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gations of the employer within the meaning of Article 3(2) which are thus transferred to the transferee in the event of the transfer of the undertaking. Finally, if those rights to benefits pass to the transferee on a transfer of the undertaking, the extent to which 4. Article 3 employees can waive their rights if appro- priate must be considered.

1 — Original language: German. '1. The transferor's rights and obligations 2 — OJ 1977 L 61, p. 26. arising from a contract of employment or

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from an employment relationship existing c o m p a n y or i n t e r - c o m p a n y p e n s i o n on the date of a transfer within the meaning schemes outside the statutory social secur- of Article 1(1) shall, by reason of such ity schemes in Member States. transfer, be transferred to the transferee.

5

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of any person employed by the transferor in or on behalf of the transferor with a trade the undertaking or part transferred but any union recognised by the transferor in such contract which would otherwise have respect of any employee whose contract of been terminated by the transfer shall have employment is preserved by Regulation effect after the transfer as if originally made 5(1) above, then: between the person so employed and the transferee.

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

— anything done before the transfer is 7. Exclusion of o c c u p a t i o n a l pension completed by or in relation to the schemes 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 According to Paragraph 12 of that section pension scheme which do not relate to there is a (contractual) obligation on the benefits for old age, invalidity or survivors employer to pay those benefits to his shall be treated as not being part of the employees. scheme.'

9. Section 46 of the GWC conditions of 2. Provisions on collective agreements service provides for an immediate payment of enhanced retirement pension and com- pensation on an employee's ceasing work in three situations:

7. The General Whitley Council conditions of service must be taken into account in addition to the statutory provisions in the — on redundancy, present case. The contract of employment concluded between the applicants in the main proceedings and the National Health Service ('NHS') declared the General Whit- ley Council conditions of service ('the GWC conditions of service') to be appli- — in the interests of the efficiency of the cable to that contract. service,

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— on organisational change. employment which stated: 'Your employ- ment is governed by the conditions of the General and Nurses and Midwives Whitley Council'.

11. The expression 'in the interests of the efficiency of the service' should be given its 14. On 27 October 1994, South Bank ordinary meaning. An example of the University wrote to the staff at Redwood meaning of the expression is given in the College of Health Studies informing them NHS guidelines in 1995. Those guidelines that as from 1 November 1994 they would state that NHS employers may seek the be employed by it. The letter went on to say early retirement of individual members of that it would offer staff a contract of staff in the interests of the efficiency of the employment in November. There was no service in a situation where the perform- compulsion to accept the terms and con- ance of that member of staff, although ditions of employment of South Bank acceptable in the past, has consistently University. The letter also stated that the declined over a period of time to an staff would not be able to continue in the unacceptable level and, after appropriate National Health Service Pension Scheme remedial action has been taken, the staff and that they would have three options in m e m b e r ' s p e r f o r m a n c e is c o n s i d e r e d respect of superannuation: unlikely to improve.

(i) Option one was to leave the NHS pension arrangement where it was and to start a new pension arrange- Ill — Facts ment.

12. Prior to 1 November 1994, the appli- cants in the main proceedings, Ms Martin, Mr Daby and Mr Willis, were employed at (ii) Option two was to transfer benefits the Redwood College of Health Studies as from the NHS pension scheme to one nursing lecturers under conditions of of the respondent's schemes.

19. None of the applicants accepted the terms and conditions of employment of South Bank University and accordingly remained on the terms and conditions However, as stated, in the event that any specified in their contracts of employment employee transferring from Redwood has a as at the time of transfer. This was contractual entitlement to such provision confirmed in the case of Ms Martin in a and this is legally enforceable, then, again, letter to her dated 21 February 1995. as in all such matters, the University would honour its legal obligations.'

