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 industrial 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 identifies that collective agreement by name. But sometimes the collective agreement is not mentioned. Where this happens, to create a binding contract term the relevant collectively agreed term must have been incorporated by implication, for example, through custom and practice (see page 81).


Even if a contract identifies a collective agreement by name, not all its provisions will create 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 contract term. Only terms regarded as “apt for incorporation” are treated as binding contract terms. 


When interpreting a collective term, as with all contract interpretation, what matters is the objective meaning of the chosen words to an informed outsider. The private beliefs and intentions of negotiators are generally 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. “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” (Cabinet Office v Bevan [2013] UKEAT/0262/13/BA). 


A good example is the case of Anderson v London Fire & Emergency Planning Authority [2013] EWCA Civ 321. In this case, read literally, the wording of a three-year pay deal suggested that in the final year, the employer was to be 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 completely 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 the text, to spell out what the parties must obviously have intended.