Our new feature ‘MTB Industrial Law Updates’ is brought to you by the Employment Team at McCartin Turkington Breen Solicitors.  In this article, Judy Hamilton, Solicitor in the Employment Team discusses the recent case of Kostal UK Ltd v Dunkley and Others [2019] regarding the issue of unlawful inducements to union members. 

Rights of Union Members -v- The Employer

There are a number of protections afforded to employees who are members of a trade union under the Employment Rights (NI) Order 1996 (ERO 1996). The main protections are set out here.

Inducements Relating to Union Membership or Activities

Definition

An unlawful inducement is where an employer makes an offer to its employees to agree to changes to terms and conditions where a collective agreement is in place and in doing so by-passes the union. Examples of an inducement are a pay rise or bonus. Article 77A (1) of the ERO 1996 protects workers from such offers.

Time Limits

Under Article 77C a complaint under Art 77A or 77B must be brought to the Tribunal within 3 months beginning with the date when the offer was made or, if a series of offers the date when the last offer was made. The tribunal has the discretion under Art 77C(b) to extend the time limit if it was not reasonably practicable for the complaint to be presented within 3 months.

Remedy

The remedy for a breach is a Declaration by the Tribunal that there has been a breach and an award as set out in Article 77E. The current award is £4401 per employee which is reviewed annually. The Employment Appeals Tribunal (EAT) in Kostal UK Ltd v Dunkley and Others held that the Tribunal was correct in awarding the individual employees 2 awards as the Claimants had received 2 unlawful offers. The Court of Appeal overturned the EAT decision (see below) but did not make reference to the EAT’s determination on the award so it can be argued that the award is per inducement.

Background

In 2002 the European Court of Human Rights (ECHR) in the case of Wilson and Palmer v United Kingdom determined that the UK violated Article 11 of the Convention which protects the fundamental right of people to join trade unions. In both cases their employers had offered them pay increases but on the basis that they would cease to be represented by the unions, ie a permanent surrender of collective bargaining.

UK law at the time provided for a wholly voluntary system of collective bargaining, with no legal obligation on employers to recognise trade unions for the purposes of collective bargaining. The ECHR said that it is the role of the State to ensure that trade union members are not prevented or restrained from using their union to represent them in attempts to regulate their relations with their employers and by permitting employers to use financial incentives to induce employees to surrender important union rights the UK breached the rights of the trade unions and their members.

The UK government then implemented changes to the law through the Employment Relations Act 2004, which changed, in particular, the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) section 146 to stipulate that all "workers" were protected by the provisions on detriment for union membership and activities.

Impact of the Change of Law

Little use of Section 145B (this is equivalent to our Art 77 of the ERO 1996) was made by trade unions until a number of cases in England in and around 2013/2014.

In 2014 a Tribunal case of Bugden & Others v London Borough of Bromley the Council held that the Council was ordered to pay 18 employees £3,600 each after the Council was found to have breached Section 145B by offering its employees £200 for agreeing to amended terms outside of collective bargaining arrangements. Letters sent to the employees clearly set out the Council’s purpose of making the offers which was to withdraw from existing collective bargaining arrangements and in future determine pay by other means.

In Wyer v Pembrokeshire County Council, after failed collective negotiations regarding a new pay and grading structure, the council implemented its new structure by obtaining the individual consent of employees. The trade unions challenged this process arguing a breach of section 145B. 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 and therefore the Employer succeeded in defending the claim.

In Whitaker v Buckinghamshire County Council the council was ordered to pay £3500 to a union member employee who had been offered £750 to change the terms of his employment. The Tribunal held that the council had made an offer contrary to section 145B which was unlawful.

Current Position

The Court of Appeal decision in the case of Kostal UK Ltd v Dunkley and Others (June 2019) has brought the issue of inducements back to the forefront and is of great importance to employers.

In this case the employer, following the rejection in a consultative ballot of proposed changes to terms and conditions, wrote to its employees directly offering them the same package and stating that failure to agree to the proposed new terms would lead to no Christmas Bonus and no pay increase this year. It then wrote to the employees again telling them that failure to agree to the terms could result in termination of their contracts. The employees claimed each letter was an unlawful inducement. The Tribunal agreed. The employer appealed to the EAT who agreed with the Tribunal.

The EAT held that there had been a breach of S145B of TULRCA and that the employer had made the offer for the sole purpose of evading collective bargaining. The EAT felt that it did not matter that this was a one-off agreement and that collective bargaining remained in place for the future.

