AIB Group (UK) Plc v Fletcher & Ors

An expressly incorporated term from a collective agreement remains a term of the individual contract unless it is varied by the agreement required for variation. A later collective agreement which changes only the timing of a payment, and merely reserves a right to discuss future payments, does not remove or vary the substantive contractual entitlement for the later year. If negotiations produce no further agreement, the existing incorporated term continues to govern.

The employer recognised a union for collective bargaining and the claimants’ contracts expressly incorporated collectively agreed terms. A performance-related-pay scheme agreed in 2001 was incorporated into those contracts.

In 2009, following negotiations during the banking crisis, payment of that year’s increase was deferred. The employer reserved a right to discuss increments and pay arrangements for 2010. No agreement was reached for 2010, and the employer paid no performance-related increase.

The Employment Judge upheld complaints of unauthorised deductions from wages. The employer appealed, contending that the 2009 collective agreement had superseded the 2001 scheme so that no entitlement arose without a fresh agreement.

1. Appeal dismissed. The Employment Judge correctly held that the claimants remained contractually entitled to the 2010 performance-related-pay increase under the scheme incorporated in 2001.

2. The 2001 performance-related-pay regime was an express term of each claimant’s individual contract. On the facts, it could be varied only by agreement between the employer and the union; there was no suggested individual agreement with the claimants.

3. The 2009 agreement effected a limited variation. It deferred the timing, but not the amount, of the 2009 performance-related payment. Its language concerning 2010 reserved a right to review and discuss future payments. It did not amount to an agreement that the existing scheme would end, or that any 2010 entitlement would depend upon a future agreement.

4. Where the contemplated discussions did not result in agreement, the incorporated 2001 term remained in force. The Tribunal applied the approach in Robertson v British Gas [1985] ICR 351: ending a collective agreement does not itself alter a term already incorporated into individual contracts. Here, the employer had not even purported to terminate the 2001 agreement.

5. The law of implied terms did not arise. The failure to pay the 2010 increase therefore constituted the unauthorised deduction upheld by the Employment Judge.

• Employment Appeal Tribunal: dismissed the employer’s appeal and upheld Employment Judge Grewal’s decision allowing the claimants’ complaints of unauthorised deductions from wages.
• Employment Tribunal: Employment Judge Grewal, in reasons dated 22 March 2012, held that the incorporated 2001 performance-related-pay scheme continued to apply in 2010.