Factual and Procedural Background
This is an appeal against a unanimous decision of the Employment Tribunal sitting at Sheffield, which held that the Respondent and approximately 33 other employees dismissed by reason of redundancy were entitled to enhanced redundancy payments. The Appellant Employers challenge the Tribunal's construction of the relevant employment contracts, arguing that although rights to enhanced payments existed, they had ended prior to contract termination.
The employees were originally employed by Company A and transferred to Company B in September 2004 under the TUPE Regulations. They were dismissed in December 2004 due to redundancy, raising the question of their redundancy entitlements. The employees contended that enhanced redundancy payments negotiated by their trade union with previous employers over many years were incorporated into their contracts—expressly for weekly paid staff and by consistent practice for monthly salaried staff. The Appellants argued that the last Collective Agreement containing these terms ended in November 2002 and that the terms were never incorporated for monthly salaried staff. The Tribunal ruled in favor of the employees.
The background facts include a series of Collective Agreements dating back to 1989, with the last formal agreement covering the period from 1 November 2000 to 1 November 2002. Despite this stated end date, the Tribunal found that parties acted as if the Agreement continued beyond November 2002, with ongoing negotiations, union representation, and application of redundancy payments under the Agreement. New employment terms issued post-transfer excluded reference to the Collective Agreement and enhanced redundancy terms. The employees lodged grievances challenging these changes, which the Tribunal found to be a nullity due to TUPE protections.
Legal Issues Presented
- Was the Collective Agreement still effective and in force in September 2004?
- Had the terms of the Collective Agreement been incorporated into the contracts of all employees, including monthly salaried staff?
- Were the terms varied or replaced by the new terms and conditions issued by the Appellants in September 2004?
- Were the employees entitled to benefit from the enhanced redundancy provisions?
Issue three was conceded as no longer relevant on appeal.
Arguments of the Parties
Appellants' Arguments
- The Collective Agreement ended as per its express term in November 2002, and the union never gave notice to vary it.
- The rights to enhanced redundancy payments could not exist independently of the Collective Agreement once it had terminated.
- Continued dealings with the union after November 2002 represented good industrial relations practice, not continuation of the Agreement.
- The Collective Agreement was never incorporated into the contracts of monthly salaried staff, and the Tribunal did not properly analyze incorporation by established practice.
Respondents' Arguments
- The Collective Agreement was incorporated into the contracts of weekly paid staff expressly and into the contracts of monthly salaried staff by consistent application and practice.
- The parties acted as if the Collective Agreement continued beyond November 2002, effectively waiving any termination clause by conduct.
- Even if the Collective Agreement had ended, the contractual terms continued by incorporation into individual contracts and were not extinguished by unilateral termination of the Agreement.
- The enhanced redundancy terms were sufficiently precise and suitable for incorporation into individual contracts.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Alexander and Others v Standard Telephones & Cables Ltd [1991] IRLR 286 |
Determination of whether collective agreement terms are incorporated into individual contracts; contractual intention must be ascertained; not all collective terms are suitable for incorporation. |
The court relied on this case to explain the principles of incorporation and the necessity to consider the nature of terms and parties' intentions when construing contracts. |
| National Coal Board v National Union of Mineworkers [1986] IRLR 439 |
Consideration of collective agreements' effect on individual contracts. |
Referenced by Hobhouse LJ in Alexander to support principles governing incorporation of collective terms. |
| Marley v Forward Trust Group Ltd [1986] IRLR 361 |
Principles relating to contractual incorporation of collective terms. |
Referenced as part of the legal framework for analyzing incorporation. |
| Robertson and Jackson v British Gas Corporation [1983] IRLR 302 |
Collective agreement terms incorporated into individual contracts may survive termination of collective agreement; unilateral termination does not affect incorporated terms. |
Used as a key authority to support the proposition that contractual terms can continue post-termination of collective agreements. |
Court's Reasoning and Analysis
The court analysed whether the Collective Agreement was still in force at the time of dismissal and whether its terms were incorporated into individual contracts. It accepted the Tribunal's factual finding that the parties acted as if the Agreement continued beyond its formal end date, supported by ongoing negotiations, union recognition, and application of terms. The court found this conduct sufficient to infer continuation or variation by conduct of the Agreement.
Alternatively, the court held that even if the Agreement had formally ended, the enhanced redundancy terms could continue as incorporated contractual terms, unaffected by unilateral termination of the Collective Agreement, consistent with the principles established in Robertson and Jackson. It rejected the Appellants' argument that the contractual rights ceased with the Agreement's expiry, emphasizing that the parties could not have intended the contracts to become empty shells.
Regarding monthly salaried staff, the court noted they lacked express incorporation but accepted the Tribunal's implied finding—based on practice and equal application of terms—that the enhanced redundancy provisions were incorporated by custom and practice. Although the Tribunal did not explicitly frame this reasoning, the court inferred this was the substantive conclusion.
The court acknowledged that collective agreements generally lack direct enforceability by employees and are presumed not legally binding, but their terms can bind individual contracts if incorporated. Not all collective terms are apt for incorporation; however, enhanced redundancy payments were suitable contractual terms.
The court also clarified that while terms may be varied or renegotiated collectively, unilateral termination of a collective agreement does not necessarily extinguish contractual rights incorporated into individual contracts.
Holding and Implications
The appeal is DISMISSED.
The court upheld the Employment Tribunal's decision that the employees were entitled to enhanced redundancy payments. The Collective Agreement was either continued by conduct beyond its nominal expiry or its terms remained incorporated into individual contracts notwithstanding termination. The ruling confirms that contractual rights derived from collective agreements may survive formal termination of those agreements if the parties' conduct or contractual intention supports continuation. There are no broader implications or new precedent beyond affirming established principles concerning incorporation and continuation of collective agreement terms in individual employment contracts.