Court of Appeal re-interprets clause of BA contract to avoid 'disastrous' consequences for the firm

Malone & Ors v British Airways Plc [2010] EWCA Civ 1225

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Owing to falling revenues in 2009 BA sought to reduce its cabin crew sizes and save £140 million. A Pay and Productivity proposal put forward by Unite union was rejected by BA. ACAS got involved but then had problems getting the different branches of Unite ( the former BASSA and Cabin Crew 89 ) to agree to common proposals. BA decided to introduce compulsory cuts which meant they had to work harder and face greater stress. This led to strike action.

The employees relied on a 'disruption agreement' whereby if the staff had work harder to make up for a missing colleague they were paid compensation. The employees argued that BA's argument that crew complements do not give rise to individually enforceable rights was not consistent with this compensation provision

BA crew members brought an action for breach of contract against their employer British Airways PLC (BA). They claimed that BA unilaterally reduced the crew levels contrary to agreements reached by collective bargaining between BA and Unite union.

It was argued that the collective agreement found in the Worldwide Scheduling Agreement (WSA para 7.1) and the Eurofleet Cabin Crew Manual (ECCM)had been incorporated into their individual contracts of employment and was individually enforceable.

BA denied that crew levels were incorporated under the collective agreements into the employees' contracts arguing that these had never been meant to be individually enforceable(under section 179 of the Trade Union and Labour Relations (Consolidation) Act 1992 collective agreements are only enforceable where the parties expressly agree to that).

BA also argued that they were allowed to make reasonable changes to contract terms (for 60% of the workforce)as the contracts included a clause to that effect. The affected employees argued that the changes were not reasonable. The Court did not make a ruling regarding this argument.

At para 38 the Court of Appeal approved Mr Hendy's submission that, "the touchstone for incorporation was whether the provision in question impacted upon the working conditions of the cabin crews. If it did, it was likely to be apt for incorporation. If it did not so impact, for example because it was inherently vague or merely an expression of policy or aspiration or because it plainly dealt with such collective matters as conciliation arrangements, then it would not be apt for incorporation" (based on Scott J in National Coal Board v National Union of Mineworkers [1986] ICR 736, [1986] IRLR 439 and those of Keene LJ in Kaur v Rover Group Limited [2005] IRLR 40).

For the Court of Appeal what was most important "was what the parties must objectively be considered to have intended the provision to mean." But in para 53 LADY JUSTICE SMITH found the provisions unclear as to whether the complements clause had been incorporated into the contract. She did however believe that the fact that the crew would be financially compensated for flying with less than the full complement was not inconsistent with the clause being a contractual one.

Moreover it was not accepted that section 7.1 of the agreement was aspirational but rather a definite undertaking by BA, the only question being whether it was given to an individual employee. That crew complements were negotiated as part of productivity deals in the past did point towards individual incorporation and enforceability.

The CA however retreated from the above and ruled, after having considered in paras 56 and 57 that the hypothetical possibility existed that individual crew members might with "disastrous consequences" hold the company to ransom by refusing to work when short staffed (something that has until now has never happened), decided that the the clause was not intended to be enforceable but was for the collective, one for cabin crew employees to protect jobs and crews from excessive demands and thus dismissed Unite's appeal.

Cases considered included:

Alexander v Standard Telephones [1991] IRLR 286 concerned collective agreement provisions in selection procedures for redundancy and whether they were incorporated into individual contracts of employment.

Hobhouse J summarised the principles to be applied:
"The relevant contract is that between the individual employee and his employer. It is the contractual intention of those two parties which must be ascertained. In so far as that intention is to be found in a written document, that document must be construed on ordinary contractual principles. In so far as there is no such document or that document is not complete or conclusive, their contractual intention has to be ascertained by inference from the other available material including collective agreements. The fact that another document is not itself contractual does not prevent it from being incorporated into the contract if that intention is shown as between the employer and the individual employee. Where a document is expressly incorporated by general words it is still necessary to consider in conjunction with the words of incorporation, whether any particular part of that document is apt to be a term of the contract; if it is inapt, the correct construction of the contract may be that it is not a term of the contract. Where it is not a case of express incorporation, but a matter of inferring the contractual intent, the character of the document and the relevant part of it and whether it is apt to from part of the individual contract is central to the decision whether or nor the inference should be drawn."

A collective agreement is construed from the factual setting (Adams and Others v British Airways PLC [1996] IRLR 574).

An 'incorporated' provision in an employment contract is the importance of the provision to the overall bargain.A provision of that sort, even if couched in terms of information or explanation, or expressed in discretionary terms, may still be apt for construction as a term of his contract" (Keeley v Fosroc International Ltd [2006] IRLR 961). This case was about the enforceability of enhanced redundancy payments described in the Staff Handbook.