The case of Anderson v London Fire and Emergency Planning Authority acts as a stark warning for employers when drafting contractual pay clauses, particularly when providing for alternate scenarios.
In this case, the unions had agreed a three-year pay deal with the Fire Authority, which was set out in a collective agreement. The provisions gave two options for an increase in the third year, but did not state which of those options would take precedence, stating only that:
“pay will be increased by 2.5% or by the NJC for Local Government Services settlement plus any uplift required to ensure general pay increases for the period 2007-09 are 1% above the NJC settlements for the same period."
The Court of Appeal (“CA”) held that this was clearly a term which was meant to be incorporated into employment contracts (the existence of the choice didn’t preclude this).
More significantly, it interpreted the clause by effectively inserting the words “whichever is the greater”. The CA considered that this was the clear intention of the parties and that no other interpretation would make any industrial sense – the unions would not have agreed to an unfettered choice by the employer, and the employer would have known this. The employer’s argument that it could choose which option to rely on was therefore rejected.
Employers should be careful, therefore, to ensure that there is no ambiguity in employment contracts or collective agreements. In the case of dispute, courts will look hard at the parties’ intentions. Clear and careful drafting is therefore essential to avoid such disputes arising, especially for provisions regarding pay increases.