Agnew & Ors v North Lanarkshire Council (Contract of Employment : Incorporation into Contract)

A collective agreement may supply enforceable terms of an individual employment contract even though the agreement itself is presumed not to be legally enforceable between its collective parties. The relevant provisions must be apt for incorporation and must be construed by ordinary contractual principles.

Where incorporated wording provides, in clear language, that a reviewed grading structure will supersede existing provisions after a prescribed process involving union consultation, it may confer a contractual power to implement the new structure without further agreement. Local attempts to reach agreement do not establish a contrary contractual intention unless they evidence the parties’ intention when the relevant agreement was concluded.

About 250 local authority employees claimed unlawful deductions from wages after North Lanarkshire Council implemented a new pay and grading structure under the national single-status agreement known as the Red Book.

The employees’ contracts incorporated collective agreements negotiated from time to time. The Employment Tribunal held that paragraph 12.2 of the Red Book’s Implementation Agreement was incorporated, and entitled the Council to implement the new structure after job evaluation and review, despite the absence of union agreement.

The employees appealed on incorporation, interpretation and unilateral variation. The central questions were whether paragraph 12.2 was apt for incorporation and whether it provided a contractual basis for implementation.

1. The appeal was dismissed. The Employment Appeal Tribunal upheld the Employment Tribunal’s dismissal of the unlawful-deduction claims.

2. A collective agreement does not automatically alter an individual employment contract. Nevertheless, an individual contract may incorporate terms from a collective agreement. The court must ask whether the contract incorporates the collective agreement, whether the particular term is apt for incorporation, and what the incorporated term means.

3. A term is apt for incorporation where, having regard to its content and character, it relates to the individual employment relationship and contemplates enforceable rights or duties between employer and employee. Collective provisions concerning industrial disputes or collective bargaining may not satisfy that requirement, but provisions concerning individual pay, grading, progression, pay protection and appeals may do so.

4. Paragraph 12.2 was part of the structure for moving to single-status employment. Read with the surrounding provisions, it concerned individual employment rights and the eventual replacement of the former grading arrangements. The use of “local arrangements”, rather than “local agreement”, and the repeated use of “will” indicated obligation rather than mere prediction.

5. The provision did not properly amount to a bare power of unilateral variation to the employees’ detriment. It implemented a nationally agreed process, following local review and full consultation with employee representatives. Even assuming a presumption against contractual powers of unilateral variation, the wording was sufficiently clear.

6. The parties’ conduct at local level in seeking agreement on a whole package did not establish a contractual requirement for further consent. Contractual intention had to be assessed at and immediately before the conclusion of the collective agreement, and there was no finding that further consent was then intended to be necessary.

The Council was therefore entitled to rely on paragraph 12.2 when introducing the new structure on 6 November 2006.

• Employment Appeal Tribunal: dismissed the appeal and confirmed the Employment Tribunal’s dismissal of all claims.
• Employment Tribunal, Glasgow: held that paragraph 12.2 of the Implementation Agreement was incorporated into the employees’ contracts and entitled the Council to implement the new pay and grading structure.