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	United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> South Tyneside MBC v. Graham [2003] UKEAT 0107_03_3110 (31 October 2003) URL: http://www.bailii.org/uk/cases/UKEAT/2003/0107_03_3110.html Cite as: [2003] UKEAT 107_3_3110, [2003] UKEAT 0107_03_3110

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APPEARANCES

 

For the Appellant	MR PAUL CAPE (of Counsel) Legal Services Department South Tyneside Metropolitan Borough Council Town Hall & Civic Officer Westoe Road South Shields Tyne & Wear NE33 2RL
For the Respondent	MS HELEN GOWER (of Counsel) Messrs Thompson Solicitors St Nicholas Building St Nicholas Street Newcastle upon Tyne NE1 1TH


 


HIS HONOUR JUDGE RICHARDSON

1. This is an appeal against a decision of the Employment Tribunal sitting in Newcastle on Tyne, promulgated on 2 December 2002. The Employment Tribunal held that South Tyneside Metropolitan Borough Council (the 'Council' hereafter) had made an unlawful deduction in the wages of an employee, Mrs Sheila Graham. Against that decision the Council appeals.
2. The Issue

Mrs Graham's case is a test case. It concerns her entitlement to a certain kind of leave. In addition to twenty five days annual leave and eight days public holidays she was entitled to two "extra statutory holidays". Until 2001 these were taken on the Tuesday following Spring Bank Holiday and August Bank Holiday. The Council offices used to shut on these days. Mrs Graham was one of the Council's home care assistants. There never ceases to be a need for their work, so home care assistants sometimes worked the extra statutory days. If a home care assistant worked an extra statutory day, her contract provided that she would be paid for that day and at plain time for all the hours worked, and she would get a further day off if she worked the whole day.

3. In 2001 the Council sought to add the extra statutory days to ordinary holiday, so the two Tuesdays became ordinary days. There were advantages to this arrangement. The days were added to the holiday of Council employees so they could take them when they wanted and the Council offices were open for the public on those days. The largest of the unions recognised by the Council had agreed to this change, but Mrs Graham's union had not. When Mrs Graham worked the extra statutory day she received her normal pay but nothing extra. The Council says it was entitled to do this. Mrs Graham, backed by her union, says it was not.
4. The Employment Tribunal agreed with Mrs Graham, hence the appeal. As we shall see, it turns on an understanding of a national collective bargaining agreement and the facts about local bargaining in South Tyneside. In particular, it turns on the question - what is a local agreement for the purpose of the national collective bargaining agreement?
5. We start with Mrs Graham's contract. It was in common form. It provided as regards terms and conditions:

"Your terms and conditions of employment (including certain provisions relating to your working conditions) are covered by existing collective agreements from time to time in force, as determined by the Joint Negotiating Committees for Local Authorities' Services (Building and Civil Engineering) and (Engineering Craftsmen) the Standing Conference for Electricians and the National Joint Council for Local Authorities' Services (Manual Workers), the North Eastern Provincial Council or locally agreed with those trade union(s) recognised by this Council for collective bargaining purposes. These agreements are embodied in the National Scheme Of Conditions Of Service relating to your work group, or otherwise in separate documents which are available to you at your work place, on Notice Boards, or in other accessible forms. From time to time variations in your terms and conditions of employment will result from negotiations and agreements with the recognised trade union(s) and these will be notified to you or otherwise incorporated in the documents to which you have reference. The Council undertakes to ensure that future changes in these terms will be entered in these documents or otherwise recorded for you to refer to within 28 days of the change."

It is common ground in this case that Mrs Graham's entitlement to extra statutory days arose by virtue of a collective agreement. If the collective agreement allowed for those statutory days to be added to ordinary holiday in the way the Council has done then Mrs Graham has no cause for complaint. Her case is that the collective agreement does not entitle the Council to do what they have done.

6. National Collective Bargaining

Countless employees in local government, like Mrs Graham, have contracts of employment which incorporate, by reference, terms and conditions agreed through collective bargaining. At national level, arrangements for collective bargaining are of long standing. The old arrangements are the ones referred to in Mrs Graham's contract, which we have quoted. They were brought up to date in 1997. The earlier separate negotiating committees for different kinds of employee were brought together into a single National Joint Council for Local Government Employees, the NJC. The agreement which implemented these changes is widely known as the Single Status Agreement. It is common ground that terms and conditions negotiated in collective bargaining agreements made under the auspices of the NJC form part of Mrs Graham's contract in substitution for those made by the bodies actually named in her contract.

7. The NJC publishes a book known as 'the Green Book' which contains the Single Status Agreement. Its formal title is, National Agreement on Pay and Conditions of Service. The Green Book has four parts. In Part One there are principles which guide the National Joint Council, its Constitution is annexed to this part. Paragraph 1 of Part One contains the following:

"We are jointly committed to the local democratic control of services to the community as the primary role of local government. Our principal role is to reach agreement, based on our shared values, on a national scheme of pay and conditions for local application throughout the UK."

