Apt for incorporation

The Employment Appeal Tribunal (EAT) has held in Lozaique v Tesco Stores Ltd that just because a collective agreement is incorporated into an individual contract of employment, tribunals should not automatically assume that all terms are therefore incorporated. Instead, they need to consider whether each individual term of the agreement is apt for incorporation or not.

Basic facts

Mr Lozaique, a store security officer for Tesco since 2001, started working as one of their CCTV operators in 2005. Most of the same terms and conditions applied but in a separate letter he was told that he was entitled to at least 12 hours of overtime each week and an 8-hour Sunday shift paid at a rate of 1.5. In 2012 he signed a further set of particulars which were very similar to the original agreement he signed in 2001, but which included a provision stating that his terms and conditions included provisions agreed in any collective agreement between Tesco and the union.

In 2013 Tesco stopped providing him with overtime but a tribunal judge ruled that Mr Lozaique was contractually entitled to work and be paid for 20 hours guaranteed overtime per week.

In 2016, Tesco reached a new agreement with the union whereby premiums for overtime worked (except for Sundays) were reduced to single time. Mr Lozaique accepted that the collective agreement applied to his main contract (any overtime worked in excess of 20 hours), but not to the specific terms set out in the 2005 letter which guaranteed an entitlement to overtime at the hourly rate of 1.5. However, there was no distinction within the agreement between different types of overtime.

Tesco refused to pay him the premium for 12 of those hours and he brought a claim for unlawful deduction of wages.

Tribunal decision

The tribunal found that his terms and conditions were in a contract of employment dated December 2001 and that the staff handbook was expressly incorporated into it. The handbook, in turn, referred to the collective agreement between Tesco and the union.

Although the tribunal acknowledged that Mr Lozaique had a tribunal judgement confirming his entitlement to guaranteed overtime, it held that this did “not confer any special or protected status on that contractual entitlement”. Instead the tribunal held that the collective agreement had been incorporated into his contract which meant that his overtime pay rate had been amended to single time, apart from Sunday which remained at time and a half. Mr Lozaique appealed.

EAT decision

Allowing the appeal, the EAT held that the 2012 particulars did not supersede the overtime terms set out in the 2005 letter. Firstly, the 2013 tribunal judgement stipulated that Tesco was obliged to offer guaranteed overtime to Mr Lozaique at a rate of 1.5 and he was obliged to do it.  As such, it was clear that the inconsistent provision about overtime in the 2012 particulars did not override the terms of the 2005 letter.

Secondly, the terms in the collective agreement referring to premiums did not apply to the 20 hours of overtime provided for in the 2005 letter because he was obliged to do it. As it was not voluntary, it could not displace the provisions of the 2005 letter and could not be incorporated into his contract. It followed that changes to premiums in the 2016 collective agreement could not be incorporated into his contact either as it only covered voluntary overtime.

The tribunal had, therefore, gone wrong when it failed to ask whether each individual term of the agreement was apt for incorporation. Instead it assumed that, if the agreement was incorporated into his contract, then every term must be incorporated. This, said the EAT was a “non sequitur”.