United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the First Appellants	MR JONATHAN COHEN (of Counsel) Instructed by: Messrs Keeble Hawson Solicitors 5-7 Regent Terrace DONCASTER DN1 2EE
For the Second Appellants	MR DAMIAN BROWN (of Counsel) Instructed by: Messrs Walker Smith Solicitors 26 Nicholas Street CHESTER Cheshire CH1 2PQ
For the Respondent	MR JOHN HAND (One of Her Majesty's Counsel) and MR OLIVER SEGAL Instructed by: CFS Legal Services Department 20th Floor CIS Building Miller Street MANCHESTER M60 0AL

SUMMARY

Redundancy – Definition

Contract of Employment – Incorporation into contract

Claimant appellants challenged the Employment Tribunal's decision that they were not made redundant. It was said that the Tribunal misdirected itself in various ways and reached a perverse conclusion when it determined that changes made to their work did not constitute a change in the kind of work so as to trigger a redundancy situation.

The EAT dismissed the appeal. There had been no misdirection and the conclusion was one which was open to the Tribunal.

The respondent society cross appealed against the finding that if the claimants had been redundant, they would have been entitled to enhanced contractual redundancy payments. The EAT dismissed this cross appeal also. Observations on the question of incorporating terms from the collective agreement into the contract of employment.


 


THE HONOURABLE MR JUSTICE ELIAS (PRESIDENT)

Introduction.

1. The respondent society in this case is part of the well known Co-Operative Group. It supplies insurance products to members of the general public. The claimants were all employees, who at the material time were described as financial advisers (FAs). They secured and serviced the clients who had obtained insurance of various kinds from the society.
2. In 2005 changes were made to the terms and conditions of employment of the FAs. The society sought to achieve this variation by agreement with USDAW, the recognised trade union, but when that failed they terminated the contracts of the employees and offered them new contracts on different terms.
3. Some of the claimants accepted those new contracts and remained; others did not and left the employment. In each case, however, they had been dismissed as a matter of law. They all claimed that they had been unfairly dismissed because of lack of individual consultation. Those who refused the new terms and left also claimed that they had been dismissed by reason of redundancy and that they were entitled to a contractual redundancy payment which was worth significantly more than the statutory entitlement. There were seven claimants before the Tribunal, but they were chosen as test cases. In all, there are apparently some 123 persons affected by the outcome of this case.
4. The society denied these claims; they alleged that the dismissal had been a lawful dismissal, being "for some other substantial reason"; that there had been no dismissal by reason of redundancy; and that the dismissals were fair.
5. The Tribunal accepted these submissions and accordingly all the claims were dismissed.
6. The claimants who left now appeal against the finding that there was no redundancy and the consequential conclusion that they were entitled to no redundancy payment, statutory or contractual. The Tribunal did, however, find that had they been dismissed by reason of redundancy then they would have been entitled to an enhanced contractual payment.
7. The society cross appeals that finding and submits the Tribunal erred in concluding that that even if the employees had been dismissed by reason of redundancy, they would have been entitled to the enhanced redundancy payment. The society contends that the enhanced payment was not a contractual entitlement for any of these employees. It was solely within the gift of the society whether to make the enhanced payment or not.
8. Mr Brown of counsel argued the case on behalf of all the claimants. Mr Hand QC resisted the appeal on behalf of the society and Mr Segal argued the cross appeal. We are grateful to all counsel, and would in particular pay tribute to Mr Hand who, in his last case before taking up a judicial appointment, demonstrated his customary skill and economy.

The law.

9. An employee is entitled to a statutory redundancy payment when he is dismissed by reason of redundancy. Section 163(2) of the Employment Rights Act 1996 places the burden of proving that there is no redundancy on the employer. It provides that:

"an employee who has been dismissed by his employer shall, unless the contrary is proved, be presumed to be dismissed by reason of redundancy."

As Mr Hand QC, counsel for the society observed, this is really a presumption of redundancy.

