Steps to correct terms of a collective agreement

Posted: 25/11/2024

In National Union of Rail, Maritime and Transport Workers and another v Tyne and Wear Passenger Transport Executive T/A Nexus, the Supreme Court considered what legal remedies exist where the written record of a collective agreement, by mistake, does not accurately reflect what the employer and the union representatives agreed. 

The case considers whether rectification is possible where the collective agreement is not legally binding and, if permitted, whether rectification is permissible against the union or the employees.

Collective agreements reached through collective bargaining between an employer and a recognised trade union are, unless expressly stated to be so, not legally enforceable contracts. However, terms of collective agreements that are apt for incorporation, such as pay and conditions, can be incorporated in contracts of employment between the employer and its employees, either through express incorporation or by custom and practice. Once incorporated as contractual terms, they are legally enforceable, by the employer or employees as appropriate.

The dispute arose between Nexus and two unions about whether a letter setting out the agreement resulted in an uplift in both basic pay and a productivity bonus, as argued by the unions. Employees brought successful claims in the Employment Tribunal that there had been an unlawful deduction of pay when the productivity bonus was not increased in line with basic pay. This claim considered the matter afresh in High Court proceedings, seeking rectification of the collective agreement.

In Nexus’ eventual appeal to the Supreme Court, it argued that the Court of Appeal had erred in law in holding that rectification is not available for a collective agreement which is not intended to be a legally enforceable contract, and/or in holding that it would be necessary to sue on the individual contracts of employment into which such a collective agreement is incorporated.

The Supreme Court dismissed the appeal. It disagreed with the Court of Appeal that Nexus had aimed at the wrong party in seeking to have the letter, rather than the individual employment contracts, rectified. There was no scope for arguing that the documents recording the employment contracts did not accurately record what Nexus and its employees intended them to say and should therefore be rectified. Any mistake was made by Nexus and the unions in failing to accurately record the terms of their collective agreement. It was therefore the letter that needed to be rectified. 

The question then was whether it was legally possible to rectify the record of a collective agreement that was not intended by the parties to be a legally enforceable contract. The Supreme Court disagreed with the Court of Appeal; the reason why a court will not normally rectify a document recording a legally unenforceable agreement was that any such rectification will not affect any legal rights or obligations (here, the individual contracts of employment). 

However, although the letter was not itself legally enforceable, rectifying it would have the effect of altering legal rights and obligations as between the employer and employees into whose contracts the terms of the letter were incorporated. As such, if a mistake had been made in recording the letter, it could be rectified. 

Having found this, the Supreme Court agreed with the Court of Appeal’s conclusion that Nexus had brought its claim for rectification of the letter against the wrong defendants. Proceeding against the unions and not the employees was improper as there was no legal dispute between Nexus and the unions as to the existence or extent of any legal right between them. Further, it would not be right to make an order that would alter the legal rights of employees without giving them the opportunity to be heard. Nexus could decide to bring a fresh action against the employees and this disposed of the appeal.

The Supreme Court then went on to consider whether the issue of rectification could have been raised by Nexus in the earlier proceedings which were brought in an employment tribunal. It noted that an employment tribunal does not have the power to make an order for rectification on a claim for unlawful deductions from wages. However, the issue of rectification, an equitable remedy, could have been raised by Nexus as a defence. This principle applied in the civil courts and there was no reason why it should not equally apply in proceedings in an employment tribunal, albeit it would now be an abuse of process to raise this in the earlier proceedings.

Ultimately, the case confirms that there is an option for either an employer or a union to seek to rely on rectification to try and correct mistakes in implementing a collective agreement. An employment tribunal can also consider the issue of rectification in appropriate cases.

For further information on how this judgment might affect your organisation, please contact Binder Bansel.

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