United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR ANDREW CLARKE QC (One of Her Majesty's Counsel) Instructed by: Messrs Jacksons Solicitors Innovation House Yarm Road STOCKTON-ON-TEES TS18 3TN
For the Respondent	MR PETER EDWARDS (of Counsel) Instructed by: Messrs Rowley Ashworth Solicitors Suite 1B Joseph's Well Hanover Walk LEEDS LS3 1AB

SUMMARY

CONTRACT OF EMPLOYMENT – Incorporation into Contract

Implied Terms /Variation /Construction of term

Unlawful deductions case. It depended on the contractual right of certain shift workers. They alleged that they had rights incorporated into their contracts from a Collective Agreement. Was the Collective Agreement finalised before the employers indicated an unwillingness to apply its terms? Or had the employers withdrawn the offer before acceptance? EAT held, reversing the Employment Tribunal, that the offer had been withdrawn and that there was no contractual right to payment.


 


THE HONOURABLE MR JUSTICE ELIAS (PRESIDENT)

1. This case raises the question whether a collective Agreement had been entered into in August 1999 so as to confer certain benefits on a category of shift workers employed by Corus UK Limited, the appellant to this appeal.
2. In the hearing before the Employment Tribunal, the appellant identified a whole series of grounds on which it was submitted that the terms of the collective Agreement had never properly been agreed or alternatively had subsequently been varied by the conduct of the parties. All these were rejected by the Tribunal.
3. The appeal is now directed only to certain particular findings of the Tribunal in which they held that the Agreement was complete and agreed before an attempt was made by the Corus to amend it with respect to shift workers. If that conclusion is correct, then of course any attempted unilateral variation of the Agreement after it had been made would be ineffective.
4. In view of the limited basis of the appeal, it is possible to summarise the essential features of the case much more succinctly than had been possible for the Employment Tribunal.

The background.

5. The employees are members of the trade union, Amicus. This is one of a number of trade unions which regularly entered into collective bargaining with Corus on terms and conditions of employment. It was not disputed that appropriate terms from the collective Agreements would be incorporated into the individual contracts of employment of the employees concerned.
6. In November 1997 Corus made proposals for new working arrangements and pay structures. It was proposed to establish three free standing engineering businesses. One of these was to operate out of Teesside and Scunthorpe. An enabling Agreement was negotiated nationally laying down certain principles to be followed in Agreements to be negotiated locally relating to specific areas of the business. In order to simplify pay structures, it was envisaged that there would be a rationalisation of the various different rates and that they would be replaced by what was termed the "weighted average" of all the existing rates. That was adversely going to affect the pay of some employees but a principle of pay protection was included in the Agreement to mitigate the consequences of that. An important principle underlying the change was that there should be no increase in the per capita employment costs.
7. Local negotiations for the new business in the North East, known as North Eastern Engineering, were led by Mr Patrick for Corus and Mr Crowder, the convenor in Scunthorpe, on behalf of the trade unions. The union side consisted of two representatives from a number of unions, in each case drawn from Scunthorpe and Teesside respectively.
8. After much detailed negotiation, it was agreed that the weighted average would be calculated only on a basic 40 hour week but that the various groups of worker, namely day workers, day rota workers and shift workers, would all have a single rate of pay and would be paid on a monthly basis. The final negotiating meeting took place on the 26 August; full time officials were present at that meeting.
9. The Agreement, headed "Team working Agreement" which was finally put to the unions for acceptance on 26 August, included the following provisions:

"Memorandum of Agreement reached on 26 August 1999 between British Steel, Sections Plates and Commercial Steels, North East Engineering, and the AEEU – (engineering & electrical sections), SIMA, MSF, GMB, UCATT, ISTC, Trade Unions, regarding the application of Teamworking within Maintenance Services & Workshops, the principles of which were agreed in each of the main site Works Teamworking Enabling Agreements at Teesside and Scunthorpe."

"6. Earnings

6.1 To support the team based approach in the maintenance services and workshop engineering teams pay structures will be established in accordance with the weighted average principles contained in section 7 of the appropriate Works Enabling Agreement and are detailed in appendices 1(f) and 2(e)."

