Our next case, as the name states, concerns supermarkets. However, unlike our previous updates about supermarkets, this is not a multi-claimant equal pay claim. Instead, this case concerns unlawful deductions, overtime clauses and trade union collective agreements.
The question in this case is:
Does a collective agreement reducing the premium pay for overtime automatically form part of an employee’s contract of employment?
Would the collective agreement overrule the express contractual term relating to overtime shift premium pay?
Mr Lozaique, the Claimant, worked as a security guard for Tesco, the Respondent. His contract included a clause which stated that it incorporated terms from any collective agreement that might be in force.
The Claimant was subsequently offered the position of CCTV Operator, with many of his previous terms remaining the same. However, he also received a separate letter which guaranteed him 20 hours of overtime including an 8-hour Sunday shift. Overtime would be paid at 1.5 times the normal rate.
The contract and the letter stated different hours that would be worked but the Claimant worked the hours as described in the letter. As such the Claimant would work at least 20 hours each week at 1.5 times the normal rate.
The Respondent negotiated a new collective agreement with USDAW, the trade union for that part of the Respondent’s staff. The new agreement removed the shift premium pay for overtime. The premium for Sunday working remained the same.
The Claimant did not agree that the new collective agreement applied to him because his overtime was not voluntary and the letter concerning his hours was given separately to his contract – making it unclear whether the letter was governed by any collective agreements. The Claimant continued to work 20 hours overtime but the Respondent would only pay premium pay for the 8-hour Sunday shift. The Claimant brought a claim for unlawful deductions.
The ET rejected the claim. It held that the new collective agreement was incorporated into the Claimant’s contract in its entirety, overruling any clause in relation to pay and/or hours. As such any premium pay for overtime should be reduced accordingly. The Claimant appealed.
The EAT allowed the appeal. It held that whilst the collective agreement had been incorporated into the Claimant’s contract the term about shift premia and pay was not apt for incorporation into the Claimant contract. The reason for this was because the clause here was governed by the follow up letter.
This follow up letter was not subject to the collective agreement and also did not distinguish between Sunday working and overtime. The Claimant simply had 20 hours of compulsory overtime that would be paid at 1.5 times the normal rate. The claim will be sent back for a further hearing to determine remedy – approximately four years’ worth of deductions!
The takeaway point:
In this case no, collective agreements do not automatically form part of the contract of employment. In this case, the reasons it was not overridden are twofold:
1. The clause does not state it was governed by collective agreements like the rest of the contract
2. The clause is poorly drafted making it difficult to distinguish between compulsory overtime and Sunday working. Additionally, the shift premium for both was tied together suggesting they were indistinguishable.
Had the letter been clearer on either of the above it would have been overridden by the collective agreement. This highlights the importance of careful drafting as the Claimant here is now entitled to four years of deductions with a deduction of 0.5 the normal rate for 12 hours each week (624 hours a year)!
This case also shows the advantages of a strategic settlement agreement. Had the claim been settled early the losses would have been lower and there could have been a lump sum payment which would have varied his contract so that the shift premia were aligned with the collective agreement. The agreement could have also included a confidentiality clause so the Claimant could not tell any other colleague who might be in the same position.