A failure by an employer to follow agreed procedures on pay negotiations is set to cost the company around £4.8m in compensation claims. The mistake by Virgin Trains is the latest in a series of cases where employers have miscalculated in their handling of pay negotiations with the unions, ended the talks too quickly, and approached employees directly with an offer in breach of the strict legislation designed specifically to prevent that outcome.
The case is Jiwanji v East Coast Main Line Company, trading as Virgin Trains, and is a decision of the Leeds Tribunal. It centred on pay negotiations which took place in 2017. So, following a meeting, the RMT agreed to put the proposals made by the company to a ballot, although its representatives advised the membership that the terms were not acceptable for various reasons. In light of the advice provided by the union the members voted overwhelmingly to reject the proposal. In response the company made a direct offer to all of the workforce on, including the RMT members who had already voted to reject the deal. It did this instead of continuing collective negotiations either with all recognised trade unions or with the RMT alone. The RMT asserted this direct offer to its members was an unlawful inducement and in contravention of the legislative provisions.
The employment tribunal agreed the offer made to RMT members was unlawful. It had arisen as a result of a unilateral decision by the company’s management to treat collective bargaining as at an end and to implement the pay award in contravention of the agreed procedure, The agreed procedure was, of course, that decisions on pay be taken jointly with the unions concerned. In its defence the company argued the negotiations had reached an impasse but the tribunal concluded that, viewed objectively, that was not the case.
In reaching its conclusion that Virgin Trains had breached section 145B, the tribunal was careful to follow the leading case on this which is last year’s Supreme Court ruling in Kostal. Incidentally, the tribunal also applied the EAT’s ruling earlier this year in the Ineos case which we featured in this programme back in July. A reminder, Kostal says employers must follow and exhaust the collective bargaining processes with their recognised trade union before they can make direct offers with a view to resolving an impasse that has arisen.
Well, given the costs of getting this wrong can be huge – close to £5m in this case – it is vital that employers are able to prove that they’ve exhausted collective bargaining. Every case will turn on its own facts, but there is a common thread running through all these reported cases which is an over eagerness by the company to end the talks and get the employees to sign up to a deal. Earlier Ed Goodwyn joined me by video-link to look back at what went wrong in Kostal. So, why did the employees win?
Ed Goodwyn: “They won on the basis that the Supreme Court found that in this case Kostal did not exhaust the collective bargaining arrangements. In particular, there was an ACAS route, a further layer, when agreement hadn't been reached, where they then go off to Acas to see if Acas could help them come to an agreement, but that wasn't sorted out. The employer jumped the gun and offered the bonuses ostensibly so the employees could get the bonus for their Christmas bonus. Nonetheless, despite the positive intention, arguably, from the employer, it clearly had not exhausted the process that the collective bargaining agreement had envisaged and, as a result, it was for that reason the majority of the Supreme Court found that the employees won their case.”
Joe Glavina: “So given this is all about exhausting collective bargaining, it's going to be pretty important that employers are able to prove that. So how do they do that?”
Ed Goodwyn: “Another excellent question. The Supreme Court was, again, quite helpful here because for the first time employers have got certainty that if they can prove the exhaustion of the processes under the collective bargaining, they are then free to approach the employees individually. That clarity hadn't been given to us before so that's why it's a useful for employers. But as you say, the issue is, well, what does exhausting the collective bargaining arrangement look like? Well, the Supreme Court were very clear that it has to be the employer’s genuine belief that the process has been exhausted. So you can quite see how it will be important for employers, when they're getting close to the end, or what they think is the end, to challenge themselves and then to record in correspondence with the trade union, but also in internally, that they genuinely believe that the process set out in the collective bargaining arrangements has now been exhausted. So long as the employer can demonstrate they had that genuine belief, and that genuine belief is upheld on the basis of reasonableness, then the employer makes the makes the issue out.”
Joe Glavina: “Since Kostal there have been a number of commentators suggesting that unions are now likely to pay far greater scrutiny to mechanisms in collective agreements that govern what should happen if negotiations reach an impasse, perhaps pushing for binding arbitration. Do you see that happening?”
Ed Goodwyn: “Well, I can see from both sides because, frankly, employers might well be wanting to do same thing because quite a few collective bargaining agreements that I've seen don't really have a clarity as to when the process has come to an end. So you can quite see why it's the employer’s benefit to have that clarity in the collective bargaining arrangement, as well as for the trade union. Quite where those negotiations themselves are going to end up is interesting to see because they themselves are a negotiation which the employer has to have with the trade union which may or may not reach agreement or an impasse. So you may inadvertently get to that circular argument where the employer is still trying to ascertain where the end of the collective bargaining process is, even when it's trying to amend the collective bargaining agreement itself. But from an employer's perspective, it wants clarity in the agreement of when the last stage is reached. From a trade union’s perspective, they equally may want to add additional layers before they are willing to accept that the end of the collective bargaining position has been reached and I think that will be a good area for discussion and negotiation going forward. It may even trigger its own issues where there's a debate as to when an impasse has been reached where the collective agreements are themselves at this stage unclear on the point.”
Joe Glavina: “So I guess the message is, simply, you need to be very careful about making offers directly to employees over the head of trade unions? Is that the advice?”
Ed Goodwyn: “Absolutely. We are in a much better position now advising employers because we can give much greater clarity of advice. The key issue is the one we've been talking about, has the employer reached the end of the road? Is it arguable that there is another stage which the employer has not yet gone through? Once we've got clarity on that and can demonstrate the genuine belief held by the employer, we're good to go, you can then approach, and that is not in breach of the collective bargaining agreement, it doesn't offend European law, which was also looked at by the Supreme Court. I will also add one other issue that we did talk about previously, a Scottish case in the EAT which looked at the issue as to whether an employer can get round the difficulties of the section 145B point by saying ‘I'm not actually seeking to agree anything and go to the employees individually, rather what I'm actually going to do is just unilaterally impose a contract variation. Now the Supreme Court did not actually deal with that specifically but I think employers will have to be even more cautious about taking that line, and that argument, because the Supreme Court did indicate that in the Kostal case the parties had expressly agreed in the collective agreement that no party could unilaterally impose a change in the contract and the Supreme Court said it would not allow an employer to ride a coach and horses through a collective agreement mechanism it had agreed. So, if an employer is thinking of using that EAT case in Scotland, and seek to impose unilaterally changes, it has to do so very, very cautiously. I think there's more caution in relation to that route than there was even before the case.”
That Scottish case Ed referred to is the EAT’s decision in Scottish Borders Housing Ltd v Caldwell. Back in September last year Ed talked to this programme about that case – that’s ‘Offers bypassing collective bargaining ‘remain risky’ after Caldwell’. That programme is available for viewing now from the Outlaw website.
- Link to HRNews programme: ‘Offers bypassing collective bargaining ‘remain risky’ after Caldwell’