"6.2These rates are all inclusive and will apply equally to Days and Shifts i.e. there will be no hourly rate differential between various shift/rota patterns and supplemented by the agreed shift working premia."

10. Appendix 2(3) to the Agreement sets out the rates for certain shift workers and has the following note endorsed:

"Note: The above rates of pay are all inclusive and reflect the requirements and duties of the new engineering business."

11. Corus accept that the effect of clause 6.2 is that the shift workers will receive the same daily pay rate as the other categories of worker. However, they contended that it was always the understanding of all parties that the shift workers would be treated differently from the other workers in the way in which their day rate was calculated and that the Agreement erroneously failed to reflect this.
12. The union denied that it had shared this common understanding and the Tribunal spent much of its decision analysing the evidence relating to that matter. The Tribunal concluded unequivocally that this was not the understanding of the unions during the course of the negotiations. The Tribunal gave cogent reasons for this conclusion and it has not been appealed.
13. This Agreement was signed by management representatives and by trade union representatives at Scunthorpe at the meeting on the 26 August (more accurately, in the early hours of 27 August) after lengthy negotiations. However, the Teesside representatives did not immediately sign because it was their practice to consult with their members prior to signature. Apparently this was so with all the unions involved; consultation was not, therefore, required by any union but was required by all signatory unions with respect to the Teesside but not the Scunthorpe employees.
14. The Tribunal noted that the evidence before them was that the Agreement was signed by everyone in the two weeks following 27 August with the exception of Mr Agar, who was the union convenor in Teesside. He in fact never signed the Agreement at all; the Tribunal does not explain why not.
15. However, on the 27 August, very shortly after signing the Agreement on behalf of Corus, Mr Patrick contacted Mr Crowder, the senior union negotiator. The Tribunal records the evidence of this conversations as follows:

"According to Mr Patrick's account, Mr Crowder apparently agreed that there ought to be a separate rate for shift workers and that the day rate that had been agreed and specifically set out in the schedules to the agreement of the 26 August would not apply to shift workers."

16. When further formal discussions on this issue took place between the parties in early November, Mr Crowder formally objected to this change being effected, thereby falling in line with his union. It was not, however, denied that he had originally intimated his personal agreement to this change.
17. The Tribunal stated that Mr Agar did not know of the conversation between Mr Patrick and Mr Crowder until the 13 September, and they inferred from this that probably quite a number of union officials would have been ignorant of it. Both parties accept that this was inaccurate. Mr Agar's evidence was that he had been told of this conversation by another union representative, Mr. Perks, on the 31 August. The appropriate inference, contrary to the Tribunal's analysis, is therefore that the employer's altered stance would have been widely known.
18. The proposed variations in the Agreement to the shift pay were finally set down in a letter from Mr Patrick on the 13 September. They were strongly opposed by Amicus in particular. Mr Agar specifically took issue with it. He sent a written response on the 20 September and took the issue to an informal committee. Thereafter extensive attempts to resolve the matter through disputes procedures have failed. The Tribunal found, contrary to the evidence of management, that Corus must have known that their proposed rate for shift workers was opposed by the unions well before the Agreement was implemented on the 1 November.
19. When it was implemented, shift workers did not receive the rates fixed in the Agreement but rather those identified in Mr Patrick's letter of 13 September. Some of them now contend that this infringes their contractual rights. The particular claimants are all members of Amicus from the Teesside region. (At the time the Agreement was negotiated they were members of the AEEU, a predecessor of Amicus.) No other union members, and no Scunthorpe workers, have made claims.

The law.

20. The legal principles are not in dispute. It is conceded that if this Agreement was reached covering the shift workers, it is a collective Agreement within the meaning of s178 of the Trade Union and Labour Relations (Consolidation) Act 1992. Furthermore, Corus accept that if the Agreement did come into force in the terms identified in the document of 26 August, then its effect was to enable shift workers to receive higher pay than they have in fact been given since the implementation of the Agreement on the 1 November 1999. (It was always recognised that the implementation of the Agreement would take some time, not least because it was necessary to work out the precise pay rates applicable to different groups.)
21. The failure to make the requisite contractual payments would be an unlawful deduction under s13 of the Employment Rights Act 1996, and it is accepted that the claims would be in time, even going back to 1999. Hence this case turns on whether there was in law an Agreement reached that the shift workers would receive these payments.