20. Ms Martin, Mr Daby and Mr Willis joined the T e a c h e r s ' S u p e r a n n u a t i o n 16. On 1 November 1994, Redwood Col- Scheme. They also applied to transfer their lege of Health Studies became part of South existing NHS pension benefits into the Bank University. Ms Martin, Mr Daby and Teachers' Superannuation Scheme. How- Mr Willis became employees of South Bank ever, only Mr Daby and Mr Willis were

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able to transfer their NHS pension benefits. 23. By a letter dated 20 January 1997, Mr Ms Martin could not do so because she was Daby expressed a wish to be considered for over 60 at the time of the transfer of the early retirement and Ms Martin wrote in undertaking. similar terms on 17 January 1997.

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28. All three applicants in the main pro- 30. The referring court identifies the fol- ceedings claim to be entitled to the benefit lowing 'issues', which are distinct from the of Sections 45 and 46 of the GWC con- questions referred for a preliminary ruling, ditions of service during their employment arising in connection with the interpre- with South Bank University. Mr Daby and tation of the TUPE in the light of Commu- Ms Martin complain specifically that they nity law: should have received the benefit of those sections at the time of their early retire- ment. Mr Willis seeks a declaration that Section 46 continues to apply to his contract of employment with South Bank University. The respondent concedes that the benefit of Section 45 did transfer with (i) Whether the rights under Section 46 of the applicants at the time of the transfer. the General Whitley Council trans- ferred and applied to the applicants after 1 November 1994;

2. Is the employees' entitlement to the payment of early superannuation bene- fits and lump sum compensation on redundancy/in the interests of the effi- ciency of the service/on organisational change, a right to an old-age, invalidity 32. Referring to the judgments of the or survivors' benefit within the mean- Employment Appeal Tribunal in Frankling ing of Article 3(3) of the Directive? v BPS Public Sector Limited and of the High Court of Justice in Beckman v Dyn- amco Whicheloe Macfarlane Ltd, and the reference for a preliminary ruling in the Beckman case, 3 the referring court con- siders that it cannot, with complete con- fidence, decide the issues raised. 3. If and to the extent that the answer to question 2 is " n o " , is there an obli- gation on the transferor arising from the c o n t r a c t of e m p l o y m e n t , the employment relationship or the collec- tive agreement within the meaning of Article 3(1) and/or 3(2) which transfers by reason of the transfer of the under- taking and renders the transferee liable to pay the benefits to the employee IV — Questions referred upon dismissal?

33. Against that background the Employ- 4. If the answers to questions 2 and 3 are ment Tribunal referred the following ques- " n o " and "yes" respectively, may the tions to the Court of Justice for a pre- employee, none the less, agree to liminary ruling: forego his/her entitlement to early payment of pension and retirement lump sum and/or the annual allowance 3 — Case C-164/00 Beckman [2002] ECR I-4893. and lump sum compensation in circum-

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of the Directive, what are the con- are not covered by the exclusions in sequences for employees who accept Regulation 7(2). Benefits under Section 46 early retirement on the basis offered to could be excluded from classification as them by the employer?' 'old-age benefits' on three grounds. First, the purpose of Section 46 is to provide a cushion against unemployment for a given period. Second, the rights are not triggered by reaching pensionable age but by pre- mature departure from the employer's ser- vice on the grounds of redundancy, effi- ciency or organisational change. Finally, V — Arguments of the parties the entitlements are, by their nature, rights to compensation rather than to pension or old-age benefits.

A — Questions 1 to 3

1. Applicants in the main proceedings and 36. Article 3(3) must, in their view, be the United Kingdom interpreted narrowly and concerns only payments which are linked to old age and not to those linked only to age and length of service.

39. In any event, Section 46 of the GWC conditions of service, in so far as it relates to a company pension scheme, falls within 42. However, like South Bank University, the definition of a contract of employment it advocates a wide interpretation of or collective agreement and thus within Article 3(3) of Directive 77/187. The term Regulation 7(1) of the TUPE. Entitlements 'old-age benefits' should also cover benefits under or in connection with company with similar characteristics. The criterion pension schemes are not transferred. The should be inter alia whether the benefits benefits under Section 46 are paid in the derive from the employees' own contribu- event of early retirement with an enhanced tions or whether they derive from a special pension and must therefore be classified as fund created for that purpose. 'old-age benefits'.