Part Two contains, what are described as "key national provisions". They are for application by all local authorities to all employees covered by the NJC, so they are widely applied throughout Local Government. Paragraph 7 of Part Two sets out arrangements for leave. Paragraph 7.4 reads:

"7.4 Extra Statutory Holidays

Employees shall have an entitlement to two extra statutory days holiday, the timing of which shall be determined by the authority in consultation with the recognised Trade Unions with a view to reaching agreement, or added to annual leave by local agreement."

So the Council may provide its employees with the extra statutory days in one of two ways. Firstly, it may determine for itself on which dates they are to take place. It must consult the recognised trade unions with a view to reaching agreement, but ultimately it is entitled to determine the dates as we have seen. Until 2001 there were two dates determined by the Council. Secondly, it may add them to annual leave. This it is not entitled to do on its own. It may do so only by "local agreement". Hence, the importance of knowing what a local agreement is.

8. Before turning to the position in South Tyneside, it is important to see what the Green Book says about the collective bargaining process. At national level the Green Book deals with this in detail. The NJC has eighty three members. Twenty five are appointed by Local Government associations to represent employers. Fifty eight are appointed by unions to represent employees; of these thirty one are appointed by Unison, sixteen by GMB and eleven by the TGWU. These are the recognised trade unions for the purposes of the Single Status Agreement. The NJC conducts its business through full meetings of the Council and through committees. There are formal requirements for the appointment of officers and for the calling of meetings with due warning of the time and the business to be conducted. As to voting, it is provided:

"No resolution shall be regarded as carried unless it is approved by the majority of the members present and voting on each side of the Council or committee."

So, a resolution must carry the majority of the employers' representatives and the majority of the employees' representatives. This must mean that the representatives of a smaller union can be outvoted by the largest one, but that can only happen after due process, a meeting convened in accordance with the Constitution. The NJC's Constitution does not provide for local committees at Borough level. It does provide for Joint Provincial Councils and a Joint Council for Northern Ireland, but these are not bodies which can be expected, themselves, to undertake local agreement.

9. Part Three of the Green Book expressly envisages local negotiation. It contains:

"Other national provisions which may be modified by local negotiation." [See Part One, paragraph 4]

These are terms of less importance of those in Part 2. In the first part there are set out the bare bones of a procedure for dealing with local negotiation:

"The party proposing change must state in writing what changes are sought and why and the parties must then seek to reach agreement, normally within three months. Where agreement is not possible, either party may refer the failure to agree to the provincial joint secretaries (or other mutually agreed persons) for conciliation. If the provincial conciliation is unsuccessful, the provincial secretaries may recommend further procedures for resolution of the difference, including external conciliation, mediation or binding ACAS arbitration. The above procedures should if possible be completed normally within a further three months."

This, as we say, applies to Part 3, not Part 2. It does not in any event prescribe what local arrangements for agreement there must be, nor what will constitute an agreement locally. It sets out a minimum process for resolving differences. Quite apart from the special provisions of Part 3, it is self evident that there will be a need for local arrangements between employer authorities and trade unions. It is not inherently surprising to see a provision such as paragraph 7.4 which envisages the possibility of a local agreement. However, the Green Book does not lay down a constitution for the bodies which will deal with local negotiation. The most that can be said is that the NJC:

"Has a strong commitment to joint negotiation at all levels." [Part One, paragraph 3]

10. Collective Bargaining on South Tyneside

On South Tyneside the Council has three thousand employees represented by Unison, over one thousand represented by the GMB and a small number, two, we are told, represented by the TGWU. There are also employees who are not trade unions members. There are also some employees not covered by the Green Book who are represented by other craft unions. The only formal structure of which we have been told is a local Consultative Forum. Unison has five seats, the GMB has two seats and others unions, UCAT and AMICUS, have a total between them of three seats. The Employment Tribunal found that it was the Council's practice when concluding a local agreement to seek unanimity from the relevant trade unions. Until 2001 it had achieved this whenever concluding a negotiated agreement.

11. The Extra Statutory Days Issue

The Employment Tribunal, in its admirably clear decision, found the facts as to what occurred in 2000 and 2001 concerning extra statutory days. We summarise them. In June 2000 the Council decided to consult with the unions on the proposal to add the two extra statutory days to annual leave entitlement. The matter was first discussed at the Consultation Forum on
26 June 2002. It was the practice on the union side to hold a preliminary meeting. In respect of each agenda item, one union would be deputed to deal with the issue on behalf of all. The lead union would do most of the talking on such issues. Other unions would only contribute to the discussion if they felt the lead union was not reflecting their views.