The Tribunal's conclusions.

22. The Tribunal found that the Agreement was concluded on the 26 August. They reasoned as follows:

"The claimants maintained that they had given to their trade union representatives the power to bargain on their behalf and to be bound by the outcomes and that was not disputed by the respondent. The Agreement of 26 August 1999 was signed at the conclusion of the negotiations by the respondent's representatives and by the Scunthorpe trade union representatives and over the following two weeks or so by the Teeside representatives. There were probably sufficient signatures on 26 August to make that bargain immediately effective and for its terms to be incorporated into the individual contracts of employment."

23. The Tribunal then rejected various arguments advanced as to why the Agreement was not valid. They also held that the fact that the employees had continued to work whilst accepting the modified wage did not amount to variation by conduct since it had always been made clear that they did not accept that this was their contractual right. The Tribunal also noted that the Agreement had been implemented from 1 November. They dealt with a submission that Mr Agar had chosen to implement the informal procedure in order not to hold up the implementation of the Agreement and said this (para 3.38):

"It was suggested that Mr Agar was playing a game by taking the matter to the grandfather committee because he did not want to stop the agreement being implemented because it was beneficial to a substantial number of the engineering workers. The argument was therefore that Mr Agar was deliberately using informal channels in order to avoid the risk of stopping the implementation of the new arrangements to avoid potential difficulties with some parts of the union membership. Equally, it appears that the respondent may well have had an eye to wider considerations and similarly did not want to hold up implementation of the agreement. According to the respondent's witnesses they knew within hours of signature that there were serious problems from their point of view with the terms of agreement that had been signed. However, they took no steps to take the agreement back through the recognised negotiating procedures either at local or national level nor did they attempt to stop the agreement being implemented. Since then the respondent has taken no action on the agreement nor has it sought rectification in the Courts. Accordingly both the respondent and the trade union side appear to have been motivated by not dissimilar pragmatic considerations. Indeed, it is a matter of fact that the agreement has been implemented to the satisfaction of both sides in relation to the other workers and it is only the shift workers where there is a dispute regarding the application of clause 6.2 and the appendices."

Mr Edwards, counsel for the employees, puts much weight on this finding.

The Parties' submissions.