10. The meaning of redundancy is found in section 139 of the Employment Rights Act. The classic case is where a business closes down altogether, or closes in the place where the employee works. But the concept is wider than that. The form of redundancy which is

potentially relevant in this case is found in section 139(1)(b) as follows:

"For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is attributable wholly or mainly to-

...

(b) the fact that the requirements of that business for employees to carry out work of a particular kind, ... have ceased or diminished or are expected to cease or diminish."

11. In Murray v Foyle Meats Limited [1999] ICR 827 at 829G Lord Irvine of Lairg (with whose speech Lords Jauncey, Slynn and Hoffmann expressly agreed) analysed the approach to this provision as follows:

 "My Lords, the language of paragraph (b) is in my view simplicity itself. It asks two questions of fact. The first is whether one or other of various states of economic affairs exists. In this case, the relevant one is whether the requirements of the business for employees to carry out work of a particular kind have diminished. The second question is whether the dismissal is attributable, wholly or mainly, to that state of affairs. This is a question of causation. In the present case, the Tribunal found as a fact that the requirements of the business for employees to work in the slaughter hall had diminished. Secondly, they found that that state of affairs had led to the appellants being dismissed. That, in my opinion, is the end of the matter. This conclusion is in accordance with the analysis of the statutory provisions by Judge Peter Clark in Safeway Stores Plc. v. Burrell http://www.bailii.org/uk/cases/UKEAT/1997/168_96_2401.html[1997] IRLR 200 and I need to say no more than that I entirely agree with his admirably clear reasoning and conclusions."

12. Both the judgment of Lord Irvine and the separate judgment of Lord Clyde emphasise that the test simply requires the application of the statutory language to the facts as found by the Tribunal. In particular, they rejected the notion that the test is a contractual one. It is not legitimate to focus on the kind of work which the employee could legally be required to carry out under the contract when determining whether there is a change in the kind of work.
13. However, even where a dismissal is by reason of redundancy, there are certain circumstances in which no payment will be required. By section 138 if a contract of employment is renewed or the employee is reengaged pursuant to an offer made before the end of his previous contract, and the new contract takes effect within four weeks of that contract coming to an end, there is deemed to be no dismissal.
14. Since there is no dismissal for redundancy, there can be no entitlement to a redundancy payment. Hence the reason why those who accepted the new terms could not claim redundancy pay. Furthermore, by section 141 the employer has a defence to a redundancy claim if the employee unreasonably refuses an offer of suitable alternative employment to take effect within four weeks of the dismissal.

The Tribunal's analysis.

15. The society is registered under the Industrial and Provident Societies Act. It provides traditional insurance products to working men and women. It was a feature of its operation that it would provide face to face advice to customers in their own homes. The FAs were originally termed 'agents/collectors'. They operated on a self-employed basis and were paid commission only on the products which they actually sold to customers.
16. By 1996, however, it was acknowledged that their true status was that of 'employees'. New terms and conditions were introduced at that time. The effect was that these employees were paid a fixed or basic, albeit relatively low, salary. The agents were in an unusual position, to this extent.
17. Even prior to 1996 they developed what was referred to as "book interest" whereby they would receive both initial fees and ongoing commissions on the business comprised in their agency. That would be so whether the business had been booked by them or by a predecessor. The book interest was regarded as the agent's own personal business asset and it would have to be purchased by a new agent taking over that particular agency. The new agent was effectively taking over the income stream from his predecessor and was paying a capital sum for that purpose.
18. The Tribunal found that throughout the whole period the agents had played the role of financial advisers, being familiar faces to their customers, visiting them to obtain premiums and assisting them in completing claim forms, delivering motor insurance cover notes and so forth.
19. There were in fact two categories of agent. Authorised agents had the necessary financial planning certificate and could sell regulated products, such as life insurance. Unauthorised agents did not have the certificate and could not sell such products. They dealt with general insurance, such as motor and home insurance. They could however arrange meetings between customers and authorised agents for other regulated products and would receive some commission if an effective sale resulted.
20. By the end of 2003 it was plain that the respondent was facing very severe financial difficulties. It was making substantial losses. For example, there was a pre-tax loss of £17 million on new life business in 2003, and £4.5 million in general insurance.
21. The board of the society resolved to implement what was termed the New Operating Model (NOM) in order to transform the entire operation. This involved radically changing the nature of the sales force, including adopting a new remuneration system, more rigorous performance management, and the removal of collection activity. The changes relating specifically to the FAs were known as the Field Sales Model. There were a number of other related initiatives, all designed to streamline and improve the productivity of the FAs, but the principal one, as the Tribunal found, was the unilateral introduction of new terms and conditions of employment in October 2005. The Tribunal concluded that these changes were all part and parcel of the desire to implement a new model for the sales staff.
22. NOM involved the closure of all of the respondent's 106 district offices and the removal of a layer of sales managers. Staff reductions were expected to be in the region of 2,500, some 800 of whom would be FAs. However, the society contended, and the Tribunal accepted, that there was no intention formally to make any of them redundant. It was anticipated that numbers would be reduced by what the Tribunal termed:

