The fall and rise of union power?

01 March 2017

If you've opened a newspaper or been on social media in the last few months you'd be forgiven for thinking that we are in the midst of a wave of industrial action not seen since the "bad old days" of the 70s.

However, despite the high profile disruption caused by the Southern Rail and Tube strikes (among others), the influence on UK business once enjoyed by trade unions has been in serial decline for decades. Figures from the Office for National Statistics (ONS) show that while in 1979 more than 29 million working days were lost to strikes, fast forward to 2016 and the figure is reduced by over 98% to only 322,000. This pattern of diminished trade union influence is reflected in declining trade union membership, down from 13.2 million in 1979 to less than half, 6.2 million, by 2015.

This fall in trade union membership has affected the automotive industry, no stranger to industrial action. According to the ONS, more than half of employees in the car manufacturing industry were members of a trade union in 1995, but this fell to just below 30% in 2015.

But a number of recent cases show that unions are still making their presence felt and are prepared to resort to legal challenges where they feel their collective bargaining rights are being undermined.

When is a Christmas bonus not *really* a Christmas bonus?

Dunkley & Others v Kostal UK Ltd is an employment tribunal decision only, so is not binding on other tribunals. However it is cautionary guidance for employers seeking to agree new terms and conditions directly with employees where a collective bargaining agreement is already in place.

Under section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 ("TULRCA") employers are prohibited from making offers to employees with the sole or main purpose of undermining collective bargaining by the union (the prohibited result). If a complaint is upheld for breach of s. 145B, the award is £3,830 per member (rising to £3,907 from 6 April 2017) receiving the offer and if anyone is dismissed for not accepting it, their dismissal is automatically unfair. Given these situations generally arise in collective situations involving a group of employees, the sums involved can quickly add up.

Mr Dunkley and colleagues were shop floor workers producing components for the automotive industry. In late 2015 their union, Unite, only recently recognised by Kostal, wrote to the company to start pay negotiations. Following a series of meetings, Kostal proposed a 2% increase in basic pay payable from the beginning of January 2016, a bonus of 2% of pay to be paid as a lump sum in December 2015, and for any employee earning less than £20,000 a further 2% increase in salary from April 2016. In return for this offer Kostal wanted to make a number of changes to employees' terms and conditions, including reducing the Sunday overtime rate from double time to time and a half. Kostal told the union that if the deal was rejected and the Christmas bonus wasn't paid in December it would be lost.

The union took the issue to its members on a free ballot, which saw 78% of those voting reject the offer.

Disappointed by this rejection Kostal wrote to its employees in December, including its 57 trade union members, making the same offer to each individually and noting that if they did not accept by 18 December 2015, they would get no Christmas bonus and no pay increase that year ("the First Offer").

Later in December Kostal issued a general notice, saying 77% of employees had accepted the offer, among them trade union representatives and members, and reminding staff that they would not receive their Christmas bonus if they hadn't accepted by 18 December.

On 29 January 2016 the company wrote again to those employees who had not accepted the pay offer, making a similar offer to the First Offer but without the Christmas bonus. Instead the pay offer was to be backdated to January 2016 subject to acceptance of the changes to the employees' terms and conditions ("the Second Offer"). The letter cautioned that in the event that no agreement was reached by 4 February, the employee could be served notice to terminate employment. There was no mention of subsequent re-engagement as would be normal in a dismissal and re-engagement process to bring in changes to terms and conditions, although the tribunal found that this was intended.

A mandate "blown away"

The tribunal had to decide whether either the First or Second Offers (or both) constituted unlawful inducements under TULRCA. Kostal argued that there could be no breach of TULRCA as it did not intend to cease collective bargaining on a permanent basis. Its purpose in making the First Offer had simply been to ensure that staff received their Christmas bonus. No such reason was given for the Second Offer.

The union argued that its mandate had been "blown away" by the actions of the company.

The tribunal agreed with the union, finding both offers had the prohibited result if accepted of undermining collective bargaining. The fact that a later pay agreement was collectively bargained did not mean that the company could drop in and out of the collective process as and when suited its purpose.

The tribunal rejected the company's contention that the First Offer was made to ensure employees would receive their Christmas bonus, finding the bonus to be a bargaining tool which could in fact have been paid in December or January - there was no December deadline. The tribunal held that the Company's true intentions could be gleaned from its publication of the percentage of employees who had accepted the offer "including trade union representatives and members". The company had taken a conscious decision to bypass negotiations and contact with the union in favour of a direct and conditional offer to employees who were members of that union.

