Employment law is underpinned by contract law, the bedrock of the relationship between employer and employee. It is therefore not surprising that in the last few months there have been a number of cases turning on the construction of contractual documents. In Hay & others v Gilgrove Ltd the construction of a 1974 collective agreement was at issue. Whilst the agreement had been terminated, the relevant terms relating to the share of ‘porterage’ (a charge made for the movement of goods at New Covent Garden Market) had been incorporated into the terms of employment of registered porters. They tried to argue that this entitled them to share porterage only between themselves and not with unregistered porters who were now entitled to work in the market. The Court of Appeal held that it was unrealistic to believe that the drafters of the agreement had intended to exclude porters who were legitimately intended to work in the Market and that the terms should be construed accordingly, entitling unregistered porters to share porterage.
The issue in O’Brien v London Borough of Haringey was whether Ms O’Brien’s visit to Gambia, where she contracted a contagious disease, was ‘in the course of the teacher’s employment’. If it was, then she was entitled to full sick pay under the terms of a collective agreement between teaching unions and employers. The circumstances surrounding her trip were unclear and the School argued that as she had not been expressly requested or authorised to go she was not entitled to sick pay. The Employment Appeal Tribunal’s approach was to examine surrounding clauses in the collective agreement. An earlier provision set out a wide range of activities perceived to be ‘in the course of employment’ and the Court saw no reason why the same criteria should not apply here, entitling Ms O’Brien to full sick pay. Had the employer intended for the criteria to be stricter in this instance, it should have spelled this out in the applicable clause.
In Dresdner Kleinwort Ltd v Commerzbank AG v Attrill the Court of Appeal ruled that an announcement and subsequent statements by an investment bank about a guaranteed bonus pool unilaterally varied the terms of employment. An announcement to all the workforce can in principle give rise to contractual obligations, provided it is couched in sufficiently certain terms and there is an intention to create legal relations. The fact that circumstances within the Bank had thereafter changed did not mean that the Bank could no longer honour its contractual promise of a guaranteed minimum bonus pool. The employees had given consideration by remaining with the Bank and not seeking employment elsewhere. As I highlighted when reporting the High Court decision in May 2012 it is an expensive outcome for the Bank since the bonuses payable to 104 former City bankers amount to £42m!
So, what we can we draw from these cases? Certainly that any contractual agreement which is sufficiently imprecise as to need clarification will be construed according to the circumstances surrounding it, in the cases above temporally and in light of surrounding clauses in the same agreement. Other factors may be relevant in different cases. In Dresdner, the point is that a contractual agreement need not be reduced to a formal contractual document signed by both sides provided the necessary elements for a contract are in place.