In INEOS Infrastructure Grangemouth Ltd v Jones and ors the EAT upheld an employment tribunal’s decision that an employer’s imposition of a pay award amounted to an unlawful inducement under S.145B of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) in circumstances where pay negotiations with the recognised trade union were at an impasse but had not been exhausted. The EAT held that the tribunal was entitled to find that the employer’s unilateral variation of employees’ terms as to pay constituted an ‘offer’ for the purposes of S.145B, which was accepted by the employees continuing to work. It was also entitled to conclude that the employer’s making of this offer achieved the result of bypassing the collective bargaining mechanism. Although the tribunal’s decision pre-dated the Supreme Court’s decision in Kostal UK Ltd v Dunkley, it was consistent with it.

Background

The claimants were employed by companies in the INEOS group at the Grangemouth site and were members of Unite. INEOS had entered into a collective bargaining agreement (CBA) which recognised Unite as entitled to conduct collective bargaining in relation to pay. The claimants’ terms and conditions stated that the terms and conditions set out in the CBA would be negotiated between INEOS and Unite.

Pay negotiations were instituted in June 2016 and continued until March 2017. INEOS made an initial proposal of 2.3% ; in February 2017 Unite made a counter-proposal of 3.25% together with other enhancements to terms and conditions. At the final meeting the Unite position was that they could not recommend anything below 3% to their membership. INEOS made a best and final offer of 2.8% which Unite presented to their members but did not put to a vote. There was evidence of an expectation on both sides that there would be a next stage if the pay negotiations resulted in an impasse or failure to agree. On 23 March 2017 INEOS issued a briefing note which stated their hope that the offer would be accepted and that the parties would be able to move forward without any requirement to invoke the disputes procedure. By this stage relations between the INEOS and Unite negotiating teams had significantly deteriorated. One of the INEOS executive team wrote in an email to the negotiating team that “the only logical conclusion is that we have to engineer a way to get rid of Unite & replace them with a different representative body”. The negotiating team was authorised to make the pay award unilaterally. INEOS sent a communication to the employees on 5 April 2017 stating that INEOS had given notice to terminate the CBA and that the pay increase would be implemented.

The decisions of the employment tribunal and EAT

The claimants brought a claim under s.145B of TULRCA which prohibits offers to union members if acceptance of the offers would have the ‘prohibited result’ that terms of employment or any of them will not or will no longer be determined by collective bargaining and that was the employer’s sole or main purpose in making the offers. The Supreme Court considered the proper interpretation and application of s.145B in Kostal. This case came before the tribunal prior to the Supreme Court’s decision and the appeal was stayed pending that decision.

In this case, unlike in Kostal, the question arose whether or not an offer was made which would have the effect of engaging s.145B at all. The tribunal concluded that it was; the communication from INEOS on 5 April was a statement of intention to vary employees’ contracts as to pay and, in continuing to work, the employees accepted that variation. The EAT agreed.

The tribunal further concluded that the offer had the prohibited result. The EAT considered that although the tribunal did not directly apply the test set out in Kostal, the tribunal reached a conclusion entirely consistent with the correct legal test. Both parties were in agreement that in the absence of a structured CBA the proper approach is to ascertain, objectively, whether or not negotiations were as a matter of fact at an end. The EAT considered that this was the approach taken by the tribunal. The tribunal had evidence before it to permit it to draw the conclusions that collective bargaining negotiations were not at an end at the time the offer of 5 April was made and that the offer was made with the result that terms and conditions as to pay were no longer determined by collective bargaining when it was more likely that agreement would have been reached by further negotiation.

The question therefore was what was the employer’s sole or main purpose in making the offer? In Kostal the Supreme Court determined that the question of the employer’s purpose becomes very relevant in circumstances, as here (due to the unstructured nature of the CBA), where it may be difficult to say with certainty whether the collective bargaining process has been exhausted. The tribunal acknowledged that there had been meaningful collective consultation but concluded that INEOS did not want to use the collective bargaining process with Unite in the future.

The appeal was refused.

Impact on employers

This decision further restricts an employer’s ability to make changes to single employment terms on a single occasion and leaves employers who reach a negotiating deadlock with a recognised trade union with fewer potential options. The case law still permits offers to be made directly to employees when an agreed collective bargaining procedure has been exhausted, but in practice few collective bargaining framework agreements set out a clear, stepped process in a way which means it is certain when it is complete. This decision further highlights the need for employers to seek to clarify bargaining agreements to set out well-defined steps, timescales and provisions on escalation as well as being clear about when it is complete.