Collective agreements: can an employer seek ‘rectification’ of a mistake in a collective agreement?
Collective agreements are presumed not to be a legally enforceable contract unless they are in writing and contain a statement that the parties intend the agreement to be legally enforceable (s179 TULRCA 1992). Where a contract contains a ‘mistake’ (ie an error in documenting the agreed terms) either party can apply to the court for the equitable remedy of ‘rectification’. If rectification is granted, the court will correct the error so that the contract correctly records the agreed terms. The Court of Appeal has recently considered whether an employer can seek rectification of a mistake in a legally unenforceable collective agreement and against whom the claim ought to be brought.
Nexus, the operator of the Tyne and Wear metro train service, recognises two independent trade unions (the RMT and Unite) for collective bargaining purposes and the contracts of staff expressly incorporate the collective agreement (known as the ‘Red Book’). A letter was sent by Nexus to the unions in 2012, setting out agreed changes to the Red Book, which included incorporating a productivity bonus into basic pay (2012 agreement).
A dispute later arose about the effect of the 2012 agreement on the calculation of shift allowances – the unions argued that the shift allowance should take account of the productivity bonus, whereas Nexus argued the opposite. In 2015, this unresolved dispute led to approximately 70 employees successfully bringing unlawful deduction from wages claims (UDW claims); the employment tribunal held that the 2012 agreement gave the employees an entitlement to shift allowance enhanced by the productivity bonus. This decision was later upheld by both the EAT and Court of Appeal, leaving the final determination of the value of the UDW claims to be decided.
Meanwhile, Nexus applied to the High Court for rectification of ‘mistakes’ in the 2012 agreement. Nexus argued that, at the time the agreement was reached, it was not the common intention of the parties (nor Nexus’s own intention, which ought to have been clear to the unions) that the shift allowance should be enhanced by the incorporated productivity bonus. Nexus asked the High Court to insert words into the 2012 agreement which made it clear that productivity bonus would not impact on the calculation of the shift allowance, or any other allowance. The unions sought the strike-out of the rectification proceedings and, after this application was rejected by the High Court, they appealed to the Court of Appeal.
The Court of Appeal held that rectification is not available for an unenforceable collective agreement. The fact that the Red Book (as amended by the 2012 agreement) was not legally binding was ‘an insuperable barrier to its rectification’. The High Court dismissed the application for rectification on the basis that it was defective. However, the legal consequences were embodied in the employees’ employment contracts, which expressly incorporated the collective agreement, and these were legally binding contracts. Therefore, Nexus should have: (a) applied to rectify the individual employment contracts; and (b) brought the rectification claim against the individual employees, not the trade unions.
The High Court confirmed that Nexus can in the future bring new rectification proceedings directly against the employees. However, the fact that it failed to raise the issue of mistake in the UDW claims, means that it would be barred from doing so now to defeat those claims. The Court of Appeal refused to determine whether the same principle would apply to any ‘new’ UDW claims; that would be an issue in any future rectification proceedings brought by Nexus. The justices also expressed differing views on whether an employment tribunal has rectification powers and the extent to which it could consider this issue.