When Can A Mistake Not Be Corrected? Court Of Appeal Rules Collective Agreements Are Not Capable Of Rectification

• Published date: 07 November 2022
• Subject Matter: Employment and HR, Contract of Employment, Employee Rights/ Labour Relations
• Law Firm: Lewis Silkin
• Author: David Hopper and William Brown

A recent Court of Appeal decision has confirmed that employers cannot seek rectification of mistakes in collective agreements. Where agreements with unions about terms and conditions have been wrongly recorded, employers will be limited to seeking to rectify relevant employees' individual employment contracts in as far as they incorporate the mistaken terms.

Rectification is a remedy involving a court correcting a mistake in a written instrument. It is available in the case of common mistake, where the document does not reflect both parties' shared intention. It is also available in cases of unilateral mistake, where the document does not reflect one parties' intention and this is known or ought to be known by the other party, making it unconscionable for it to insist on the mistake being honoured.

Collective agreements between employers and unions are a key pillar of the industrial relations landscape, setting out the framework for recognition and collective bargaining. Under section 179(1) of the Trade Union and Labour Relations (Consolidation) Act 1992, there is a presumption that a collective agreement is not legally enforceable, unless it is in writing and expressly contains a provision to the contrary. Provisions of this kind are rare, and collective agreements are therefore typically "binding in honour only".

What happened in this case?

Nexus, which is the operator of the Tyne and Wear Metro network, recognises two trades unions for collective bargaining purposes - the RMT and Unite. The proceedings relate to annual pay negotiations in 2012, in which Nexus sent a letter offering to consolidate a "productivity bonus" into employees' basic pay (the Letter Agreement). This offer was accepted by the unions and the relevant employees' terms and conditions were accordingly amended by the Letter Agreement.

In 2015, 70 employees brought an unlawful deduction of wages claim against Nexus, arguing that Nexus should have taken the incorporated bonus into account when calculating the value of their shift allowance. The Employment Tribunal (ET) upheld their claim, finding that on the correct construction of the Letter Agreement the shift allowance was to be paid on the basis of their enhanced basic pay. That decision was subsequently upheld by both the Employment Appeal Tribunal and the Court of Appeal (CA).

Nexus then issued rectification proceedings against the RMT and Unite, rather than the individual employees, arguing there was a common or unilateral...