Unlawful offers to bypass collective bargaining – narrow scope confirmed

Background

Under section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), it is unlawful for an employer to make an offer to employees who are members of a recognised trade union that, if accepted, would mean their terms of employment would not (or no longer) be determined by collective bargaining. This outcome, called the “prohibited result”, must be the main purpose of the employer’s offer for the section to be contravened. An employer making such unlawful offers faces a penalty of £4,341 per offer.

In this case, Scottish Borders Housing Association (SBHA) had negotiated with its recognised trade unions for two years to amend its pay scheme but had failed to reach agreement with them on its proposals. On 18 September 2019, SBHA wrote directly to its employees offering them the opportunity to agree to its proposed amended terms of employment. Out of the 104 employees, 96 accepted this offer.

On 13 December 2019, SBHA wrote to those employees who had not accepted its offer “to confirm that the variation will be introduced with effect from 16 January 2020”. The letter made it clear that, unilaterally, their “terms and conditions have been amended”.

Employees have three months from the date an offer is made, or the last offer if part of a series of offers, to bring a complaint under section 145B of TULRCA. The claimants in this case submitted their Employment Tribunal (ET) applications on 28 January 2020. As a preliminary issue, the ET had to determine whether the time limit expired three months after 18 September 2019, in which case the claims would be out of time, or three months after 13 December 2019 in which case they would be in time.

The ET accepted the trade union members’ contention that the 13 December 2019 letter was an “offer” on the basis that it could be accepted or rejected, and employment contracts could not be varied without mutual agreement. As a result, it was part of a series of offers, the last one having been made on 13 December 2019. The ET concluded that the claims had been brought in time and should be allowed to proceed. SBHA appealed to the Employment Appeal Tribunal (EAT).

Employment Appeal Tribunal’s decision

Overturning the ET’s decision, the EAT ruled that the 13 December 2019 letter was not an “offer”. It merely set out the changes that SBHA had decided to make unilaterally, irrespective of the absence of the employees’ consent. SBHA had not sought such consent in the letter.

The EAT went on to say that the 13 December 2019 letter nonetheless amounted to an anticipatory breach of contract by SBHA. This gave rise to a range of options for how the employees could respond, such as continuing to work only “under protest” and suing for breach of contract. As the letter was not an offer, however, the claims under section 145B were out of time and could not proceed.

Implications for employers

This case is welcome news for employers considering whether unilaterally to impose new terms on employees when trade union negotiations are at an impasse. Some employers have previously opted against such a course of action, given the automatic penalty of £4,341 per offer if it was held to amount to making unlawful offers to members of its recognised trade union. The financial risk of several claims under section 145B would in most cases far outweigh any potential benefit of implementing the proposed contractual changes. But following the EAT’s ruling, more employers may be willing to impose new terms – particularly in cases (like this one) where employees would struggle to show any loss arising from the change.

From a labour relations perspective, where trade union negotiations reach an impasse, it may be preferable for employers to seek their employees’ consent rather than unilaterally impose the change. Notably, all but eight of SBHA’s 104 employees accepted its offer and did not bring any legal proceedings.

In fact, however, this approach may turn out to be riskier from a legal perspective than simply imposing a change without employees’ consent. This is because the Supreme Court (SC) is currently considering whether to overturn the Court of Appeal (CA) decision in Kostal UK Ltd v Dunkley. That decision was favourable for employers by suggesting there is no breach of section 145B if an offer to amend terms of employment is made that does not result in the terms being determined without collective bargaining on a permanent basis. The SC heard this case on 18 May 2021 and, with the judgment expected soon, employers should carefully consider their position if confronted by this type of issue. For now, the CA’s decision reflects the current legal position.

Finally, although this was a case heard by the EAT sitting in Scotland, it is binding in England and Wales as well. The EAT is a single court and this judgment concerned a provision of TULRCA that applies across Great Britain. It is therefore relevant to all employers across Great Britain despite having been heard in Scotland.

Scottish Borders Housing Association Ltd v Caldwell – judgment available here