Anderson & Ors v London Fire & Emergency Planning Authority

An agreement is not unenforceable merely because a future payment is determined by reference to an external figure not yet fixed, or because it gives one party a choice between clearly expressed alternatives. Such terms can be sufficiently certain to form part of a contract.

Construction remains objective. Previous negotiations and subjective intentions cannot be used to alter clear contractual language. Where a collective agreement provides for payment by one alternative or another, it does not require the higher payment unless its language so provides.

The claimants, employees of the London Fire & Emergency Planning Authority, claimed unlawful deductions from wages under section 23 of the Employment Rights Act 1996. They contended that a collective agreement entitled them to a 2.5% pay increase from 1 April 2009, rather than the 1.575% paid.

The Employment Tribunal dismissed the claims. It held that the third-year pay term was an unenforceable agreement to agree because it offered two alternatives without specifying which had priority. It also rejected the alleged 2.5% minimum guarantee. The employees appealed on both issues.

1. Appeal dismissed. The Employment Tribunal erred in treating the third-year pay provision as an agreement to agree or negotiate. A pay term may be certain although it refers to a future National Joint Council settlement. Likewise, an agreement remains certain where it gives one party a choice between two clear methods of calculation.

2. The collective agreement therefore created a contractual entitlement to a pay increase for 2009. There was no evidential basis for finding that further negotiation was contemplated before that increase could be fixed. The agreement was expressly presented throughout as a three-year deal.

3. That error did not affect the result. Clause 2 plainly provided for a 2009 increase of 2.5% or the alternative calculation based on the National Joint Council settlement and uplift. The word “or” created alternatives. The clause did not say that the greater sum was payable, although other provisions of the agreement used express wording where the greater sum was required.

4. Applying the objective approach to construction explained in Investors Compensation Scheme Ltd v West Bromwich Building Society, [1998] IWLR 896, and Adams and others v British Airways plc, [1996] IRLR 574, the parties’ prior negotiations and subjective intentions could not add a minimum-pay guarantee absent from the agreed language. The respondent discharged its contractual obligation by paying under one of the stated alternatives. The claimants were not entitled to 2.5% or to whichever alternative produced the higher increase.

• Employment Appeal Tribunal: appeal dismissed. Although the Employment Tribunal erred in characterising the 2009 provision as an agreement to agree, its dismissal of the wage-deduction claims was upheld on the correct construction of the collective agreement.
• Employment Tribunal: claims under section 23 of the Employment Rights Act 1996 dismissed by a judgment sent to the parties on 6 June 2011.