The Employer appealed and the Court of Appeal overturned the EAT’s decision. It held that offers made as a one-off did not breach S145B. It distinguished between a one-off agreement made directly with employees, where the employer’s sole or main purpose is to end collective bargaining on a permanent basis. It also noted that the employer was not motivated by hostility to trade unions and the offer was made to the whole workforce.

Conclusion

The Kostal decision is an important case for employers as it clarifies the meaning of S145B of TULRCA and enables employers, in some situations, to deal directly with employees on issues concerning their terms and conditions. Employers should however proceed with caution and not use this decision as a carte blanche to disregard unions when making changes to employees’ terms and conditions. Legal advice should always be sought prior to implementing any major changes within the workforce to minimise the risks of legal proceedings.

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Relevant Legislation

Rights of Union Members - Employment Rights (NI) Order 1996 (ERO 1996)

Unlawful Inducements: Articles 77A-E of the ERO 1996

Article 77A(1) A worker has the right not to have an offer made to him by his employer for the sole or main purpose of inducing the worker—

(a)not to be or seek to become a member of an independent trade union,

(b)not to take part, at an appropriate time, in the activities of an independent trade union,

(c)not to make use, at an appropriate time, of trade union services, or

(d)to be or become a member of any trade union or of a particular trade union or of one of a number of particular trade unions.

Article 77B.—(1) 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—

(a)acceptance of the offer, together with other workers' acceptance of offers which the employer also makes to them, would have the prohibited result, and

(b)the employer's sole or main purpose in making the offers is to achieve that result.

(2) The prohibited result is that the workers' 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.

(3) It is immaterial for the purposes of paragraph (1) whether the offers are made to the workers simultaneously.

(4) Having terms of employment determined by collective agreement shall not be regarded for the purposes of Article 77A (or Article 73 or 136) as making use of a trade union service.

(5) A worker or former worker may present a complaint to an industrial tribunal on the ground that his employer has made him an offer in contravention of this Article.

Time limits for proceedings

77C.  An industrial tribunal shall not consider a complaint under Article 77A or 77B unless it is presented—

(a)before the end of the period of three months beginning with the date when the offer was made or, where the offer is part of a series of similar offers to the complainant, the date when the last of them was made, or

(b)where the tribunal is satisfied that it was not reasonably practicable for the complaint to be presented before the end of that period, within such further period as it considers reasonable.]

Burden of Proof

77D.—(1) On a complaint under Article 77A it shall be for the employer to show what was his sole or main purpose in making the offer.

(2) On a complaint under Article 77B it shall be for the employer to show what was his sole or main purpose in making the offers.

(3) On a complaint under Article 77A or 77B, in determining any question whether the employer made the offer (or offers) or the purpose for which he did so, no account shall be taken of any pressure which was exercised on him by calling, organising, procuring or financing a strike or other industrial action, or by threatening to do so; and that question shall be determined as if no such pressure had been exercised.

(4) In determining whether an employer's sole or main purpose in making offers was the purpose mentioned in Article 77B(1), the matters taken into account must include any evidence—

(a)that when the offers were made the employer had recently changed or sought to change, or did not wish to use, arrangements agreed with the union for collective bargaining,

(b)that when the offers were made the employer did not wish to enter into arrangements proposed by the union for collective bargaining, or

(c)that the offers were made only to particular workers, and were made with the sole or main purpose of rewarding those particular workers for their high level of performance or of retaining them because of their special value to the employer.

Remedy

77E.—(1) Paragraphs (2) and (3) apply where the industrial tribunal finds that a complaint under Article 77A or 77B is well‐founded.

(2) The tribunal—

(a)shall make a declaration to that effect, and

(b)shall make an award to be paid by the employer to the complainant in respect of the offer complained of.

(3) The amount of the award shall be [£4,401] (subject to any adjustment of the award that may fall to be made under Part IV of the Employment (Northern Ireland) Order 2003).

(4) Where an offer made in contravention of Article 77A or 77B is accepted—

(a)if the acceptance results in the worker's agreeing to vary his terms of employment, the employer cannot enforce the agreement to vary, or recover any sum paid or other asset transferred by him under the agreement to vary;

(b)if as a result of the acceptance the worker's terms of employment are varied, nothing in Article 77A or 77B makes the variation unenforceable by either party.

(5) Nothing in this Article or Articles 77A and 77B prejudices any right conferred by Article 73 or 76.

(6) In ascertaining any amount of compensation under Article 76, no reduction shall be made on the ground—

(a)that the complainant caused or contributed to his loss, or to the act or failure complained of, by accepting or not accepting an offer made in contravention of Article 77A or 77B, or

(b)that the complainant has received or is entitled to an award under this Article.]