This determination of the Pensions Ombudsman illustrates that employees may be bound by the terms of a collectively bargained pay and benefits agreement, even if their contracts of employment do not expressly permit amendment by such deals.
Mr Peck was employed by FirstGroup plc (the Employer) and was a member of the Final Salary section of the First UK Bus Pension Scheme (the Scheme). He was not a member of the union.
Neither Mr Peck’s conditions of service nor the Employer’s current standard terms and conditions of employment include any reference to collectively bargained agreements.
In 2005, the Employer offered a “Total Rewards” package. The package included a pay rise but rendered any salary increase above the increase in the retail price index from April 2006 non-pensionable.
Following a union ballot, the rewards package was accepted and the trustee agreed to make the necessary amendments to the Scheme. Mr Peck challenged the legality of the amendments.
The Obmudsman found that:
- union involvement in a pension scheme is not of itself inappropriate;
- although there was no express term in Mr Peck’s contract permitting variation by collective bargaining, such a term could be implied on the basis of previous dealings between the parties. (The union had been in operation since Mr Peck’s employment commenced and Mr Peck had not previously objected to changes to his contract introduced following collective bargaining);
- as Mr Peck had continued in employment and benefited from the pay rise he had, by his conduct, accepted the Total Rewards package; and
- that Mr Peck’s contract had been varied and the trustee had acted correctly in agreeing to the consequential Scheme amendments.
The trustee in this case was referred to the decision in the case of South West Trains v Wightman, which established that alterations relating to pensions and pensionable pay could be agreed by collective bargaining and become binding on individual employees by virtue of their employment contracts (in that case variation by such agreements was expressly permitted). This case could be useful for employers as it extends that principle to allow changes to be implemented where there is no such express provision in employees’ contracts, provided that such a term can be implied.