The Employment Appeal Tribunal has ruled that an employer cannot unilaterally declare that its negotiations with its recognised trade union had finished and then proceed to make direct offers to employees if that employer has not exhausted their collective bargaining procedure. So, an employer engaged in collective bargaining, having had its ‘final’ offer rejected, cannot simply treat collective bargaining as over, and go on to make direct offers to employees. That would effectively bypass the collective bargaining legislation which prohibits offers to forego collective bargaining rights, and so would be unlawful.
The case, Ineos Infrastructure Grangemouth Ltd v Jones, is the first reported application of the Supreme Court’s landmark Kostal decision and serves as a clear warning to employers of the perils of making direct offers to employees where a union is recognised for collective bargaining purposes.
A reminder. Section 145B of TULRCA prohibits employers making offers directly to employees which undermine collective bargaining. It says that members of a union cannot be approached directly by an employer with any offer if it results in the worker’s terms of employment no longer being determined by the collective agreement with the union, and the employer’s sole or main purpose in making the offer was to achieve that result. The Supreme Court in Kostal v Dunkley gave employers some comfort when it ruled that trade unions do not enjoy a veto over employers making direct offers to their members to change their terms and conditions of employment. However, employers must follow and exhaust the collective bargaining processes before they may make direct offers with a view to resolving an impasse that has arisen.
The facts briefly. The case concerned Ineos’ pay negotiations with its recognised trade union, Unite. A protracted and acrimonious negotiation had taken place between management at Ineos and representatives of Unite. Despite being fairly close in numbers, Ineos decided that negotiations were at an end and imposed the pay award of 2.8%. That resulted in the claimants issuing claims asserting that Ineos’ intention was to undermine collective bargaining and was in breach of Section 145B. The employees brought claims before the Glasgow employment tribunal which found in their favour.
On appeal, the EAT agreed with the employment tribunal’s reasoning, there had been a breach of section 145B. Ineos had made an ‘offer’ which had the ‘prohibited result’ of bypassing collective bargaining. On the evidence it was clear that the purpose of the offer was to remove the union from the negotiations and that approach was a breach is section 145B. The EAT agreed with Unite that it would be ‘anti purposive’ if an employer could avoid its obligations by simply stating that any particular offer was ‘final’.
So, let’s get reaction to this from Jon Coley who joined me by video-link from Birmingham. I asked Jon how, exactly, does an employer judge whether they have exhausted collective bargaining:
Jon Coley: “Well, that's the key point at the heart of Kostal really, Joe, and it was borne, out as well, in the Ineos case. The court talks about it being a point of causation and in Kostal employers can take some comfort from the fact that the Supreme Court, in that case, Lord Leggett, spoke about the employer having a genuine belief that it had exhausted collective bargaining. I think in the Ineos case that was a little harder for Ineos to satisfy the court of that because there was evidence from both Ineos and Unite’s side that they both thought that they were close to an agreement - the difference between 2.8 and 3% - and through further collective bargaining they may have got there. But from an employer’s perspective, if you've reached an impasse, then the first thing you need to do, if you are looking at imposition is, I would say, seek legal advice, but to dust off your collective agreement and understand that you have actually exhausted all the process under that collective agreement, including any relevant dispute resolution mechanism in the collective bargaining agreement. The court was very clear in the Ineos case that it's not sufficient for an employer just to label something as a ‘final and best’ offer, or this is our ‘final communication’, especially in the circumstances of that case, as the evidence showed, they were close to negotiating an agreement. I think it's a world of difference, obviously, if you're miles apart and/or heading for strike action. But the top tip, dust off the collective agreement, seek legal advice, and make sure you've been for all the processes, including the dispute resolution mechanism, before you even decide to consider imposing unilaterally any offer to the employees.”
Under section 145B one of the tests in determining whether there has been an unlawful inducement is what the employer was seeking to achieve by making the direct offer. So the employer will have a problem if there’s evidence of anti-union sentiment – and in this case there was. Jon Coley again:
Jon Coley: “There is another thing worth highlighting Joe, in the Ineos case which is there was an unfortunate internal memo, which was referred to in evidence and referred to in the judgement, which passed between managers which said that the only logical conclusion was effectively that they had to remove Unite from the organisation. Now one can understand that if you've been working hard to try and reach a collective agreement, especially against the background there where they were on a ‘survival and turnaround’ plan the frustrations that can be caused internally, but that sort of communication is obviously really unhelpful from an employee, when essentially one of the tests that one is looking at in section 145B is what the employer’s purpose is in making the offer direct and if there is any anti-trade union sentiment expressed in emails between managers, etcetera, then that's going to point to a purpose which is to drive the trade union out rather than the proper business purpose which the employer may otherwise have.”
It's worth highlighting just how expensive it can be if an employer gets this wrong. At current rates the award is a fixed sum of £4,554 in respect of each, different unlawful offer made on or after 6 April 2022. In Ineos’s case, the penalty is thought to be in excess of £100,000.
Jon referred to the Supreme Court’s ruling in Kostal v Dunkley. Back in November last year when that ruling came out Ed Goodwyn talked to this programme about its scope and how it’s a welcome development for employers when negotiations with unions reach an impasse, albeit it carries much the same health warning that Jon was highlighting. That programme is ‘Supreme Court’s ruling in Kostal brings welcome clarity to collective bargaining’ and is available for viewing from the Out-Law website.