40. South Bank University submits that any 43. However, the Commission takes the 'entitlements' which arose under Section 46 view that it is for the national courts to before 1 November 1994 were not trans- decide whether the benefits at issue fall ferred but lapsed when the applicants' within Article 3(3).

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B — Questions 4 to 9 continued to be employed under the GWC conditions of service, regardless of whether they had joined the Teachers' Superannu- ation Scheme, retained all their rights.

1. Applicants in the main proceedings, United Kingdom and Commission

45. In their view, which is shared by the United Kingdom and the Commission, they have not waived their contractual rights under Section 46 by joining the Teachers' Superannuation Scheme. It was not poss- ible for them to remain in the NHS scheme after the transfer. The only options avail- able to the applicants in practice from then on were either to join the teachers' scheme, 4 8 . The changes to their employment so that their new employer made contribu- contracts are in their view solely and tions to their pension, or to belong to no exclusively the result of the transfer of the pension scheme at all. undertaking. Because of that transfer they had to choose another pension scheme. South Bank University did not put forward any other reason, such as economic, tech- nical or organisational considerations, for the changes to the terms of employment. 46. Moreover the answers to the questions put by staff on 9 October 1994 and the 5 — Cited in footnote 4. lengthy correspondence at the time of the 6 — Case C-209/91 Watson Rask and Christensen [1992] ECR transfer all indicate that the staff who I-5755.

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49. They did not in fact waive their rights applicants in the main proceedings had under Section 46 nor could they have done continued to be employed by the NHS so in any event either on the transfer of the there would have been no changes. Ms undertaking in November 1994 or on early Martin, Mr Daby and Mr Willis would, in retirement in March 1997. Even in March the absence of a transfer, have had no 1997, the changes derived solely from the reason to accept a deterioration in their transfer of the undertaking. South Bank conditions of employment as regards bene- University made its offers on the assump- fits payable on early retirement. tion that the applicants in the main pro- ceedings had lost their rights on the transfer of the undertaking.

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safeguarding of the rights of employees on 57. Moreover, the applicants in the main the transfer of an undertaking, which proceedings never had a right to early cannot be excluded, even with the consent retirement with higher pension payments. of the employees, must be distinguished The terms offered were accepted without from a variation of the employment rela- argument. Ms Martin and Mr Daby agreed tionship by mutual agreement between the to early retirement on the terms offered. employees and the new employer. The Those agreements were not reached 'solely lawfulness of such a variation is a matter by reason of the transfer'. for national law alone. The Court of Justice can at most decide the criteria for deter- mining when a change in the employment relationship is a result of the transfer of the undertaking. 58. In the view of South Bank University, the answer to Questions 4 to 9 should be that changes to a contract of employment are permissible, if they are permissible under national law. A waiver, solely because of the transfer, of the rights granted by the Directive is only possible in cases where an employee agrees to be taken on by the transferee without his existing conditions of employment. 55. South Bank University takes the view that it was entitled to offer terms for voluntary early retirement. If Ms Martin and Mr Daby had insisted on another set of rules, no early retirement would have been on offer. In that case their employment relationship would have continued until the usual retirement age. However, they did accept the terms it offered, so that they VI — Assessment cannot now argue that other terms applied to the agreements.

legal basis for the benefits derives from general structure of the pension scheme in contracts of employment or employment question that can be classified as 'old-age relationships or a collective agreement and benefits' within the meaning of Article 3(3) the obligation to pay them is therefore of Directive 77/187. However, benefits taken over by the transferee on the transfer paid in the event of dismissal for redun- of the undertaking pursuant to Article 3(1) dancy do not fall within that provision even or (2) of Directive 77/187 or whether they if they are calculated by reference to the have a statutory basis and their transfer is rules for calculating normal pension bene- thus ruled out. If the obligation does fits. Therefore, early retirement benefits transfer to the transferee, they are in and benefits intended to enhance the con- dispute as to whether the employee may ditions of such retirement, paid in the event waive his rights or whether and to what of dismissal to employees w h o have extent the transferee of an undertaking can reached a certain age, are not old-age, vary the terms of employment. invalidity or survivors' benefits under supplementary company or inter-company pension schemes within the meaning of Article 3(3) of the Directive. 8

