Employers who recognise a trade union for the purposes of collective bargaining should be aware of a recent tribunal decision which may significantly impact on their ability to implement contract variations where union negotiations reach a stalemate.
The s.145B conundrum
This is due to a little-known section of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA). Section 145B of TULRCA is complex but essentially prohibits employers making offers directly to union members to change their terms and conditions in order to avoid collective bargaining (i.e. if the employer’s “sole or main purpose” in making the offer is to achieve a “prohibited result”) .
TULCRA defines a “prohibited result” as being that one or more of the workers’ terms “will not” or “will no longer” be determined by collective agreement. There is no binding case law on what this means in practice. In particular there is uncertainty about whether employers who, despite bargaining in good faith with the union, fail to reach agreement on a new contractual term are able to then approach employees directly to agree the change, without breaking the law.
This is an issue which arises frequently. For example, if an annual pay bargaining negotiation reaches stalemate, or an employer tries and fails to agree new working patterns with its recognised trade union then if the employer invites workers to accept its proposals directly and they accept, that particular contract term will not have then been determined collectively. The key questions are does the employers offer amount to a prohibited result and was this its sole or main purpose?
Following 3 employment tribunal cases in 2013 it was generally considered that for the legislation to be breached the employer had to be seeking either the total or partial elimination of collective bargaining.
Dunkley and others v Kostal UK Limited
This position has been called into question by the recent employment tribunal decision in Dunkley and others v Kostal UK Limited.
The employer had a recognition agreement with Unite providing for collective bargaining. In pay negotiations in November 2015 the company made a pay offer of a 2% increase in basic pay plus a 2% Christmas bonus, in return for changes to terms relating to sick pay for new starters, reduction in overtime rates and consolidation of breaks.
The union balloted members on the offer, which was rejected. The employer then sent a notice to all employees summarising the deal and giving until 18 December to accept. The notice stated that failure to sign and return would result in the Christmas bonus not being paid. In January the employer sent a further letter to employees who had not accepted the offer stating that if no agreement could be reached this may lead to notice being given to terminate employment. In the meantime the dispute between the company and the union was referred to ACAS but a collective agreement in respect of pay for 2015 was not concluded until November 2016.
The claimants – all members of Unite – brought claims under s.145B.
The tribunal held that the employer had breached s.145B. It found that the employer took the conscious decision to bypass further meaningful union negotiations in favour of a direct and conditional offer to individual employees. It was, the tribunal found, improbable that the employer did not intend to circumvent the collective bargaining process when it made the offers. If there is a recognition agreement which includes collective bargaining the employer cannot drop in and out of the collective process as and when that suits its purpose. The tribunal discounted the fact that the employer intended to determine terms and conditions collectively in the future.
Interestingly, the tribunal failed to accept the employer’s arguments that the impact of this would prevent the employer ever implementing a change to terms with union members if the Union refused to agree. The tribunal disagreed and considered the option was still open to employers of terminating the contract and offering re-engagement on the new terms. In our view, however, this misses the point that the offer of re-engagement would in itself be in breach of s.145B if the tribunal’s interpretation of s.145B is correct.
Implications of this decision
While there is much the employer could have done differently in this case to strengthen their argument as to their true purpose in implementing the changes, the tribunal decision casts new uncertainty on the impact of s.145B and the level of restriction it places on employers with trade unions who are recognised or seeking recognition.
Although this is only a tribunal decision and therefore not strictly binding, we are aware that Unite is already seeking to rely on it to prevent employers engaging directly with employees in relation to terms and conditions. There is now a much higher risk that trade unions will encourage employees to bring claims if offers to change terms are made direct to union members even where collective bargaining has been followed in good faith and reached a stalemate and where the employer intends to collectively bargain on all future matters.
Why is this important?
The consequences of a breach of s.145B can be significant. An Employment Tribunal will award £3,830 to each employee who has been made an offer in breach of the statutory provisions (whether or not they have accepted the offer) and the contract variation may not be effective. In addition, dismissal for failing to accept such an offer will be automatically unfair with no minimum service requirement. While this legislation only restricts offers to union members, making offers only to non-member employees presents other risks.
What should employers now do?
What can employers do to mitigate the potential for a breach of s.145B?
- Be clear in communications with the union and the employees what the business reason or need is for any proposed change to terms and conditions and the reason for any urgency. Employers must prove their purpose is lawful. The stronger the business need the more likely a tribunal is to accept the business reason for the new terms is the main purpose;
- Ensure if offers are made to employees the terms are the same as those offered via the trade union and, in most cases, that the scope of collective bargaining going forward remains unchanged;
- Exhaust collective bargaining procedures first. Avoid expressing hostility towards collective bargaining arrangements. In determining the employer’s purpose, the employment tribunal must take into account any evidence that the employer had recently changed or sought to change, or did not wish to use, collective bargaining; and
- Review collective bargaining agreements.
Our employment team have extensive experience of advising on changes to terms and conditions where a union is recognised for collective bargaining and succeeded in defending British Airways against a s.145B claim in 2013 following a restructure. If you would like to discuss your current collective bargaining arrangements or ongoing or anticipated change programmes, please contact your usual DLA Piper contact.