Works rules and collective agreements

Works rules, guidelines or rules about how work should be carried out can be part of a contract even if the employee has no choice but to accept them.

In the UK, collective agreements are not generally legally binding on the parties to the agreement — the union and the employer (section 179 TULRCA). Instead, they are binding “in honour” and backed up voluntarily by good employment relations and by the implicit threat of collective action. Only collective terms that have been incorporated into the employment contract are legally binding.

In most straightforward cases it is obvious which terms of a collective agreement have been incorporated into the employment contract because the contract actually names the collective agreement. But sometimes the employment contract does not mention the collective agreement. Where this happens, to create a binding contract term the relevant collectively agreed term must have been incorporated by implication — through conduct, custom and practice.

Even if a contract identifies a collective agreement, not all its provisions will be legally binding contract terms. For example, in Kaur v MG Rover [2005] IRLR 40, the Court of Appeal ruled that a term in a collective agreement stating that there would be no redundancies was only “aspirational” and not a contractual term. Only terms regarded as apt for incorporation are treated as binding contract terms.

When interpreting a collective term, what matters is the objective meaning of the chosen words to an informed outsider. The subjective or private beliefs and intentions of negotiators are irrelevant.

Words used in a collective agreement are not simply given their literal meaning. Instead the industrial context of the agreement must be taken into account. As the EAT explained in Cabinet Office v Bevan UKEAT/0262/13/BA: “Just as in the commercial context regard must be had to business common sense, so in the context of employment relations regard must be had to industrial common sense.”

A good example is the case of Anderson v London Fire & Emergency Planning Authority [2013] EWCA Civ 321. In this case, the literal text of a three-year pay deal suggested that in the final year the employer was completely free to choose between two different pay awards. The Court of Appeal said that since the collective agreement represented an attempt to secure a three-year pay deal, it was “fanciful” and “flouting industrial common sense” to imagine that both sides intended to give the employer a free rein to decide on the pay award in the final year. Instead the judges interpreted the agreement by adding the words “whichever is the greater”, to spell out what the parties must obviously have intended.