"natural attrition, combined with stricter performance controls, resulting in under-performance being managed out."

23. The claimants conceded that changes had to be made and that the losses could not be sustained in the long term. Their contention was that the changes in the terms and conditions amounted to redundancy as a matter of law. They advanced before the Tribunal four principal differences between the duties of the FAs prior to the restructure, and after it. These were identified under the headings of collections, servicing, administration, and selling.
24. Collections and servicing were effectively to cease altogether. Administration would change in that there would be very little, if any, customer contact under the new regime. As a consequence, the FAs were expected to increase by 50% the time spent selling. The commission to be paid was also significantly reduced. Furthermore, the concept of book interest was scrapped. The FAs would be paid the value of the book, calculated in accordance with accepted practice, but thereafter they would not have an interest to sell when they gave up their position. The basic salaries were to be increased.
25. The Tribunal concluded that certain FAs, notably those who had been authorised and could sell high value life insurance, might be able to maintain their previous earnings and possibly to increase them, but the unauthorised FAs would almost inevitably suffer a reduction in their level of earnings.
26. The Tribunal accepted that these were significant changes which were unwelcome to many of the claimants and deprived many of them of job satisfaction. They said this (para.26):

"Contrary to the assertions on behalf of the respondent, however, the Tribunal also accepts that the nature of the business being transacted on a day-to-day basis would be likely to alter to a significant degree. FAs would not be calling on their existing customers to anything like the extent they previously had for non-selling purposes and would therefore be deprived of the opportunity potentially to secure the sale of new products to existing customers during a non-selling visit. To many of the FAs, the Tribunal accepts, this was a most unwelcome development which did not fit in with the pattern and style of doing business which they had been used to and which suited their personalities. There would be a higher and more extensive level of "selling" in the normal sense which may well involve "cold calling", although in the Tribunal's judgment it could see no reason why "warm calling" could not be made to existing customers to make enquiries as to the state of that customer's insurance portfolio and whether a visit to examine the possibility of making alterations or additions to their requirements would be in order."

27. The Tribunal then posed what it considered to be the principal issue, as follows (para 27):

"The real question for the Tribunal, however, so far as the redundancy point is concerned, is whether the changes to the "de facto" terms and conditions of employment resulted in the FAs being invited to sign up to new terms and conditions which would effectively result in them agreeing to be employed in a different kind of job."

28. The Tribunal noted that although the company predicted that the FAs would reduce to 1700, it was not requiring any compulsory redundancies. It subsequently formulated what it termed 'the real issue' in para 57, in terms slightly different from para 27, as follows:

"The real issue, therefore, in the Tribunal's judgment, is whether the new terms and conditions of employment brought about a situation in which the claimants were being required to carry out work of a particular kind which was different to the work they had performed under their existing contracts. If they were, then their dismissals were by reason of redundancy having regard to Section 139(1)(b)."

