Trade unions are increasingly using a relatively unknown provision in the Trade Union Labour Relations (Consolidation) Act 1992 (TULRCA) in negotiations with employers over changes to collectively agreed terms and conditions of employment. With three Tribunal cases in less than twelve months, involving potential compensation in the hundreds of thousands, employers need to be aware of the issues involved and how to respond.
Section 145B TULRCA provides that a worker who is a member of an independent trade union which is recognised, or seeking to be recognised, by his/her employer has the right not to have an offer made to him/her which would result in any of his/her terms and conditions no longer being determined by collective bargaining.
The financial penalty for a breach of section 145B is £3,600 for each claimant union member receiving the offer. For large employers, such as education institutions, such penalties can therefore be substantial. In addition, there are conflicting statutory provisions over whether any changes made relying on such an offer are enforceable. Finally, dismissals as a consequence of rejecting an offer which contravenes section 145B are automatically unfair.
Section 145B was introduced in 2004 to address a defect in the law, identified by the European Court of Human Rights in Wilson, Palmer and Doolan v UK, in the context of employers at that time offering financial incentives to employees to accept personal contracts in place of collectively agreed terms and conditions of employment.
While it is unlikely that there will be a repetition of the type of employer incentives seen in the Wilson case, there remains a lack of clarity as to the current scope of section 145B and whether it applies more widely than anticipated. If it does, there are unwelcome implications for those employers with recognised trade unions.
For example, when faced with an impasse in collective bargaining an employer may wish to seek agreement direct with their workforce, through individual offer and acceptance of new contractual terms (or even termination and re-engagement). Some trade unions have taken exception to such routes to implementation, arguing that any such offers breach section 145B. If this argument succeeds, it effectively provides the trade union with a monopoly when employers are seeking to implement changes to collectively agreed terms and conditions.
Surprisingly, there has been no Employment Appeal Tribunal decision on this point. However, there have recently been three Employment Tribunal decisions on the interpretation of section 145B. Two are helpful for employers and one less so; none are binding authorities as they are first instance decisions.
Recent Tribunal decisions on section 145B
Eversheds lawyers were involved in the recent successful defence of a large section 145B claim in Wyer v Pembrokeshire County Council. The Council tried to implement a new pay and grading structure following a job evaluation exercise. Collective negotiations had taken place over a number of years without agreement being reached. Ultimately, given the failure of collective bargaining, the Council implemented its new structure by obtaining the individual consent of employees. Unison and Unite challenged this process, arguing that acceptance by employees breached section 145B given that the terms and conditions introduced were not reached through collective agreement (even though collective bargaining would continue going forwards).
If correct, this would result in a wide scope for section 145B. It would include any offer which seeks to secure the implementation of a change not collectively agreed.
However, section 145D requires the employer to prove its sole or main purpose in making the offer. The Council was successful in arguing that section 145D requires an analysis of the employer’s motivation in making the offer and it is not enough to simply consider the offer and its effect in isolation. In this case, the main purpose in making the contested offers was not to move away from collective bargaining but to implement a new pay and grading structure, to minimise equal pay risks. The Council was able to demonstrate, through detailed witness evidence and a wealth of documentation, that collective negotiations had taken place and that the decision to make individual offers was not taken lightly. A broader interpretation of the Council’s “purpose” was adopted by the Tribunal.
In contrast, the trade unions argued unsuccessfully that once it is established that the employer agrees (or seeks to agree) individual acceptance of terms, there should be no further investigation into the employer’s reason for so doing.
A similar conclusion was also reached by the Reading Employment Tribunal in another claim involving a private sector transport company. The employer argued they had genuinely attempted to collectively agree the changes but had been unsuccessful. The Tribunal’s decision went in the employer’s favour after it adduced evidence to show that their main purpose was to restructure their management team, a consequence of which (but not the main reason) involved moving groups of staff into different pay bargaining groups.
While it is important to remember that neither decision is binding on another Tribunal, it is notable that in both cases the employers were able to demonstrate that their primary purpose in making individual offers to staff were credible business reasons and they had the evidence to support their defence. Institutions in similar situations should consider whether they can prove that the main purpose for making contested offers is a sound good business reason and is not, for example, aimed at marginalising the trade unions.
Institutions also need to be aware of an adverse decision in circumstances not dissimilar to those in Wyer. In Whitaker v Buckinghamshire County Council the employer was unsuccessful in arguing that an offer they had made to staff did not breach section 145B. The Tribunal in this case preferred the trade union’s approach to the interpretation of ‘purpose’ referred to above. This case illustrates not only the importance of devising a robust strategy when managing these risks, but also the current uncertainty surrounding the interpretation of section 145B.