at footnote 10, para. 28. 29 — Case C-104/98 Buchnerami Others [2000] ECR I-3625.

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30 — Buchner and Others, cited at footnote 29, paras 20 and 21. 31 — Opinion of 16 September 1999 in Case C-104/98 Buchner 32 — Opinion in Buchner and Others, cited at footnote 31, and Others [2000] ECR I-3625, point 22. point 25.

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the NHS, it can, none the less, hardly be 78. The type and manner of financing and considered to be an 'old-age benefit' within the period for which the ERP is paid also the meaning of Article 3(3) of Directive confirm the view expressed here. As 77/187. explained at points 14 and 20 above, the necessary monies for the financing of the ERP benefits are to be provided by the authority of the NHS responsible. They are paid by the Secretary of State to those entitled to the benefit. However, the NWRHA is under an obligation to com- pensate the Secretary of State. In that way it is the employer, who is responsible for the dismissal, who in the end bears the cost of its rationalisation measures alone. In that 76. That conclusion is confirmed by the respect there is a clear separation between following considerations. Article 3(3) of the financing of the ERP and the financing Directive 77/187 is, like Article 7(1) of of the general occupational old-age pension Directive 79/7, a derogating provision. As under the NHS Pension Scheme. such it must, as the Court has consistently held, be interpreted narrowly. 33

hard to see why the rule that the benefits terms of its content, a collective agreement under Section 46 of the GWC conditions of drawn up by the employers in the health service are to be offset against benefits service and recognised by the unions. The under Section 45, to the point where Court of Justice has repeatedly stressed in benefits under Section 45 of the GWC its case-law that a collective agreement conditions of service may not be payable at does not lose its status as a contractual all, should necessarily mean that only arrangement by being embodied in or benefits under Section 45 of the GWC confirmed by statute. 35 conditions of service are benefits payable on dismissal, as DWM argues. Rather, the rule prohibiting cumulation of benefits emphasises the equivalent status of the benefits under the two provisions. Thus, if benefits under Section 45 of the GWC 82. In the light of the foregoing consider- conditions of service are 'benefits payable ations, it must be concluded that the ERP is on dismissal', which is not disputed not an 'old-age benefit' within the meaning between the parties, then the same should of Article 3(3) of Directive 77/187. apply to benefits under Section 46 of the GWC conditions of service. Otherwise, the justifiability of offsetting these benefits against one another is called into question. Normally, only benefits of the same type (bb) Other benefits are offset against each other. Benefits of different types can as a rule be paid in tandem.

(cc) Proposal for a decision

86. The second question raises the problem that the rights under Section 46 of the 84. In the light of the above arguments, I GWC conditions of service might not come therefore suggest the following answer to within the scope of Article 3 of the Direc- the first question referred for a preliminary tive because Section 46.12 of the GWC ruling: the entitlement of an employee to conditions of service provides that the payment of the Early retirement pension collective agreement is to be implemented and Lump sum on retirement and/or the by statute. This reference for a preliminary Annual Allowance and Lump sum com- ruling was probably prompted by the pensation is not a right to an old-age, findings of the EAT in its judgment in invalidity or survivor's benefit within the Frankling, cited above. The EAT decided meaning of Article 3(3) of Directive that the entitlements under Section 46 of 77/187. the GWC conditions of service were not contractual entitlements and thus did not transfer to the transferee because Section 46.12 provided that the provisions of that section were to be implemented by statu- tory instrument. The EAT based its view on the triangular relationship described in point 18 of this Opinion. In contrast to Section 45 of the GWC conditions of (2) The second question service the employer does not undertake in the collective agreement to pay the benefits provided for in Section 46 of the GWC conditions of service. Rather, the employee has a statutory entitlement to 85. By its second question the referring benefits, which corresponds to an obli- court wishes to know whether the entitle- gation incumbent on the NHS Pension ments to benefits under Section 46 of the Scheme to pay benefits. The employer is GWC conditions of service are obligations under an obligation to the NHS Pension of the transferor, in other words the Scheme to make the necessary resources NWRHA, arising from a contract of available. This is an enforceable claim employment or employment relationship under the satutory provisions. There may, which are transferred to DWM pursuant to possibly, be a contractual obligation owed Article 3(1) of Directive 77/187 on the by employer to employee in that the