29. The Tribunal answered that question by concluding that the changes to the way in which the work was performed did not constitute a change in the kind of work within the meaning of section 139 of the Employment Rights Act. Accordingly, since there was not what might colloquially be described as a redundancy situation, the dismissals could not be by reason of redundancy. The Tribunal set out its reasons as follows (paras 58-61):

"The Tribunal is of the unanimous view that they were not [dismissals by reason of redundancy]. Whether the claimants do not particularly like the term or not, they were in reality employed by the respondent as "salesmen". Their remuneration had always been based principally upon commission on products sold to customers. If there were no sales of products to the respondent's customers, there would be no requirement for FAs at all. All of the advice given by FAs to customers or potential customers was with a view to selling one of the respondent's products to those customers. Whilst there would in future be additional channels for sales of the respondent's products, the bulk of selling would still be undertaken by FAs.

Whilst the Tribunal accepts that the respondent was intending to enforce performance standards in a manner and to a level which it had not previously done, it was only proposing to exercise its normal right as an employer to handle capability or performance issues with appropriate sanctions.

The Tribunal also accepts that a more "aggressive" form of selling would under FSM be expected from FAs, that the "comfort" of the book was being removed and that the "cosy" element of the close relationship between FAs and existing customers may not be as extensive. Personal collection of premiums no longer formed part of the FAs normal duties but that was simply a move in keeping with a general tendency away from cash transactions and an attempt to reduce administrative overheads. In short, the FAs constituted the respondent's face-to-face sales force and the new terms and conditions of employment related to the same sales force carrying out the same "work of a particular kind" but simply performing it in a different way.

Many of the FAs were not keen on the new style of selling envisaged and many, particularly unauthorised, FAs would find it difficult to retain a comparable income. However, that was as a direct result of sound commercial decisions made by the respondent with a view to stemming enormous financial losses which had befallen it and would continue unless the whole basis upon which its business was conducted was significantly streamlined. So far as the sales force of FAs was concened, this was, in the Tribunal's judgment, a reorganisation and not a redundancy situation."

30. The Tribunal went on to consider whether the dismissals were unfair for procedural reasons, and concluded that they were not. It is not necessary to set out its findings on that matter since it is not being appealed.
31. They also considered two further matters which did not strictly arise given their finding that there was no dismissal by reason of redundancy. The first was whether the claimants would in any event have been denied redundancy payments on the grounds that they had been offered suitable alternative employment and had refused it. They concluded that none of the claimants would have lost their entitlement for this reason. The offer to the unauthorised agents was not suitable; for the authorised it was suitable but not unreasonably refused. There is no cross appeal against that finding.
32. The second issue was whether the claimants would have been entitled, had they been dismissed for redundancy, to enhanced redundancy payments. The basis of that claim was that they had a contractual entitlement to such enhanced payments. Clause 12.1 of the claimants' contract of employment provided as follows:

"Any terms agreed in the course of collective negotiations between CIS and the trade union recognised by CIS for such negotiations will have been incorporated into and form part of this agreement."

33. The collective agreement relied on in this case was one dated 9 September 2004. It is

headed "Organisational Change and Redundancy Process". The aim is stated to be to provide:

"an effective end-to-end process, beginning with the building of a business case in the first instance through to the managing any staffing implications which may result following implementation."

34. There are detailed and extensive provisions dealing with such matters as collective and individual consultation, the criteria for selection, rights of appeal and the process of redeployment. The agreement was to last for two years, subject to review after twelve months.
35. One of the appendices provided for what were termed "severance terms". It states that:

"in the event of redundancy taking effect, a severance payment will be made, calculated in the following way".

The formula links pay to years of service and provides for payments which are well in excess of the statutory amount.

36. The second paragraph of clause 1 of the agreement stated:

"This process is not intended to form part of individual contracts of employment."