A — Questions 1 to 3

62. Although the benefits under Section 46 60. The substance of Questions 2 and 3 is of the GWC conditions of service at issue in the same as the two questions referred in the main proceedings are subject to a the Beckman 7 case. In its judgment in that minimum age (50) and linked to a mini- case the C o u r t of Justice held t h a t mum length of pensionable service, the Article 3(3) of Directive 77/187 should be entitlement does not arise on the attain- interpreted narrowly, as it provides for an ment of a certain age but by reason of exception to the rule. The rights of dismissal. employees do not transfer to the transferee of an undertaking only when they relate to one of the benefits listed exhaustively in that provision and the terms used in the legislation must be construed in a narrow sense.

having reached that minimum age, cease to dismissal to employees who have reached a be employed for the specific reasons set out certain age, such as the benefits at issue in in Section 46 of the GWC conditions of the main proceedings, are not old-age, service. invalidity or survivors' benefits under supplementary company or inter-company pension schemes within the meaning of A r t i c l e 3 ( 3 ) of C o u n c i l D i r e c t i v e 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to the safeguarding of 64. It was also held in the judgment in employees' rights in the event of transfers Beckman, in the light of the judgment in of undertakings, businesses or parts of Abels,9 that it is irrelevant whether rights businesses. and obligations which transfer to the trans- feree under Article 3(1) or (2) of the Directive derive from statutory instruments or what the practical arrangements for their implementation are. 10 It is thus irrelevant that the applicants' rights during their employment at Redwood College were Question 3: On a proper construction of governed by statute. 1 1The obligations of Article 3 of Directive 77/187, the obli- the former employer derived from the gations applicable in the event of the employment relationship and the collective dismissal of an employee, arising from a agreement and thus transferred to the contract of employment, an employment transferee under Article 3(1) and (2) of relationship or a collective agreement bind- Directive 77/187. ing the transferor as regards that employee, are transferred to the transferee subject to the conditions and limitations laid down by that article, regardless of the fact that those obligations derive from statutory instru- ments or are implemented by such instru- ments and regardless of the practical 65. In the light of the case-law cited, the arrangements adopted for such implemen- answer to Questions 2 and 3 in these tation. proceedings should be as follows:

is to safeguard the rights of employees on 68. The Court of Justice has already ruled the transfer of an undertaking lends sup- on those issues too. In Tellerup v Daddy's port to the view that the rights deriving Dance Hall it held that an employee cannot from a contract of employment or an waive the rights conferred on him by the employment relationship, which in the mandatory provisions of Directive 77/187 absence of early retirement have not yet even if the disadvantages resulting from his been invoked are 'rights and obligations' waiver are offset by such benefits that, within the meaning of Article 3(1) of taking the matter as a whole, he is not Directive 77/187. Therefore, the answer placed in a worse position. Article 3 of to the first question referred should be: Directive 77/187 is a mandatory provision and not in the discretion of the parties to a contract. The rights conferred on an employee by the Directive cannot be cur- tailed even with his consent. 12

Question 1: Rights which are contingent upon either dismissal or premature retire- ment by agreement with the employer fall within the definition of 'rights and obliga- tions' within the meaning of Article 3(1) of Directive 77/187.