employer is obliged to make payments to GWC conditions of service were negoti- the NHS Pension Scheme, which make it ated, in terms of their content, in the possible for the employee to receive the collective agreement. However, the imple- benefits under Section 46 of the GWC mentation of the collective agreement is conditions of service. However, there is no governed by statute. As has already been contractual obligation of the employer established, a collective agreement does not towards the employee. Nor is this necessary lose its status as a contract because it is as the employee has a statutory claim incorporated in or confirmed by statute. 37 against the NHS Pension Scheme. 36 There is no sign that the legislature influenced the content of the entitlements under Section 46 of the GWC conditions of service. In that respect the role of the legislature is really a formality which arises because the NHS belongs to the public sector. 87. In answering the question whether the rights of employees under Section 46 of the GWC conditions of service are obligations of the transferor under an employment contract in existence at the time of the transfer within the meaning of Article 3(1) 89. Further, it must be observed that the of Directive 77/187, it will be necessary to employment contract concluded between take account of the following factors, as Mrs Beckman and the NWRHA expressly well as the question of who pays whom, on declared the GWC conditions of service to which the decision of the EAT turned. The be applicable to the contract. In that rights in Section 46 of the GWC conditions respect there are good reasons for speaking of service derive, according to the findings of a contractual basis for the entitlements of the referring court, which coincide with under Section 46 of the GWC conditions of those of the EAT in that respect, from a service and — conversely — the obli- collective agreement concluded between gations of the transferor, contrary to the NHS employers and the unions in which decision of the EAT in Frankling. the NHS employees are organised. Thus, Article 3(1) and (2) may be inapplicable as a result of the legal effect of the require- ment of statutory implementation of Sec- tion 46 of the GWC conditions of service. 90. As explained above, the fact that the regulations in Section 46 of the GWC conditions of service have to be imple- mented by statute, in the end merely reflects the fact that the NHS is part of the public administration and the expendi- 88. In the course of the discussion of the ture of the public administration requires a first question referred for a preliminary legal basis. If, as I propose, we take ruling it has already been established that Directive 77/187 to be applicable generally the entitlements under Section 46 of the to employment relationships in the NHS, it

would be inconsistent to disallow the 92. Accordingly, in this case, too, it will be application of Article 3(1) and (2) on the necessary to take account of the fact that ground that the entitlements enshrined in the benefits under Section 46 of the GWC the collective agreement must be confirmed conditions of service derive from a collec- or implemented by statute. On the basis of tive agreement. They were negotiated these observations on the first question we between the NHS employers and the rep- must conclude that the entitlements under resentatives of the major unions and sub- Section 46 of the GWC conditions of sequently adopted by the General Whitley service are obligations of the transferor Council. Moreover, it must be borne in under a contract of employment existing at mind that it is expressly agreed in the the time of the transfer within the meaning contract of employment, as it is in Mrs of Article 3(1) of Directive 77/187 or under Beckman's, that they apply to the employ- a collective agreement within the meaning ment relationship in each case. It must of Article 3(2) of Directive 77/187. therefore be assumed that the application of the provisions in Section 46 of the GWC conditions of service is based both on the contract of employment and employment relationship within the meaning of Article 3(1) of Directive 77/187 and on a collective agreement within the meaning of Article 3(2) of Directive 77/187. Even if the contested benefits in the PSR and the CPRR are governed by statute, the rights and obligations do not derive from the statutory 91. The solution proposed here is com- instrument but from the collective agree- parable to the case-law on the definition of ment and its incorporation in the contract the term 'pay' in Article 141 EC. In defin- of employment in each case. ing the term the Court of Justice excluded from the definition of pay only social security schemes or benefits, in particular retirement pensions, directly governed by legislation without any element of agree- ment within the undertaking or the occu- 93. I therefore propose that the second pational branch concerned, which are com- question referred for a preliminary ruling pulsorily applicable to general categories of should be answered as follows: workers. 38 On the other hand it recognised benefits under schemes which are not compulsorily applicable to general cat- egories of workers but apply only to workers employed by certain undertak- there is an obligation of the transferor of an ings — with the result that affiliation to undertaking arising from the contract of those schemes derives of necessity from the employment, the employment relationship employment relationship with a given and the collective agreement within the employer — as pay within the meaning meaning of Article 3(1) and (2) to pay of Article 141 EC. 39 benefits to an employee in the event of dismissal which transfers by reason of the transfer of the undertaking and renders the 38 — Barber, cited at footnote 10, para. 22. transferee liable to pay the benefits to the 39 — Barber, cited at footnote 10. para. 26. employee upon dismissal.

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