Supreme Court confirms employers can seek rectification of collective agreements
In a recent judgment, the Supreme Court has confirmed that the equitable remedy of 'rectification' is available for collective agreements, even though they are typically legally unenforceable.
Background
Rectification is an equitable remedy used in civil law to correct errors in legal documents so that they reflect the true intentions of the parties involved. It is one of the few ways a document can be retrospectively altered, allowing parties to amend inaccuracies that could otherwise impact their rights and obligations.
Rectification is only applicable if the original document inaccurately represents the agreement reached by the parties. It is typically sought when the document is legally enforceable or when its terms affect legal rights or obligations. The remedy does not create new rights or obligations but ensures that the document reflects the true agreement.
Factual background
In National Union of Rail, Maritime and Transport Workers and anor v Tyne and Wear Passenger Transport Executive t/a Nexus, Nexus, the employer, recognises the RMT and Unite trade unions for collective bargaining.
In 2012, Nexus sent a letter agreement (Letter Agreement) to the unions, consolidating a productivity bonus into basic salary. Nexus believed the bonus should not affect the calculation of a shift allowance, but a dispute arose. In 2015, employees brought successful claims for unauthorised deductions from wages, with the Court of Appeal finding that the Letter Agreement, as incorporated into individual contracts of employment, did not exclude the bonus from shift allowance calculations.
In response, Nexus sought rectification of the Letter Agreement in the High Court, arguing that the document mistakenly failed to exclude the bonus from shift allowance calculations. The High Court allowed the claim to proceed, but the Court of Appeal dismissed it, holding that:
- The Letter Agreement could not be rectified because it was not a legally enforceable contract
- Nexus should have directed the claim against the employees rather than the unions, as the employees' legal rights were at stake
Nexus appealed to the Supreme Court.
Supreme Court judgment
The Supreme Court confirmed that rectification can, in principle, apply to collective agreements if they affect the legal rights or obligations of others—such as employees—through incorporation into individual contracts of employment.
However, the Court dismissed Nexus’s appeal for procedural reasons. The Court held that Nexus had targeted the wrong parties in its claim for rectification. The claim was improperly directed at the unions rather than the employees whose legal rights were affected. Altering employees’ rights without giving them an opportunity to be heard was procedurally unjust and contrary to fundamental principles of fairness.
The Court also observed that Nexus could have raised rectification as a defence during the earlier unlawful deductions case in the Employment Tribunal. While an employment tribunal cannot formally order rectification, equity allows a tribunal to treat a document as if it had been rectified. Addressing the issue at that stage could have prevented the need for subsequent High Court litigation.
The Court emphasised that while collective agreements are not legally enforceable between unions and employers, they may have significant legal consequences when incorporated into individual contracts of employment. Rectification of such agreements is therefore not inherently futile if it alters legal obligations.
Learning points
This decision confirms that employers can seek rectification of collective agreements when they impact employees’ legal rights. However, it underscores the importance of targeting the correct parties in such claims. Employers must ensure that any rectification action is directed at the individuals whose legal rights are affected—in this case, the employees—rather than third parties like unions. Failing to involve the appropriate parties risks procedural injustice and can render the claim defective.
The ruling also highlights the importance of raising rectification issues early, ideally as part of related litigation. Employers should consider raising rectification as a defence in proceedings such as unlawful deductions claims. Addressing these issues at the earliest opportunity can streamline the legal process and prevent unnecessary delays or complications caused by separate proceedings.