70. On the basis of those findings, the 72. The answer to the fourth question Court of Justice has held that — in so far should therefore be that an employee may as national law allows the employment not agree to forego his rights arising from a relationship to be altered in a manner contract of employment or employment unfavourable to employees in situations relationship. other than the transfer of an undertak- ing — the possibility of alteration is not precluded merely because the undertaking has been transferred in the meantime and the agreement has therefore been made with the new employer. Since by virtue of Article 3(1) of the Directive the transferee is 73. There is no need to reply to the fifth subrogated to the transferor's rights and question as it posits that such agreement is obligations under the employment relation- possible. ship, that relationship may be altered with regard to the transferee to the same extent as it could have been with regard to the transferor, provided that the transfer of the undertaking itself may never constitute the reason for that amendment. 13 That case- law was confirmed in the judgments in 74. However, a distinction must be made Watson Rask and Christensen and Collino between the fact that the possibility of and Chiappero. 14 waiving rights arising under a contract of employment or employment relationship is generally ruled out — whether or not there is a transfer — and the possibility of agreeing to vary terms of employment. Such agreement is permissible, as is clear from the case-law cited above, in so far as such an alteration is permitted by the national law applicable to the employment relationship. It must therefore be examined whether the changes made by South Bank University to the early retirement benefits could have been made by Redwood Col- lege. It is for the national court to answer 71. In the light of the case-law cited, it that question in the light of the applicable must be concluded that Ms Martin, Mr national law. Daby and Mr Willis could not at any time waive their rights under Sections 45 and 46 of the GWC conditions of employment. The transfer of those rights to South Bank University is required by binding law.

78. There will seldom be only one reason for a variation of conditions of employ- ment. As a rule there will be several reasons 77. It should be possible to answer that for varying the employment contracts or question on the basis of the circumstances employment relationships of the workers of the individual case. For instance the fact transferred. In accordance with the purpose that the alteration is made at the same time of protection pursued by Article 3 of the as the transfer of the undertaking may be Directive the transfer of the undertaking an indication that the transfer is a reason should in such a case not be the key for the change. The fact, too, that the argument in the reasoning, and thus not conditions of employment are brought into the main reason for the change. On the line with those applicable to existing staff other hand, there should be no cause for of the new owner, is a sign that the transfer criticism where a change which is permis- sible under national law is dictated by other reasons, such as economic, technical or 15 — Tellerup v Daddy's Dance Hall, cited in footnote 4, organisational considerations and is linked paragraph 17. Upheld in Watson Rask and Christensen, merely chronologically and not causally to cited in footnote 6, paragraph 17, and Collino and Chiapperò, cited in footnote 14, paragraph 52. the transfer of the undertaking.

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79. In the light of the foregoing consider- for the distribution of the financial burden ations, the answers to Questions 6 to 8 of early retirement rules can be indications should be as follows: which should be taken into account in assessing whether the transfer of an under- taking was the sole or main reason for a change.

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VII — Conclusion

82. In the light of the foregoing observations, I propose that there should be no answer to the fifth question referred and that the answers to the remaining questions should be as follows:

(1) Rights which are contingent upon either dismissal or premature retirement by agreement with the employer fall within the definition of 'rights and obligations' within the meaning of Article 3(1) 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) Early retirement benefits and benefits intended to enhance the conditions of such retirement, paid in the event of dismissal to employees who have reached a certain age, such as the benefits at issue in the main proceedings, are not old-age, invalidity or survivors' benefits under supplementary company or inter-company pension schemes within the meaning of Article 3(3) of Directive 77/187.

(7) Whether the transfer of an undertaking is the reason for a change must be assessed in the light of all the circumstances of the individual case. Proximity of the change to the transfer of the undertaking, adaptation of conditions to bring them into line with the conditions of employment of the employees already employed before the transfer of the undertaking or proposed legal changes with implications for the distribution of the financial burden of early retirement rules can be indications which should be taken into account in assessing whether the transfer of an undertaking was the sole or main reason for a change.

(8) Provided that the change in conditions of employment is permissible under national law and the transfer of the undertaking is not the reason, or at least not the main reason, for the change, the agreement between employee and employer to vary conditions of employment is valid.

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