Anderson v London Fire & Emergency Planning Authority

The Court of Appeal held that a clause in a collective "General Pay Settlement 2007-09" incorporated into individual contracts of employment was a legally enforceable contractual term for the year commencing 1 April 2009. The court rejected the Employment Tribunal's conclusion that the clause was an agreement to agree or was void for uncertainty. Applying the objective approach to contractual construction, including the background that the parties intended a three-year pay deal, the court construed the 2009 provision to entitle employees to an increase of 2.5% or the National Joint Council (NJC) settlement plus any uplift required to ensure general pay increases for 2007-09 were 1% above NJC settlements, whichever was the greater.

Legally significant holdings were (i) collective agreements, while not enforceable as contracts between union and employer by reason of Trade Union and Labour Relations (Consolidation) Act 1992, section 178, may give rise to enforceable terms incorporated into individual employment contracts; (ii) a provision giving two alternative methods of calculation is not necessarily uncertain or an agreement to agree and may be construed to give a guaranteed minimum where that construction best accords with industrial common sense; and (iii) courts may imply the effect of "whichever is the greater" where the objective meaning and context of the agreement make that the only sensible construction.

Background and parties: The London Fire & Emergency Planning Authority (the Employer) concluded a collective pay agreement with GMB and Unison for 2007-09. The appellants, members of Unison, claimed under Part II of the Employment Rights Act 1996 for unlawful deductions from wages, asserting an entitlement to a 2.5% pay increase from 1 April 2009 pursuant to terms incorporated from the collective agreement into their individual contracts.

Procedural history: The Employment Tribunal found the 2009 clause was no more than an agreement to agree and therefore conferred no contractual entitlement. The Employment Appeal Tribunal (Slade J) dismissed the employees' appeal but on the ground that the clause clearly gave the employer a choice between two alternatives and that paying under one alternative satisfied the obligation. The employees appealed to the Court of Appeal.

Issues framed: (i) whether the 2009 provision was legally enforceable when incorporated into individual contracts, or whether it was an agreement to agree, uncertain or not apt for incorporation; (ii) if enforceable, how the clause should be construed—whether the employer had a free choice between two alternatives or whether the clause guaranteed a minimum increase.

Court's reasoning and decision: The court first rejected doctrinal obstacles to enforceability, noting that although collective agreements are not enforceable as between union and employer under TULRCA s.178, terms can be incorporated into individual contracts and be binding. It held the 2009 wording was not an agreement to agree nor void for uncertainty: the parties plainly intended a three-year pay deal and would not have understood the third year to be left to unfettered employer discretion. Applying the objective approach to construction (Investors Compensation Scheme and related authorities) and considering the factual background, the court concluded the clause meant employees were entitled to 2.5% or NJC plus 1%, whichever was the greater. The appeal was allowed and the ET/EAT decisions reversed on the construction point.

Appeal allowed. The Court of Appeal held that the 2009 provision in the collective Pay and Conditions Agreement, incorporated into individual contracts, was a contractual entitlement. Construed in its factual context as part of a three-year deal, the clause required payment of 2.5% or the NJC settlement plus any uplift required to ensure pay increases for 2007-09 were 1% above NJC settlements, whichever was the greater. The court rejected the Employment Tribunal's view that it was an agreement to agree and rejected arguments that the clause was void for uncertainty or not apt for incorporation.

Employment Tribunal: claim for unlawful deductions dismissed on ground the 2009 provision was an agreement to agree. Employment Appeal Tribunal (Slade J, UKEAT/050511SM): appeal dismissed on different reasoning (held clause gave employer a choice between alternatives). Court of Appeal: appeal allowed [2013] EWCA Civ 321.