Clarity and precision required when settling industrial disputes - David Morgan

The strong support for strike action among teaching and nursing union members expressed recently was the latest instance of the trade union movement continuing to demonstrate its strength, piling pressure on employers during the cost-of-living crisis.

While the natural and expected outcome of any trade dispute is that an agreement will eventually be reached one way or another, that is not always the end of the matter.

A recent Court of Appeal case has shown that the courts are willing to intervene and rein in the scope of collective agreements in trade disputes.

In the relevant case – Tyne and Wear Passenger Transport Executive t/a Nexus -v.- RMT & Unite – the Court of Appeal held that an employer could not seek rectification of a collective agreement, in an action brought against its recognised trade unions.

David Morgan is a Partner – Employment with Burness Paull

Under English law, collective agreements can only be rectified if they are legally binding, and there is a presumption against them being legally binding. Section 179 of The Trade Union and Labour Relations (Consolidation) Act 1992 specifically provides that collective agreements are not legally enforceable unless they specifically state otherwise (the agreement in this case did not). Although the collective agreement could be rectified to the extent that its terms were incorporated into individual contracts of employment, that could only be done in the course of an action involving the employees individually, not in an action brought by the employer against the trade unions themselves.

On this latter point, the Court of Appeal held that an employment tribunal does have power to order rectification if it is necessary to do so in order to determine a claim for, say, unlawful deductions (e.g. a dispute over bonus or other allowances). The former provisions of the “Wages Acts”, now contained in the Employment Rights Act 1996, confer on the employment tribunal jurisdiction to determine whether a deduction from wages is unauthorised. It follows, therefore, for the Court of Appeal, that the tribunal must have power to decide any issue in order to determine whether a deduction from wages is unauthorised.

In this case, which involved a long-running pay dispute with transport workers around Newcastle, the court decided that, if the employer contended that the deduction was lawful because the written contract between the parties did not properly reflect what was agreed and needed to be rectified, that is an issue which needs to be decided. However, the employer should have treated this as a dispute over the individual terms of employee contracts, rather than the collective agreement with the trade unions.

This case underlines the importance for employers of ensuring accuracy around the terms of collective agreements. If an employer is able to achieve a pay deal after what nowadays tends to involve extensive and exhaustive periods of collective bargaining, it is all the more important to document this correctly in a clear collective agreement. In turn, the power of collective bargaining is that these collectively agreed terms are then incorporated (virtually automatically) into individual employee contracts, thereby varying their terms.

We would generally recommend avoiding going so far as to making collective agreements expressly legally binding as it is preferable for collective trade disputes to be resolved in conciliation or mediation. In particular, when it comes to union recognition agreements, it is best to state that these are “binding in honour only” in order to underline their voluntary status. However, that is not to underplay the importance of accuracy and consensus when it comes to drafting these important documents, especially given how they change the express terms of all employees’ contracts in the bargaining unit once “incorporated”.

As employers ready themselves to kick off their next round of collective bargaining in the New Year, and with inflation continuing to put pressure on earnings, I think that we can be quite sure that industrial disputes are set to continue for the foreseeable future. If a reasonable collective agreement can realistically be reached with your recognised trade unions, it’s all the more important to get this locked down with clarity and precision.

David Morgan is a Partner – Employment with Burness Paull