37. The claimants submitted that the term of the collective agreement relating to severance pay is clear and unambiguous and conferred a contractual entitlement to the enhanced payment. The society relied upon the terms of the collective agreement, which suggests that the terms contained therein were not intended to confer any rights enforceable through the individual contract.
38. The Tribunal preferred the argument of the claimants, giving their reasons succinctly as

follows: (para 68):

"Finally, so far as enhanced redundancy is concerned, the provisions providing for this contained in the collective agreement entitled "Organisation Change and Redundancy Process" were apt to be incorporated in the claimants' contracts of employment and were so by virtue of Clause 12.1 thereof. The provision to the contrary in the agreement itself is not, in the Tribunal's judgment, effective as between the employees and the respondent, as the employees were not party to it. The respondent clearly felt bound to make enhanced payments where it was satisfied that dismissals were by reason of redundancy. Any judgment to that effect by the Tribunal would have rendered the enhanced payments contractually enforceable."

39. The reference to the society feeling bound to make payments where it was satisfied that the dismissals were by reason of redundancy reflected evidence which management gave to the Tribunal.

The grounds of appeal.

40. Mr Brown advances a number of grounds on which it is alleged the Tribunal erred in law in its approach to the question of whether or not the dismissal was by reason of redundancy.
41. First, he submits that the Tribunal failed properly to apply the burden of proof. It ought to have asked whether the employer had satisfied them that the principal ground for dismissal was not redundancy, but nowhere did it expressly do that. He points out that the burden of proof for redundancy is different to that which applies in unfair dismissal, and that the Tribunal has not clearly distinguished between the two.
42. We do not accept that criticism. The short answer is that the Tribunal in terms referred to the provision and it would be quite unjust to assume that they had thereafter ignored it. But in any event, in our judgment this case was not about the burden of proof or presumption of redundancy at all. We accept that sometimes the presumption will be important. This is particularly so where there is a prima facie case for believing that a dismissal is by reason of redundancy payment but the employer contends that it is for some other reason, such as misconduct. If he fails to satisfy the tribunal that this other ground was the genuine reason for dismissal, the presumption will come into play and fix the employer with redundancy liability.
43. In this case, however, there was no dispute that the dismissal arose because of the imposition of new terms and conditions of employment which were not acceptable to the claimants. The question was whether the effect of these new arrangements was to alter the particular kind of work which the claimants were carrying out. That was the issue posed to itself by the Tribunal in paragraph 57 of its decision and we think that is a perfectly accurate statement of the question it had to answer. In truth the burden of proof did not pose a problem; the Tribunal had all the relevant facts before it and simply had to analyse them in accordance with the statutory provisions.
44. Mr Brown's second ground alleged that the Tribunal had misdirected itself in two ways. First it, he submitted that the Tribunal was in error in making reference to the terms and conditions of employment at all when considering the question whether the work being carried out was of a different kind. He rightly points out that that question has to be answered by focusing on the kind of work being carried out rather than the terms of employment of those doing the work. Second, he submitted that there are also indications, and particularly in paragraphs 60 and 61 reproduced above, that the Tribunal focused on the commercial justification for the change and may have thought that if the change was commercially justifiable then it would not be a redundancy.
45. We accept that it would be an error for a tribunal to examine this question either through the lens of contract or commercial justification, but in our view this Tribunal did neither here. As to the contractual argument, to the extent that there were changes in the nature of the work and the way in which it was being performed, this was largely being achieved by changes made to the terms and conditions of employment. By no means all terms and conditions would have a bearing on the question of whether there had been a change in the kind of work, but it was the introduction of the new terms and conditions that brought about the alteration. That, in our view, is all the Tribunal was saying. Accordingly, we do not accept that the Tribunal has misunderstood the test it had to apply. They clearly understood that it was their task to consider what the claimants were in fact doing. They in fact stated so in terms in paragraph 16 of the decision.
