Background:

The case involved ‘check-off’ arrangements whereby employees from the respondent departments would choose to have their Union subscription deducted from their salary at source and paid directly to the Union. This arrangement arose from collective agreements between the government and the unions in the 1960s.

The Government departments unilaterally withdrew the check-off arrangements. They had agreed during the proceedings that that decision was a breach of the contract of employment for individual employees. However, the issue in this case was whether the Union could take an action as they had suffered a loss from a drop in subscriptions.  The argument from the Government was that collective agreements were not intended to be legally enforceable. However, the Union argued that it had rights under the Contracts (Rights of Third Parties) Act 1999 which conferred a benefit on them from the individual contracts of employment which they could seek to enforce.

Outcome:

The Union succeeded at first instance in the High Court but the Government were successful on appeal to the Court of Appeal. The Court of Appeal held that there was no intention that the check-off arrangements were to be enforceable by the Union accepting the argument that the collective agreements were not legally enforceable.  The Union appealed to the Supreme Court stating that the Court of Appeal did not give sufficient weight to the statutory presumption in the 1999 Act relating to third party rights.

The Supreme Court allowed the appeal. They stated that the presumption of enforceability under Section 1 of the 1999 Act was a strong one. The Court of Appeal had erred in suggesting that the presumption merely shifted the burden vis-à-vis the parties’ common intention. The Supreme Court further held that the presumption within the 1999 Act had not been rebutted. The natural assumption and that of the objective bystander was that the Union would be able to enforce the arrangement where they had the benefit from the individual contract of employment. The Supreme Court referred to the logical points raised by Popplewell J in Hickey v Secretary of State for Communities (2013) when he held that employees would find it simpler and more beneficial to have a Union take the action rather than take the action individually.   To this end, there was a common intention that the check-off terms as incorporated into the contract of employment would be enforceable by the Union.

Practical Guidance for Employers:

This Supreme Court judgment provides a useful examination of the extent to which third party rights under the 1999 Act can work to allow Unions to take actions.    The collective agreements, not being legally enforceable, can be seen to stymy such action.  However, the operation of third party rights allows for Unions to use the individual contracts of employments as their conduit to take action where they are conferred a benefit. This was a clear benefit in this case through the simplicity of receiving the subscriptions and there was a common intention that they would be able to take the action.

https://www.supremecourt.uk/cases/docs/uksc-2023-0075-0076-0077-judgment.pdf