The Employment Appeal Tribunal (EAT) had upheld a decision of the employment tribunal that two companies within the same group had made unlawful inducements relating to collective bargaining under section 145B of the Trade Unions and Labour Relations (“Consolidation”) Act (TULRCA) when it made direct offers of pay to its employees after it reached an impasse in negotiations with the recognised trade union. Although the tribunal’s decision pre-dated the Supreme Court’s decision in Kostal v. Dunkley, its findings were “presciently, so close in language to the test enunciated by the Supreme Court” that its conclusion was entirely consistent with the correct legal test as set out in Kostal.
- While Kostal was a welcome decision for employers in terms of potentially allowing offers to be made directly to employees, this decision shows that there is likely to be a greater degree of scrutiny by tribunals as to whether the collective bargaining process was truly exhausted, particularly where there is no clearly defined collective bargaining process.
- The EAT agreed with the claimant employees that it would be “anti-purposive” to hold that an employer could avoid its obligations under section 145B simply by stating that their offer was final.
- Where possible, therefore, for reasons of certainty, we would recommend that employers seek to agree with the collective bargaining process with their recognised trade unions in writing.
For advice or to discuss what this means for you and your business, please contact your usual Baker McKenzie contact.
In more detail
Section 145B TULRCA prohibits an employer from making a direct offer to a worker who is a member of a recognized trade union where the employer’s sole or main purpose in making the offer is to achieve the “prohibited result”, i.e., acceptance of the offer would mean that any of the worker’s terms and conditions of employment “(or any of the terms) will not or will no longer” be collectively bargained by the union. Where section 145B is breached, each affected worker can accept or reject the offer and claim a mandatory award of compensation, currently GBP 4,554, “in respect of the offer complained of”.
In Kostal, the Supreme Court held that the key question is what is the result of making the offer (i.e., a test of causation)? If the collective bargaining procedure has been followed and exhausted, a subsequent offer made directly to the employees would not give rise to the prohibited result and therefore a breach of section 145B as the terms would not have been determined by collective agreement if the offers had not been made and accepted.
The employer, INEOS, recognised Unite at its Grangemouth site. The collective bargaining agreement was a “simple” agreement covering collective bargaining in respect of pay, hours and holidays. It made reference to meetings between the parties for the purposes of collective bargaining but did not stipulate any minimum or maximum number. Protracted pay negotiations commenced in 2016. In the end, the parties attended five negotiation meetings. At the last meeting, INEOS put forward a “best and final” offer of 2.8% against Unite’s position that it couldn’t recommend anything below 3% to its members. INEOS was disappointed with the outcome of the discussions, with one of its witnesses giving evidence that the “discussions had run its course”, “there was no life left in the union negotiations”, and “we had exhausted the CBA procedure”. Ahead of an internal INEOS meeting, one of its executives, Mr. Currie, emailed saying “the only logical conclusion is that we have to engineer a way to get rid of Unite and replace them with a different representative body”. On 5 April 2017, INEOS sent a letter (“Letter“) to its employees informing them that they would implement the 2.8% pay increase and that they had served notice on Unite to terminate the collective bargaining agreements as the negotiations have been “very unsatisfactory”.
The tribunal upheld the employees’ claims that INEOS had acted in breach of section 145B. The tribunal’s decision pre-dated the Supreme Court’s decision in Kostal and the appeal was sisted until the outcome of the Supreme Court’s decision.
The EAT upheld the tribunal’s decision that INEOS had breached section 145B when it sent the Letter communicating its intention to increase pay.
Was there an offer? INEOS argued that the pay increase in the Letter did not amount to an offer. Instead, it argued that it was a unilateral promise that didn’t require the employees’ acceptance, which fell outside the scope of section 145B. The EAT rejected INEOS’ argument. The Letter was a statement of intention to vary the employees’ contractual pay, which was accepted by those employees who continued to work. The EAT considered that the tribunal’s view was fortified by the express language of the Letter which stated INEOS’ intention “to implement our pay increase as described in our latest offer backdated to 1 January 2017”. The plain reading of the Letter is consistent with an implementation of an offer already made with the result that the employees’ contractual pay would be varied.
Did the offer achieve the prohibited result? INEOS argued, among other things, that the offer did not achieve the prohibited result because at the time the offer was made, negotiations had come to an end, and therefore there was nothing impermissible in making the offer. The EAT also rejected this argument. The tribunal had concluded that “Viewed objectively, the parties were close to agreement” and “The respective positions of the two sides were sufficiently close that an observer would regard it as more, rather than less, likely that agreement would have been achieved by further collective bargaining”. These findings were unchallenged by the parties and were entirely consistent with the test enunciated by the Supreme Court in Kostal. It was open for the tribunal to decide that objectively speaking, the collective bargaining negotiations had not concluded by 5 April 2017 and the offer, implicitly accepted by the employees’ continuing to work when there was “no other realistic way to proceed”, had the result that their contractual pay was not, or no longer, determined by collective bargaining.
What was the sole or main purpose of making the offers? INEOS argued that the purpose of making the offer was for business purposes and not to achieve the prohibited result. The tribunal had acknowledged that INEOS had engaged in meaningful consultation with Unite. However, it also found that INEOS did not want to use the arrangements it had agreed with Unite for collective bargaining, as evidenced by Mr. Currie’s email and by INEOS giving notice to terminate the collective bargaining agreement. There was, therefore, ample evidence to support the tribunal’s findings on this point.