46. Similarly we do not accept that the Tribunal did make the error of assuming that if the changes in the work were commercially justified, that would militate against a finding of redundancy. The Tribunal did make the observation that the changes were dictated by sound commercial reasons, but reading the Tribunal decision fairly, we do not accept that it can be said that they treated this as a material factor when asking whether the kind of work had changed.
47. Third, Mr Brown contends that the Tribunal confused the need to determine whether the work was of a different kind with the question whether the claimants were employed on a different job after the change in the terms and conditions. He focused on the fact, as we have recounted above, that the Tribunal at paragraph 27 of its decision focused on the question whether it was a different kind of job and at paragraph 57 whether the claimants were being required to carry out work of a different kind. He submits that this displays a confusion lying at the heart of the Tribunal's analysis. The job, he says, includes all the contractual terms and conditions attached to the work but many of these were immaterial to the kind of work being performed.
48. We reject this criticism also. In our judgment the colloquial use of the term "job" in paragraph 27 is no more than shorthand for the kind of work being performed. That is how the word would naturally be understood. In any event, the proper test is set out in paragraph 57 of its decision (see para 27 above) and that is contained within the conclusions section of the judgment. The Tribunal there refers specifically to the statutory language. We do not accept that the different formulation in paragraph 27 casts any doubt as to whether the Tribunal applied the right test when determining whether the dismissal was for redundancy or not.
49. The final ground focuses not on any misdirection as such by the Tribunal, but contends that the conclusion that there was no change in the kind of work was perverse. That is an extremely heavy burden to discharge. As Lord Justice Mummery put it in Yeboah v Crofton [2002] IRLR 634, paragraph 93, it requires "an overwhelming case" that the Employment Tribunal reached a decision which no reasonable tribunal on a proper appreciation of the evidence and the law could have reached. Grave doubts about the decision are not enough.
50. It is submitted here that changes in the nature of the selling process, the reduced contact with clients, the more intensive management scrutiny, together with the shift from servicing to selling, compelled a conclusion that there was a change in the kind of work being undertaken. It was far less rewarding than the original work and was much less palatable to the employees affected. In particular Mr Brown places much emphasis on the finding in paragraph 26 above, in which the Tribunal accepted that there were significant changes on the ground, and yet reached the conclusion it did. He submitted that the conclusion did not properly flow from the premise.
51. We do not accept that the Tribunal did fall into this error. This is classically an area for the Tribunal to determine. It is a question of fact, as Lord Irvine emphasised in the Murray case and as has been emphasised frequently since: see e.g. the observations of Longmore LJ in Shawkat v Nottingham City Hospital NHS Trust (No.2) [2001] IRLR 555, para 17. The tribunal has to consider whether the change in the nature and quality of the tasks and the way in which they were being carried out is sufficient to justify an inference that the work could now be described as being of a different kind or not.
52. There is no single right or wrong answer to that question; it involves assessing all the relevant evidence and reaching a judgment. We have to remind ourselves that it is not for us to make this assessment. It may be that other tribunals might have assessed the evidence differently. However, we are all wholly satisfied that there is no basis for saying that this decision was so unsustainable on the evidence that it could properly be described as perverse.
53. The Tribunal heard evidence over 9 days; their judgment makes it plain that they were fully alive to the arguments being advanced by the claimants, but ultimately they rejected them. They concluded that the essence of the job was selling, and that the changes in the method of performance and the removal - largely albeit not entirely - of the regular links with clients did not justify the inference that there was a different kind of job being performed. In our judgment, that was a decision which the Tribunal was plainly entitled to reach and for which it gave clear reasons.
54. It follows therefore that the ground of appeal fails.

The cross appeal.