24. Mr Clarke QC, counsel for Corus, made two submissions. The first is that the Tribunal erred in concluding that there was a binding Agreement entered into on 26 August. He says it is quite inadequate for the Tribunal merely to indicate that "probably" enough signatures had been appended to the Agreement to make it binding. It could not be binding without the consent of those representing the Teesside workforce.
25. More substantially, he contends that the Agreement could not have been properly reached at that date because the Teesside representatives had in terms stated that they needed to consult their members. If that consultation were to be more than a sham then one must suppose that the representatives were intending to leave open the possibility that their members might choose not to approve the Agreement. Accordingly, there could have been no valid Agreement until the Teesside representatives themselves signed the Agreement, which, as the Tribunal found, was not until some time after 27 August but before 13 September. Mr Clarke recognises that if he is wrong about this, and the Agreement was made on the 26 August, then the appeal must fail.
26. His second submission is, therefore, contingent upon the first being successful. He says that Corus, through Mr Patrick's conversation with Mr Crowder, had made it plain that it was not prepared to implement the Agreement so as to apply it to shift workers. He submits that this amounted to a withdrawal of the offer, and once an offer is withdrawn it cannot thereafter be accepted. In this case it had been made plain to the unions prior to the Teesside representatives signing the Agreement that Corus was not prepared to offer the same pay rate to the shift workers. . It was enough to communicate this to Mr Crowder as the senior union officer, but in any event it was apparent that Mr Agar and other union representatives were aware of the new stance before signing the Agreement. There would have been widespread knowledge of this fact when the Agreement was signed.
27. This latter argument was not expressly dealt with in terms by the Tribunal. A similar argument, however, was considered. This was that the employees had by agreeing to the implementation of the Agreement with knowledge of Corus's changed stance, impliedly agreed to a variation. This was rejected by the Tribunal on the grounds that at all stages the union and the employees had opposed Corus's attempt to row back on the agreed terms (this was apart from the personal indication by Mr Crowder initially expressed to Mr Patrick that the rates could be changed for shift workers). The Tribunal found that Mr Crowder did not have authority himself to vary the Agreement or to approve any changes and they noted that in the formal negotiations he supported the other union representatives in opposing the change.
28. Mr Clarke accepts the Tribunal's conclusion that the employees never agreed to the variation. However, he submits that equally the employers did not agree to pay the same rate to shift workers as to the other workers. As he graphically put it in argument, they woke up very late to the fact that the Agreement did not reflect their intentions, but they did so just in time. There was simply no proper meeting of minds. The notification that the shift workers would be paid a different rate and that they would not pay them in accordance with the proposed Agreement was as plain an indication as there could be that the original offer no longer stood. Corus' subsequent implementation of the other terms was consistent with this position.
29. In short, there never was a valid Agreement in relation to the shift workers at all. It follows that those workers were not entitled to the higher payment they now claim.
30. Mr Edwards contends that the Tribunal's decision was sustainable on the facts. More specifically, he contends that the decision that the Agreement was made on the 26 August was open to the Tribunal. The signatures appended to the Agreement did no more than evidence the Agreement, which says in terms that it is a "Memorandum of Agreement reached." This suggests that there was already a completed Agreement before any signatures were appended. He says that the consultation exercise conducted by the Teesside representatives was simply for the purpose of informing the members of what had been agreed. However, by then the unions at Teesside were bound irrespective of the views of the members. If the members expressed dissatisfaction with the Agreement that might lead the unions to seek renegotiation, but it would not affect the binding nature of the Agreement itself.
31. In the alternative, he submits that the conduct of the employers was insufficient to amount to a withdrawal of the offer. Corus had never sought to allege that the Agreement was void or wholly ineffective. It had been implemented with respect to all the other workers, and indeed with respect to the shift workers themselves, save in relation to their pay rates. He relied on the findings of the Tribunal reproduced in para 22 above, which he submits shows that far from wanting to withdraw the offer, Corus wished to keep it alive.
32. Corus neither sought to have the Agreement rectified in a court of law, nor did they put the Agreement back through recognised negotiating procedures. Indeed, they did not even seek to vary clause 2 of the Agreement at all; they merely proposed different pay rates to be substituted in the appendix for the rates therein outlined. They had not unambiguously told the unions that the Agreement was no longer on the table and that new negotiations were necessary. They had not, for example, notified the Teesside representatives that there was no purpose in signing the Agreement. Rather, they had tried to hold to the Agreement whilst refusing to give effect to one of its terms and that they could not do.

Conclusions.

