When an employer and a trade union successfully conclude their negotiations, they may confirm the results of their efforts in a formal collective agreement.
Collective agreements can broadly be divided into two main types. One type regulates the relationship between the employer and the union, and deals with mainly procedural issues such as how and when negotiations will be conducted and the facilities the employer will provide to the union's officials. A recognition agreement falls within this category. The other type covers substantive issues such as pay, holidays and sickness benefits. Some collective agreements are a hybrid of the two. An agreement on redundancy, for example, may deal with issues such as consultation with the union, as well as the size of the redundancy payments that individual employees will receive.
It is advisable for a collective agreement to be in writing. It should be clearly drafted to avoid disputes over its meaning. If the agreement will be renegotiated from time to time, then it should state how long it is intended to last and when negotiations will begin again.
According to the Trade Union and Labour Relations (Consolidation) Act 1992, a collective agreement is legally enforceable by the parties to it only if it is in writing and states that the parties intend it to be legally enforceable. These conditions are rarely, if ever, met. As a result, neither employer nor union has any legal redress if the other party decides to ignore the terms of the agreement or withdraw from it. Collective agreements may, however, create legal rights if they form part of the contracts of employment of the employees they cover, as explained below (see 'Incorporation').
The terms of a collective agreement can become part of an individual employee's contract by a process known as 'incorporation'. A collective agreement can be incorporated into an employee's contract even if the individual is not a union member. A contract can even incorporate the terms of a collective agreement that the employer had no part in negotiating. However, any terms of a collective agreement which prohibit or restrict the right of workers to engage in industrial action ("no strike clauses") are not to be incorporated into employment contracts unless a number of restrictions are satisfied in the collective agreement itself. These conditions are seldom, if ever, met.
In order to be capable of being incorporated, an agreement must cover issues that are suitable and appropriate for inclusion in an individual's contract. For example, an agreement dealing with collective bargaining arrangements between the employer and the union would not be capable of incorporation, but an agreement on working hours or rates of pay would be. Some agreements deal with a combination of procedural and substantive issues, and the terms dealing with substantive issues may be capable of being incorporated even if the terms covering procedural issues are not.
If an agreement is appropriate for incorporation, the next question is whether the whole or part of it has actually been incorporated into an individual employee's contract. The clearest mechanism for doing this is a term in the employee's written contract of employment, offer letter or written statement of terms and conditions that expressly states that the agreement is part of the individual's terms and conditions. As explained elsewhere in this Guide (documenting the contract), an employer is required to provide its employees with written information on their terms and conditions of employment. This must include a statement of whether there are any collective agreements that directly affect the individual's terms and conditions. If the employer is not party to those agreements, the employee must also be told the bodies by whom the agreements were made.
It is also possible, however, for a collective agreement to be incorporated into an individual's contract by implication. This can happen if the employer intends the agreement to be part of its employees' contracts, even if it has not expressly stated anywhere that this should be so. If an employer observes the terms of a collective agreement in practice, this may be viewed as evidence that the employer intends to be bound by them.
If it is intended that a collective agreement that is incorporated into an individual's contract will be reviewed and renegotiated from time to time, any incorporation clause in the employee's contract should reflect the fact that the terms of the agreement may change. In that way, the employee will be bound by any change, even if he or she has not individually consented to it. The clause could read, for example: 'Your basic rate of pay will be as set down in the Pay Agreement as negotiated by the Company and the XYZ Union from time to time.'
Once the whole or part of a collective agreement has been incorporated into an individual employee's contract, the incorporated terms become part of that individual's enforceable legal rights. An employer that departed from the terms of the agreement could therefore face a variety of legal claims, including breach of contract, unlawful deductions from pay and unfair constructive dismissal. Further, the terms of the agreement remain part of the employee's contract even if the employer decides to withdraw from the agreement because, for example, it has derecognised the union. Therefore, the employee remains entitled to the terms and conditions set by the agreement before the employer withdrew.
The content of a collective agreement may have legal implications even if it is not incorporated into individual employees' contracts. Where, for example, an employer disregards a collectively agreed disciplinary or redundancy procedure when dismissing an employee, that could possibly lead to a finding of unfair dismissal, on the basis that the employer did not act reasonably when deciding to dismiss.