An improbable impasse

At first glance the decision in Dunkley would appear at odds with the decision in Wyer v Pembrokeshire County Council, an earlier employment tribunal decision. In Wyer the tribunal held that where an impasse with a union had been reached it was possible to seek agreement directly from the employees without breaching s.145 TULRCA. However, unlike in Dunkley the sole or main purpose of the Council in making an offer was not to undermine collective bargaining but to use the established dismissal and re-engagement route to implement a new grading structure aimed at minimising equal pay risks. The direct approach to staff was made only after years of negotiations with the union had reached an impasse. In Dunkley the negotiations were relatively short lived and so could not be truly said to have reached an impasse.

As a result an employer seeking agreement directly with employees will need to establish that its "main purpose" is a credible business reason and that it has genuinely reached an impasse after collective consultation with the relevant union.

A contractual flight of fancy

In British Airline Pilots Association v Jet2.Com Limited, the Court of Appeal had to decide on the scope of those matters subject to collective bargaining under TURLCA as a result of compulsory union recognition.

BALPA secured recognition in respect of flight deck pilots by Jet2.Com follow an application for compulsory recognition to the Central Arbitration Committee ("CAC"). Under the statutory regime BALPA was granted negotiating rights in respect of "pay, hours and holidays" and as they could not agree the method of collective bargaining with the airline, the CAC prescribed the method to be used, namely the Specified Method. This meant the airline could not vary the contractual terms affecting the pay, hours or holiday of workers in the bargaining unit unless it had first discussed those issues with BALPA.

The question for the Court of Appeal was the extent to which pilots' rostering arrangements fell within "pay, hours and holidays".

The airline argued they did not as rostering arrangements did not relate to pay, hours or holidays. It argued that negotiations with BALPA should be limited to those proposals which, if accepted, would confer specific contractual rights on individuals. Rostering arrangements were not "apt for incorporation" into their contracts of employment as the needs of the business meant that they could not be set in stone.

BALPA argued that it was irrelevant whether the matters that BALPA wished to negotiate on were apt for incorporation - this was not a limitation on the scope of collective bargaining following compulsory recognition. The Court of Appeal agreed with BALPA. There is nothing in the phrase "negotiations related to pay, hours and holidays" which limited the effect of the legislation to proposals that would give rise to individual contractual rights. Procedures, processes and managerial discretion could all impact the obligations and rights of workers - it was not solely a matter of contract.

The Court of Appeal concluded that a range of the airline's rostering proposals fell within matters "related to pay, hours and holidays" including the frequency with which rosters were published and the form they took, the minimum days off that a pilot should have, standby arrangements, arrangements for night duties and rest breaks, and procedures for booking leave. Those matters were therefore subject to negotiation, albeit there is no obligation for employers to agree to particular proposals put forward.

Not so sweetheart union?

The final recent case is a Court of Appeal decision which went against the union bringing the claim. But this could be a short-lived victory for the employer.

The Pharmacists' Defence Association Union (PDAU) was planning to seek compulsory recognition from Boots. However before the PDAU made its application to the CAC, Boots entered into a voluntary recognition agreement with the Boots Pharmacists Association. This was a non-independent union, and although the recognition agreed by Boots was extremely limited, the arrangement blocked the PDAU's application to the CAC for compulsory recognition, on the basis there was a pre-existing recognition agreement in place.

The PDAU challenged the legality of this arrangement, arguing that the blocking procedure was a breach of Article 11 of the European Convention on Human Rights, namely the right to form and join trade unions. The CA found there was no breach because TULRCA also contains a statutory scheme to procure de-recognition, which the PDAU could have used, albeit they would have to have done so via an affected worker, as there is no free-standing right for a union to implement that scheme. If the PDAU could not find a worker willing to use that statutory scheme, it would indicate that the PDAU had no more support than the recognised union, in any event.

Turning up the heat on industrial action?

These cases show an increased willingness by unions to bring legal challenges to enforce their collective bargaining rights, and in the first two cases, a willingness of the courts to uphold those rights. In what may end up being an own goal by the government, this increased union activity may about to be given a boost by six new regulations which bring into force the majority of the Trade Union Act 2016 on March 1 2017. Key provisions of the Act include a requirement for a minimum 50% turnout of those entitled to vote in ballots and a six month time limit for industrial action supported by a ballot. There are also more stringent requirements around picketing and employers will get 14 days rather than seven days' notice of industrial action, so more time to try to resolve disputes and put in place contingency plans.

While designed to constrain industrial action, the effect may be the opposite. One unintended consequence of the increased need for turnout could be that unions will feel they have to turn up the heat on disputes in order to garner the necessary support. Disputes which could have been resolved amicably may be escalated as a result, leading to more entrenched positions and disruption than might otherwise be the case. Add to the mix reports that inflation will cause a fall in real wages in 2017, the uncertainty of Brexit, the rise in the gig economy, and a political backlash against the "elite", and we may be seeing the first stirrings of a union revival.

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