How to correct a mistake in a collective agreement

Thanks to a Supreme Court ruling earlier this month, we now know that an employer can bring proceedings to rectify a mistake in a collective agreement. Any such claim must be brought against the affected employees, and not against the union.

Operating in a “legal twilight”

The Supreme Court explains the reason for the legal complexity of this issue at the beginning of its decision:

Collective agreements reached through collective bargaining between an employer and a recognised trade union exist in a legal twilight. Unless expressly stated to be so, such agreements are not legally enforceable contracts. Yet typically, through express words of incorporation or custom and practice, terms of collective agreements dealing with pay and conditions are incorporated in contracts of employment between the employer and its employees. As terms of those contracts, such terms are legally enforceable

Why is this issue important?

Because of the environment in which they are created, and the fact that they are not legally binding, it is not unusual for collective agreements to be unclear. Much of their content can be regarded as aspirational and not “apt” for incorporation into contracts of employment. A degree of imprecision arguably doesn’t matter in that context.

But it is particularly important to use precise wording to record collectively agreed terms which will be incorporated into the employment contracts of workers represented by the union. Unfortunately, it is fairly common for collective agreements to fail to meet this standard.

What happened in this case?

The underlying dispute goes back to 2012 when Nexus, the operators of the Tyne and Wear Metro, agreed with the two unions they recognise to consolidate a productivity bonus into basic pay. This was recorded in a letter which did not address what would happen to shift allowances, which had previously been calculated as a percentage of basic pay. The employers argued that it had always been intended that the shift allowances would continue to be calculated as a percentage of the original basic pay, excluding the consolidated productivity bonus.
Despite arguments from the unions that this was not what the letter said, Nexus continued to calculate and pay the shift allowances in the old way. In the end this approach was challenged by a group of workers who brought claims for unlawful deduction from wages. In those proceedings the employment tribunal ruled that on the face of the letter the unions’ interpretation was the correct one. That ruling was upheld by the Employment Appeal Tribunal and then by the Court of Appeal.

The employers then changed tack. They brought proceedings relying on the legal principle that in some circumstances an agreement can be corrected (“rectified”) to reflect what the parties actually intended it to mean. These proceedings started in the High Court and were finally ended by the Supreme Court’s recent ruling.

Key lessons

There are two main lessons to drawn from this litigation, one practical and the other legal.
On the practical side, it is vitally important that both parties focus on the way they record collective agreements in relation to terms and conditions. That’s because they will be incorporated into individual contracts of employment, to which strict rules of legal interpretation will be applied, which will focus on the objective meaning of the words used.

The legal lesson is that if a genuine mistake is made in relation to the wording of a collective agreement, the legal avenues to pursue are now much clearer. One option is to bring a claim for rectification against all the affected employees in the High Court. The other is to use the argument that the collective agreement ought to be rectified as defence against claims in the employment tribunal which are based on the uncorrected term. That is on the basis that all our courts and tribunals can operate on the principle that to do justice between the parties they are entitled to “treat as done that which ought to have been done.”

The law in relation to rectification is particularly complicated, so legal advice should be obtained if an employer finds itself in this situation, as not all mistakes can be corrected in this way.

Finally, it is worth adding that although this was not the focus of this litigation, it must follow that a union can bring rectification proceedings in the same way. All the more reason for both parties to a collective agreement to focus on setting down what has been agreed clearly and unambiguously.

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