The risks of seeking to avoid collective bargaining
EAT: Unilateral imposition of a pay rise outside collective bargaining was an unlawful offer.
It seems we are heading into a further period of uncertainty for employers and employees characterised by tough negotiations and consultations on pay, benefits and job security. In these difficult times, it is vital that good relationships are nurtured and transparent communication between employers, unions and staff is prioritised.
Employers with recognised trade unions, or where unions are seeking recognition, should also be aware of the significant legal risks of bypassing union negotiations on terms which are to be determined by collective bargaining.
We reported in November 2021 on the Supreme Court’s decision in the case of Kostal UK Ltd v Dunkley and others. For more detail, please see our article: Employers should exhaust collective bargaining procedures before making direct offers to workers (available on our website).
When will a direct offer to employees be unlawful?
Under section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), a direct offer of terms by an employer to a member of a trade union which is recognised or seeking to be recognised will be unlawful where:
a) the effect of the offer, if accepted, would be that the workers’ terms, or some of those terms, will not be determined by collective agreement (this is known as the "prohibited result"); and
b) the employer's sole or main purpose in making the offer is to achieve the prohibited result.
In Kostal the Supreme Court made clear that offers can be unlawful if there is a real possibility that the term would otherwise have been determined by collective agreement, such as when the steps set out in a procedural agreement are not yet complete.
It also stated that offers can be unlawful where the effect of acceptance would only be a temporary removal of the term from collective bargaining and where the term will be determined by collective bargaining in future.
What are the penalties for making an unlawful offer?
The fixed penalty awards for unlawful offers are increased each year. Since April this year, claimants can be awarded £4,554 for each separate unlawful offer. An employer which makes a number of unlawful offers to a large group of workers could therefore face very significant financial liability.
Collective bargaining procedure must be exhausted
Kostal was found not to have exhausted the agreed collective bargaining procedure, and so there was a real possibility that the terms in question would otherwise have been determined by collective agreement. The procedural agreement in Kostal included a final step of referring the dispute to Acas for conciliation. This had not been done.
The Employment Appeal Tribunal (EAT) has now upheld the decision of a tribunal that an employer made unlawful offers to members of a recognised trade union in order to avoid collective bargaining where the collective bargaining agreement did not include a clear final step of this kind.
Case details: Ineos Infrastructure and others v Jones and others
Unite was a recognised trade union of the Ineos group. Pay, hours and holiday terms were subject to collective bargaining but, unlike in Kostal, the collective bargaining agreement did not include clear procedural steps and did not have a dispute resolution procedure applicable to collective bargaining.
A series of pay negotiation meetings took place in 2016 and 2017. These resulted in the employer making a “best and final offer” of 2.8%. Unite’s members authorised the union to return to talks to seek an improved offer. Its position was that it could not recommend a pay increase to its members of less than 3%. The tribunal found that there was an expectation by both parties that there would be a ‘next stage’ if the pay negotiations resulted in an impasse or failure to agree.
Ineos considered that the relationship with Unite had broken down and was unwilling to continue negotiations. Ineos wrote directly to workers stating that a pay increase of 2.8% in line with its latest offer would be implemented. It stated that it had given notice to terminate the collective bargaining agreement with Unite but that it was happy to negotiate with a works council or alternative union.
An employment tribunal found that Ineos had made unlawful offers under section 145B TULRCA.
The EAT agreed with the tribunal that the offers were unlawful and dismissed the employer’s appeal.
Can the unilateral imposition of a pay increase be an unlawful offer?
Ineos argued that it had not made an offer to its workers (and so could not have made an unlawful offer) when it wrote to them to inform them of the pay increase, and that this was rather a unilateral promise not requiring acceptance. The EAT did not agree.
The EAT agreed with the tribunal that the letter included a statement of intention to vary contractual terms as to pay. The unilateral imposition of the pay increase was the implementation of an offer which had already been made and this offer was accepted by the employees by continuing to work.
Did the offer have the prohibited result?
The EAT agreed that the offer had the prohibited result as its acceptance meant pay terms were not determined by collective bargaining. Importantly, it noted that the tribunal had found that collective bargaining negotiations were not at an end when the offer was made and it was likely that agreement would have been reached had negotiations continued. Evidence showed that the two sides were not far apart and that the difference between them was “not worth falling out over”.
Was the employer's sole or main purpose to achieve the prohibited result?
The EAT agreed with the tribunal’s findings that Ineos’ main purpose in making the offer was to achieve the prohibited result. These findings were based on inferences drawn from evidence that the employer sought to “get rid of Unite” and that it in fact gave notice to terminate the collective bargaining agreement.
Comment
Ideally, collective bargaining agreements will include a clearly staged procedure. However, this is not always the case. As with Ineos, the agreement may imply that a series of negotiation meetings should be undertaken, but have no indication of what happens when an impasse is reached or what marks the end point of negotiations.
The Supreme Court in Kostal commented that employers who genuinely believe negotiations are at an end will not be found to have made a direct offer with the sole or main purpose of avoiding collective bargaining. Italso made clear that any agreed procedure for attempting to resolve an impasse in negotiations should be followed before direct offers are made to workers.
Employers seeking to show they genuinely believed negotiations were at an end would need good evidence that the collective bargaining process was exhausted before the offers to workers were made. Where no clear procedure is agreed, how can the employer evidence that the collective bargaining process is at an end? Such evidence might include minutes of meetings evidencing the employer’s genuine commitment to the bargaining process, written evidence of any impasse in negotiations, setting out in writing a formal failure to agree, and evidence of any relevant dispute resolution step being followed.
Employers who are considering making offers to workers outside of a collective agreement are strongly advised to take legal advice at an early stage.
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How Wrigleys can help The employment team at Wrigleys is expert in advising charities, third sector and education sector clients on employment tribunal claims, including those relating to section 145B TULRCA. We also have extensive experience in advising employers on collective consultations and negotiations with recognised trade unions. Importantly, we work within the wider charities, social economy, and education teams at Wrigleys and so we also have in-depth understanding of how our clients’ governance and regulatory obligations impact on employment litigation risks and staff / union relations. Our CSE team can further help to minimise your risks by providing advice on charity law, trustee and director duties and delegation of powers, reporting to the regulator, and reputational risk. |
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