55. Strictly, it is not necessary to go on to consider whether, had the dismissal been by reason of redundancy, the claimants would have been entitled to an enhanced payment. However, we have heard argument on the point and we will briefly set out our conclusions on that matter.
56. It is well established that terms can only be incorporated from collective agreements into the individual contract of employment where they are apt for incorporation: see Alexander v Standard Telephones and Cables Ltd [1991] IRLR 286 where Hobhouse J (as he then was) said this (para 49):

"The principles to be applied can therefore be summarised. The relevant contract is that between the individual employee and his employer; it is the contractual intention of those two parties which must be ascertained. Insofar as intention is to be found in a written document, that document must be construed on ordinary contractual principles. Insofar as there is no such document, or that document is not complete or conclusive, their contractual intention has to be ascertained by inference from other available material including collective agreements. The fact that another document is not itself contractual does not prevent it from being incorporated into the contract if that intention is shown as between the employer and the individual employee. Where a document is expressly incorporated by general words it is still necessary to consider, in conjunction with the words of incorporation, whether any particular part of that document is apt to be a term of the contract; if it is inapt, the correct construction of the contract may be that it is not a term of the contract. Where it is not a case of express incorporation, but a matter of inferring the contractual intent, the character of the document and the relevant part of it and whether it is apt to form part of the individual contract is central to the decision whether or not the inference should be drawn."

57. Not all terms typically found in a collective agreement will be incorporated. That is so, even where the contract of employment ostensibly incorporates all relevant terms from the collective agreement. In order to be apt for incorporation the terms must, by their nature and character, be suitable to take effect as contractual terms. Some collective terms will not do so because, for example, they are too vague or aspirational, or because their purpose is solely to regulate the relationship between the collective parties.
58. It is not disputed that in principle a term fixing redundancy payment is manifestly apt to be incorporated. Its very purpose is to define what the individual employee will be paid in the event of redundancy. The term in issue in this case is precise, unambiguous and intended to regulate the relationship between the employer and the individual employees rather than the employer and the trade union.
59. However, Mr Segal submits that the fact that the collective parties have sought to deny the agreement any effect with regard to individual contracts precludes it in this case from being treated as a term apt for incorporation. Employees cannot rely upon a term being incorporated from a collective agreement where the collective parties haves specifically sought to deny it from having any contractual effect.
60. That proposition needs some unwrapping. To the extent that the argument is based on the premise that the collective agreement will necessarily take precedence over the contract of employment, that is plainly wrong and at odds with the analysis in Alexander. The Tribunal was right to focus on what the individual contract says, not what the collective agreement states. So, for example, the terms of a collective agreement may continue to operate and bind the parties to the individual contract even when the collective agreement has been brought to an end, and indeed even after the employer has withdrawn recognition from the union: see Robertson v British Gas [1983] IRLR 302 and Framptons Ltd v Badger UKEAT/0138/06.
61. Mr Segal does not, as I understand it, take issue with that principle. His principal submission is that the contract of employment itself envisages that what is to be incorporated are "terms agreed in the collective negotiations." This means, he says, that they must be recognised as terms by the collective parties themselves if they are to be incorporated. The collective parties do not just agree provisions which may be apt to take effect as terms; they must also agree that these provisions are to take effect as terms, or at least they must not deny them that status.
62. The claimants submit that this is not the right construction at all. The terms are those matters which would in principle be apt for incorporation into the contract. If there is agreement about such matters they can be incorporated into the contract irrespective of what status the collective parties would confer upon them. In other words, the court should not look at the collective agreement to ask whether the provisions of the agreement have been given the status of a contractual term by the collective parties; rather they should look at the nature of what has been agreed and ask whether that can properly take effect as a term in the individual contract of employment..
63. In principle, we agree with that submission. The question is whether what is agreed is a term as defined by the contract and not as defined by the collective agreement. In this case we do not accept that the contract is expressly conferring on the collective parties the right to determine what is and what is not capable of being a term to be incorporated from the collective agreement.
64. However, we accept that there is an alternative basis for reaching essentially the same result. In most, if not virtually all, cases it will in our view be necessary to imply a term into the individual contract that the parties to that contract do not intend that terms should be incorporated from the collective agreement where the collective parties take the view that they should not be.
65. We think that in the usual case at least the individual parties are agreeing that what constitutes a term - or more accurately, what does not - can be determined by the collective process. In principle, that implication can arise even with respect to a provision of the collective agreement which would otherwise be apt for incorporation.
66. The basis for the implication is that the individual employees have agreed with the employer to leave it to the collective procedures to determine certain terms and conditions of employment. However, the employees are not in a position to compel the collective parties to agree about anything.
67. It is therefore reasonable to infer that they would be willing for the collective parties to agree on certain matters which the employer might only be willing to accept on the basis that they do not directly affect the individual contracts. Otherwise the unions would have to forego what they perceive to be beneficial agreements for employees because of the risk, which the employer is unwilling to undertake, that the agreement may give rise to contractual rights and obligations.
68. Technically, however, it is not then the statement in the collective agreement that trumps the terms of the individual contract of employment. Rather it is the contract itself which, properly construed, allows the collective parties to deny contractual effect to such terms. Frequently, the collective agreement says nothing about which provisions should be incorporated and which should not. In those circumstances the only issue will be whether the term in the agreement is apt for incorporation. But where the collective agreement purports to determine that question - which it will normally do by stipulating what is not to take effect as a contractual term - that determination will, at least in the normal case, have to be respected.
69. In practice, however, we would confidently expect that the trade unions will only be likely expressly to accept that what is agreed should not be incorporated where the provision would in any event be considered, or be likely to be considered, inapt for incorporation.

