Works rules and collective agreements

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

In the UK, collective agreements are not 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 the implicit threat of collective industrial action. Only collective terms that have been incorporated into the individual employment contract are legally binding.

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

Even if a contract refers expressly to a collective agreement, it does not follow that all the terms of that agreement will be legally binding. Instead, a court or tribunal will look at all the circumstances, especially the language used in the collective agreement, to decide whether the parties intended to create a binding obligation. For example, in Kaur v MG Rover [2005] IRLR 40, the Court of Appeal held that a term in a collective agreement stating that there would be no redundancies was “aspirational” only and not a contractual term. Only terms that a court regards as “apt” for incorporation will be treated as binding contract terms (see below).

As with any agreement, the basic aim of courts and tribunals is to work out the parties’ intentions at the time of entering into the collective agreement. What matters is the objective meaning of the words chosen to an informed objective outsider. As always, the subjective or private beliefs of negotiators are irrelevant.

Words used in a collective agreement are not simply given their literal meaning, if this frustrates the parties’ purpose. 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 written text of a three-year pay deal suggested that in the final year, the employer had a free hand to choose between two different pay awards. The Court of Appeal said that when interpreting the agreement, it was essential to take into account its industrial context. Since this was an attempt to secure a three- year pay deal, it was “fanciful” and “flouting industrial common sense” to imagine that the parties intended the employer to have free rein to decide the pay award in the third year. Instead, the judges interpreted the agreement by adding the words “whichever is the greater”, to spell out what the parties must obviously have meant.