33. On the first issue, we unhesitatingly agree with Mr Clarke. In view of the finding of the Tribunal that the Teesside representatives had not signed the Agreement on the 26 August, and given that their reasons for not so doing were that they wished to consult with their members, the Tribunal could not properly find that the Agreement was reached on that date.
34. The experienced lay members wholly refute Mr Edwards' submission that consultation in that context would have amounted to no more than information. The reason for not signing the Agreement at that time was the recognition that consultations might demonstrate that the Agreement did not have sufficient support, in which case the representatives would not sign it and would not be bound by it.
35. We do not accept that the Agreement was already completed and that the signatures were no more than a formal and unnecessary recognition of that fact. Nor do we see how the acceptance by the Scunthorpe representatives alone could suffice to make a binding Agreement. That would mean that they had authority to bind the Teesside unions, which in our view cannot be right. Moreover, the whole Agreement was contingent on acceptance across the board. It follows that there was no Agreement in place when Mr Patrick communicated with Mr Crowder about Corus' change of position with respect to shift workers on the 27 August.
36. The issue arising from the second submission is this: did Corus's indication that they were unwilling to confer the same pay rate on the shift workers amount to a withdrawal of the offer? That was not precisely how the issue was identified by the Employment Tribunal, but no doubt that was because it found that the Agreement had been completed by 26 August. Plainly, in the usual contractual situation the making of a fresh offer will impliedly involve the revocation of the original offer.
37. There must be a communication of that withdrawal to the other party although in contract law it is established that the communication need not come from the offeror himself: see Dickinson v Dodds (1876) Ch.D.463. In fact in this case there was a direct communication to Mr Crowder, the senior negotiating officer. That in our view is plainly sufficient notification of the change of position, even had that not been communicated to other representatives. In fact other representatives had become aware of the change in position before signing the Agreement.
38. Notwithstanding the attractive argument of Mr Edwards, we have come to the conclusion that Corus is right in asserting that the offer was withdrawn. No agreement was reached while the original offer of the same terms for shift workers remained on the table, because by the time the Agreement was signed by the Teesside representatives the only reasonable inference is that they were aware of the Company's new position.
39. Corus's subsequent conduct in implementing all the terms of the Agreement save for the shift rate was consistent with that withdrawal. They were willing to implement only the other terms. The unions could have rejected this modified offer, but they chose not to do so. They have pragmatically accepted that the rest of the Agreement should be implemented.
40. Mr Edwards' argument amounts to this: that either the employer should have formally withdrawn the offer and put matters back into negotiations or be deemed to have kept the offer on foot. He contends that they chose to do the latter and relies on the Tribunal's finding reproduced in para 22 above. However, we do not read that paragraph as an unambiguous finding of fact that the original offer remained in place. It is a recognition that both parties benefited from implementing the rest of the Agreement. Moreover, it does not explain why the employer could not withdraw the offer by the simple expedient of notifying the other party.
41. The Tribunal have not focused on that feature of the case. We do not see how it would be open to the Tribunal to find that, objectively viewed, the original terms remained on offer without treating the communication from Mr Patrick to Mr Crowder as simply a request for further discussions on the question of pay for shift workers, with the implication that the Agreement would remain in its original form if those discussions did not bear fruit. We do not think that it can properly be so construed.
42. We do not see why Corus could not pragmatically seek to deal with the position by trying to secure the union's compliance to this modified offer. The unions were not required to accept these new terms, but for good policy reasons they did so. It was open to them by their

conduct to accept what was on offer - as they did - but they could not by their conduct change what was on offer. Nor could they seek to hold Corus to terms which were no longer available to them.

43. We recognise that Corus could have done more to make it plain beyond doubt that they were not willing to give effect to the original Agreement as it was drafted. They could, for example, have told the Teesside representatives that there was no point in signing that Agreement because it no was no longer an option. However, the Lay Members accept that in industrial relations' terms once Mr Crowder had indicated his willingness to go along with the modification, it was reasonable for Corus not to take such a formal and potentially antagonistic step. This was a continuing relationship with give and take between both parties. We do not thereby suggest that Mr Crowder had authority to bind the unions; plainly he did not. But the fact that he had indicated his personal agreement to the change would adequately explain why Corus did not think it necessary to trumpet its change of position more loudly.
44. Looking at it in industrial relations terms, both Lay Members accept that it would be unrealistic and unjust to infer in those circumstances that the failure to put the matter formally back into negotiations demonstrated an intention to keep the original draft open for acceptance. As to the suggestion that the union might have sought rectification, even assuming that could be done with a collective agreement which is conclusively presumed not to be intended to be legally enforceable (see s179(1) Trade Union and Labour Relations Act 1992), this presupposes that there is a valid agreement in place but that its terms do not reflect the true intention of the parties. The case for Corus is that there was no agreement at all and therefore rectification would not have been appropriate.

Disposal.

45. The appeal succeeds and we find that there was no breach of contract by Corus in failing to pay to the shift workers the sums specified in the Agreement as originally drafted.