The appellant employees (A) appealed against a decision that a collective pay agreement with the respondent employer (B) gave B the opportunity to choose from two different pay increases. B had reached an agreement with A's trade union. This agreement was included in A’s employment contracts and made provision for set pay increases for 2007 and 2008. For 2009 the agreement stated that pay would be increased by 2.5 per cent or by the NJC Local Government Services settlement plus 1 per cent. In 2009 B claimed it was not obligated to increase pay by 2.5 per cent. A brought proceedings for unlawful deductions from wages.

It was held by the employment tribunal that B was not contractually obligated in 2009 as the agreement gave B the option of choosing between the different pay increases. The ability of B to make this choice did not mean the agreement was void for uncertainty. B argued the wording of the 2009 settlement should not have been incorporated into A’s contract as it was an agreement to agree, it was uncertain, it was incomplete and did not intend to create legal relations. The employment tribunal agreed with the submission that the agreement was merely an agreement to agree and did not specify which of the two alternate pay increases would apply.

The appeal was dismissed by the EAT which stated that B had “'fulfilled their contractual obligation by paying in accordance with one alternative”. Maurice Kay LJ, giving the lead judgment in this appeal, stated that both the EAT and the ET erred in concluding that it was an agreement to agree as the 'central purpose' of the original negotiations was to settle a 3 year deal. The key issue in this case is one of construction. He relied on the decision of Adams and Investors Compensation Scheme Ltd v West Bromwich Building Society (No.1) [1998] 1 W.L.R. 896.

It was concluded that the documents are not negotiation documents but represent a concluded agreement. The omission of the phrases "whichever is the greater", or "whichever is the lesser", in the provision was not deemed to be relevant. The provision for 2009 was more complex. Looking at the matter objectively, the provision meant that there would be an increase of 2.5 per cent or NJC plus 1 per cent whichever was the greater; no other meaning made good industrial sense. http://bit.ly/YtdAxp