12. In respect of extra statutory holiday, Unison took the lead at each meeting of the Consultation Forum where the matter was discussed. The GMB was represented by different people at these meetings. Mr Hamilton, its branch secretary, worked in the cleansing section which had always been paid at plain time rates if they worked an extra statutory holiday. He did not personally feel that the proposals would be an issue with GMB members. He was happy to let Unison take the lead. No objection was recorded in any set of minutes of the Consultative Forum.
13. On 14 March 2001, the Council's head of personnel services, Mr Cleaver, wrote to all the unions. He set out the proposals in detail. He said they were to be applicable from 1 April. At the Consultative Forum on 19 March 2001, Unison reported that they would ballot their members on the proposals. A ballot was held. On 9 April 2001 Unison informed Mr Cleaver that his members were in favour. At that time Mr Hamilton, of the GMB, was in the town hall. Mr Cleaver spoke to him at the top of the town hall steps. He told Mr Hamilton the result of Unison's ballot. He said he would make arrangements to introduce the change before the next Bank Holiday. Mr Hamilton said, 'do what you need to do and I will speak to my people'. Mr Cleaver thought that Mr Hamilton was agreeing to the proposal. Mr Hamilton said he was not agreeing, simply indicating that he would have to report back to obtain a branch decision. Neither party wrote confirming the conversation. When Mr Hamilton reported to his branch on 11 April 2001, the branch wanted to hold a ballot. Eventually, on 21 June 2001, a ballot was held. Most were against the proposals. So the GMB never agreed the proposals. When they were implemented, the GMB lodged a formal collective grievance. It has brought a test case based on the Council's failure to pay Mrs Graham.
14. The Submissions to the Tribunal

The Council's case before the Tribunal was that there was a local agreement to add the statutory days to annual leave entitlement. The Council submitted that what took place on the town hall steps amounted to agreement by the GMB. Alternatively, the Council submitted that it did not need the agreement of the GMB. Unison represented a majority of the employees in the Council. On the NJC the representatives of the largest union can outvote the smaller unions. Since Unison agreed, it had effectively outvoted the GMB. On behalf of Mrs Graham, whose case was funded by the GMB, it was submitted there was no local agreement. What took place on the town hall steps did not amount to an agreement. Unanimity of the unions was required for a local agreement. That was the custom and practice.

15. The Tribunal's Decision

The Tribunal concluded, as a matter of fact, that the GMB did not agree to the Council's proposals on the town hall steps. There is no appeal against that finding. The Tribunal rejected the Council's alternative argument that its agreement with Unison sufficed to constitute a local agreement. The Tribunal concluded:

"The natural and ordinary meaning of the words used suggest that a local authority has to secure the agreement of all the trade unions in order to conclude a local agreement, which has the effect of binding all of its employees whose contracts incorporate the relevant collective bargaining machinery."

The Tribunal considered whether the interpretation was contrary to common sense, because it was submitted that if the interpretation was correct, the TGWU with only two members could prevent the making of a local agreement and thwart the desire of the vast majority. The Tribunal observed that in that extreme eventuality the Council could impose the variation in the knowledge that the vast majority of employees could acquiesce in it. To this point we will return later. The Tribunal concluded that it should follow what it regarded as the natural and ordinary meaning of the words and rejected the Council's arguments.

16. Submissions on Appeal

On appeal the Council has renewed its submissions. Mr Cape, on behalf of the Council, submits that it is sufficient for a local agreement that the Council has reached agreement with a recognised union which represents the majority of employees. He says that the principles of construction to be applied include the factual matrix in which the Green Book provision was reached. He points out that at national level a provision may be incorporated into the Green Book, hence into employees' contracts of employment, so long as the majority of union representatives agree. Why, he says, should the same not be true at local level? If Unison can outvote the GMB nationally, why should not a local agreement be contracted with Unison even though GMB have not agreed? He points to the fact that the Joint Consultative Committee has a weighted membership. He points to the absurdity of the TGWU with a handful of employees being able to thwart the will of the majority. He submits that the Green Book can never have been predicated on the basis that the employer would have to force a variation on employees merely because a minority union did not agree. He submits that the Employment Tribunal erred in its approach. The words 'local agreement', he says, have no ordinary and natural meaning. The context is everything. The Employment Tribunal erred in finding an ordinary and natural meaning and then considering whether there were factors which meant there should be a departure from it.