The application of the principles in this case.

70. Mr Brown submits that properly analysed, the collective agreement in this case does not in fact purport to deny contractual effect to the redundancy terms. It states that the process is not part of the individual contract of employment; it does not say that the agreement is not to form any part of the contract. The claimants say that there is every reason to distinguish between the procedural provisions which form the body of the agreement and the precise and unambiguous terms which identify the sums to be paid to individual employees on redundancy. Mr Brown notes that the severance payments are in fact described as "severance terms" in the agreement itself, and that there is no indication at all that they are intended to be optional in any way.
71. Mr Segal contends that the reference to the "process" in clause 1 of the collective agreement is to all aspects of the agreement, including the redundancy terms. He accepts that if the procedures were adopted then there may come a point where there would be a legal obligation to pay the enhanced rates, but submits that on any view that would not be so where, as here, the society did not act in accordance with the procedures because they considered them to be inapplicable.
72. In our judgment the enhanced terms were incorporated into the individual contract. We accept the claimants' submission that the reference to "process" in clause 1 when considered in the context of the agreement as a whole refers to the procedures. In our opinion where there is a term which is manifestly apt for incorporation into the individual contract, as the redundancy severance terms were, then it would require very clear and unambiguous language to deny it contractual effect. There can be no doubt that the unions and the employees would confidently anticipate that the enhanced terms negotiated in this way would be paid in the event of redundancy, and it would take clear language to deny giving contractual effect to that expectation.
73. We are reinforced in that decision by the fact that in the course of the redundancy process it is envisaged that there will be letters written to those whom it is proposed to dismiss for redundancy. The drafts of these letters, found in appendices 2 and 7 of the agreement, confirm that the payments will be the enhanced sums stipulated in the agreement. There is no suggestion that the amount is in any sense discretionary.
74. Nor do we accept that the society would have been entitled to avoid the making of enhanced payments by the simple expedient of not invoking the redundancy process at all. This would mean that employees who had the benefit of the procedures would be entitled at the end of the process, if made redundant, to the enhanced payments whereas if the society wrongly believed that the process was not applicable, they would be deprived of both the procedural safeguards and the enhanced payments. In our judgment the enhanced payments were intended to be paid when redundancies were made in the course of the organisational change regulated by the agreement. It may well be that the right to the payment would not have continued beyond the duration of the agreement itself. We heard no argument about that because it was not this case.
75. It follows that in our view there would have been an obligation to make the enhanced payments had the Tribunal found that the dismissals were by reason of redundancy. In the event, however, the obligation did not arise since the dismissals were not for that reason.

Disposal.

76. Both the appeal and cross appeal are dismissed.