Education HR e-briefing: Court of Appeal loosens limits to contractual change in absence of trade union collective agreement

• United Kingdom

• Education - Briefings

17-06-2019

Introduction

An attempt to change the terms and conditions of employment of existing staff where any of the new terms are less favourable is bound to carry risk. Should the employees not accept the change then amongst the potential claims that may be brought are those of breach of contract, unlawful deduction from wages, unfair dismissal (actual or constructive) and a failure to collectively consult (where an employer seeks to achieve the change by termination and offer of re-engagement).

To avoid such risks an institution will try and agree the changes collectively. If that approach is not successful, however, institutions may be tempted to try and agree changes with individual employees. Whilst on the face of it such agreement could reduce the exposure to the claims mentioned above, such an approach could fall foul of a provision contained at section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA).

Whilst section 145B is a provision that has previously been invoked in litigation arising from collective change processes within the sector, there has been relatively little reported case law on its application since its introduction. However, the leading case on section 145B has now been decided at the Court of Appeal.

In Kostal UK Ltd v Dunkley, the employer has succeeded in overturning the EAT's decision on trade union legislation which had restricted an employer’s ability to change employment terms in a unionised workplace without collective agreement.

The employer argued that the EAT’s decision effectively gave a veto to a union where the collective bargaining process had been followed. The Court of Appeal has decided that this is not what Parliament intended.

The legislation

Section 145B of TULRCA was introduced in 2004 to bring the UK in line with Article 11 of the European Convention on Human Rights (Freedom of Assembly and Association). The purpose of the amendment to the TULRCA was to prevent the strategy then adopted by some employers to offer financial incentives to staff to sign up to terms and conditions of employment which provided that the employer no longer had to collectively consult with the recognised trade union in relation to those terms and conditions.

Whilst institutions would not seek such an approach, the way section 145B is drafted means that it has been interpreted in a way which is arguably wider than the circumstances it was intended to prevent.

Section 145B states that:

•  a worker who is a member of an independent trade union which is recognised, or seeking to be recognised, by his employer;
•  has the right not to have an offer made to him by his employer if acceptance of the offer would have the "prohibited result"; and
•  the employer’s sole or main purpose in making the offer is to achieve that result.

The "prohibited result" is that the worker’s terms of employment, or any of those terms, will not (or will no longer) be determined by collective agreement negotiated by or on behalf of the union.

The facts of Kostal

K, the employer, had newly recognised Unite for collective bargaining. During the first annual pay negotiation, K’s 2% pay increase and 2% Christmas bonus was conditional upon some less favourable changes to overtime, sick pay and breaks. The offer was rejected by the union and by members in a consultative ballot. K then wrote directly to employees offering the pay increase, bonus and changes to other terms, with a warning that if the offer was not accepted by 18 December they would not receive the Christmas bonus and that it could not be paid at a later date. In January, a further letter offering a 4% pay increase was sent to those employees who had so far rejected the offer and warned that if they did not accept, K could serve notice in relation to their contract of employment. Some ten months later, collective agreement was finally reached on the pay proposals

ET and EAT decisions

A tribunal upheld claims brought by 55 employees arguing that the December and January letters sent by K constituted a breach of section 145B of TULRCA. Approximately £420,000 compensation was awarded, based on the then statutory award of £3,800 for each of the two letters, per claimant. The current figure is £4.193.

K had argued that the first offer to employees was made so that employees had the opportunity to receive the Christmas bonus and both offers were a temporary solution to an impasse with the union, with collective bargaining continuing thereafter. The tribunal cast doubt on the Christmas bonus timing issue and rejected the second reason on the grounds that ‘the employer cannot drop in an out of the collective process as and when that suits its purpose’

On appeal to the EAT, K argued that 145B of TULRCA is not intended to apply to situations, such as this, where collective bargaining continues and that the tribunal’s interpretation, in effect, gave unions a veto on changes to employment terms – which was not the intention of Parliament. The EAT, by a majority, dismissed K’s appeal. K appealed further to the Court of Appeal.

Court of Appeal judgment

The Court of Appeal reviewed the history of section 145B to establish the reason for its introduction. In particular, that it was in response to the offering of inducements ("sweeteners") to employees to opt out of collective bargaining altogether and that UK law at the time was defective in protecting trade unions rights under Article 11 of the European Convention on Human Rights. 

As this case did not involve the surrender of collective bargaining rights by the workers, the Court agreed with K and decided that s145B did not apply in the circumstances in question. Otherwise, the Court noted "It would amount to giving a recognised trade union with a collective agreement similar to the one in the present case a veto over even the most minor changes in the terms and conditions of employment, with the employers incurring a severe penalty for overriding the veto." Such a result would, in the view of the Court, go far beyond curing the defect in UK law.

Comment

The Court outlined two situations where s145B will apply:

• where a trade union is seeking to be recognised and the employer makes an offer whose sole or main purpose is to achieve the result that the workers’ terms will not be subject to a collective agreement; and
• where an employer makes an offer to end collective bargaining for some or all terms on a permanent basis.

It rejected a third situation, as in K’s case, where the employer makes an offer which results in one or more terms on this one occasion not being determined by collective agreement. This is because union members are not being asked to relinquish their right to be represented by their union in the collective bargaining process and have their terms and conditions negotiated by the union in the future. The Court commented "All that has happened is that the employer has gone directly to the workforce and asked them whether they will agree a particular term on this occasion". In such circumstances, according to the Court, a union still has options open to it, including opposing the change by calling an industrial action ballot.

This is a dramatic about turn that will be welcomed by employers and an important case for institutions, given the unionised environment in which they operate. However, the Court noted that K was not motivated by hostility to trade unions, that the offers were made to the whole workforce and that each individual would continue to be represented by Unite under the collective agreement. As such, it distinguished K from those employers in the past that had offered sweeteners, leading to s145B’s enactment. Employers with an "anti-union motivation", per the Court, should be aware that s145B may still apply, although in our experience such motivation is unlikely to be successfully argued in the sector.

The union is applying for permission to appeal to the Supreme Court.