17. On behalf of Mrs Graham, Ms Gower supports the Employment Tribunal's decision. She says that the Council statement of terms and conditions to Mrs Graham is part of the factual matrix. It refers to "conditions locally agreed with those trade unions recognised by the Council for collective bargaining purposes". She says this plainly means agreed with each relevant union. She says that the Council's interpretation of the Green Book would involve a significant change from local practice. The local practice was for unanimity.
18. Our Conclusions

Ordinary principles apply to the interpretation of collective agreements – see Adams v British Airways [1996] IRLR 574, where Bingham LJ, as he then was, said:

"A collective agreement has special characteristics, being made between an employer or employers' organisation on the one side and a trade union or trade unions representative of employees on the other, usually following a negotiation. Thus it represents an industrial bargain, and probably represents a compromise between the conflicting aims of the parties, or 'sides' as in this context they are revealingly called. But despite these special characteristics a collective agreement must be construed like any other, giving a fair meaning to the words used in the factual context (known to the parties) which gave rise to the agreement."

He also said of such agreements:

"The court is not concerned to investigate the subjective intentions of the parties to an agreement (which may not have coincided anyway). Its task is to elicit the parties' objective intentions from the language which they used. The starting point is that the parties meant what they said and said what they meant. But an agreement is not made in a vacuum and should not be construed as if it had been. Just as the true meaning and effect of a medieval charter may be heavily dependent on understanding the historical, geographical, social and legal background known to the parties at the time, so must a more modern instrument be construed in its factual setting as known to the parties at the time. Where the meaning of an agreement is clear beyond argument, the factual setting will have little or no bearing on construction; but to construe an agreement in its factual setting is a proper, because a common-sense, approach to construction, and it is not necessary to find an agreement ambiguous before following it."

These words set out in the context of collective bargaining general principles which are equally applicable to the interpretation of all documents – see, for the general principles, Lord Hoffman's speech in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896 at 912 - 913.

19. Collective bargaining, in our judgment, rests upon a foundation of consensus and process. The Single Status Agreement itself rests upon consensus. While there is now a voting structure on both sides which enables a larger union to outvote a smaller one, that voting structure in turn rests on an agreement which the unions have accepted on the view that it represents their overall best interests. The process set out in the Green Book is an important one. Although a larger union may outvote a smaller one, it can do so only at a meeting called on proper notice with due warning of what will be discussed. Over the whole range of industrial relations, process is important. Where there are good processes, issues may be argued, points of view listened to and discussed, accommodations made, suspicions allayed and outcomes understood. We do not think the Green Book necessarily envisages that all local agreements must of necessity be agreed by every recognised union. It would be surprising if the Green Book envisaged this, for at national level agreement need not be unanimous in that way. Suppose, for example, that in South Tyneside the Council and the recognised unions agreed to be bound by the decisions of a local body with a constitution similar to that of the JMC, working by majority voting on each side. We have no doubt that a proposal voted for by a majority on both sides after a duly constituted meeting could constitute a "local agreement" within the meaning of the Green Book. To that extent we accept the submissions of the Council and disagree with the Employment Tribunal.
20. But, in our judgment, the Green Book does envisage that local agreements will either be agreed by all the recognised unions or determined by a process which has itself been agreed by all the recognised unions. The Green Book is not prescriptive of the process. As we have said, employers and unions locally may agree a process which requires unanimity or which allows for majority voting or which in some other way takes account of different interests at local level. We are entirely satisfied that the Green Book does not envisage an agreement made outside an agreed process by an employer with a single recognised union. That is contrary to the whole spirit and intent of joint negotiation as it is found in the Green Book.
21. It follows that this appeal cannot succeed. The Council's proposal to add the extra statutory days to annual entitlement was not agreed with the GMB. Nor was it agreed by any process to which the GMB had agreed. The only process was the Consultation Forum, which had operated entirely by consent. No process had been agreed whereby majority voting would be allowed.
22. The problem in this case, we are sure, has arisen because of an honest misunderstanding between the Council and an officer of the GMB. The officer of the GMB may himself have been taken by surprise by the views of his members. A better designed process might have avoided the misunderstanding and ensured that the officer of the GMB had taken his members' views at an earlier stage. In our view it is not possible for a moment to suppose that the Green Book envisaged what happened in this case to amount to a "local agreement".
23. Nor are we persuaded by the Council's arguments that in such circumstances a single union could thwart the making of a local agreement which the majority desire. In a system of collective bargaining it is not unusual for one party to be able to hold out where others would prefer to compromise. Where this happens, systems of collective bargaining have procedures of their own for resolving disputes. Those procedures are founded in consensus and process. We have quoted the kind of solution which the Green Book envisages for disputes over Part Three. They include, taking the matter to a higher level, conciliation and arbitration. Ultimately in a system of collective bargaining the parties may fail to agree, that is in the nature of the process, but large organisations employers and workers have usually found that the approach of consensus and process is better than the alternatives. In this case, of course, local agreement was no more than an additional option under paragraph 7.4.
24. For these reasons we conclude that no local agreement has been reached of the kind which will satisfy paragraph 7.4 We have no doubt that the Employment Tribunal's conclusion was correct. The appeal is dismissed.