Autumn 2021 Employment Law update: Part 4 - Focus on trade unions, redundancy terms, status & NMW

14 minute read
18 October 2021


Here, Gowling WLG's Employment, Labour & Equalities team brings you a quick round-up of the recent need-to-know employment law developments. In Part 1, we looked at COVID-19 related developments, in Part 2, family-friendly and equalities issues and in Part 3, issues relating to unfair dismissal claims. In our final Part 4, we consider the latest developments concerning issues arising in relation to trade unions, enhanced redundancy terms, employment status and the National Minimum Wage ("NMW"):

  1. Protection from detriment for taking part in 'trade union activities'
  2. Trade union unlawful inducement claims - the latest
  3. Factors to consider for enhanced redundancy terms to be implied by custom and practice
  4. Employment status: the mutuality of obligation factor
  5. Compulsory training before a job starts may attract NMW

1. Protection from detriment for taking part in 'trade union activities'

Section 146 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) provides that employers are prohibited from subjecting an employee to a detriment for the sole or main purpose of deterring them from taking part in the activities of an independent trade union at an appropriate time or penalising them for doing so. For these purposes, an "appropriate time" is specified as being outside of the employee's working hours, or at a time within them with the employer's consent (it would be very unusual for an employer to consent to industrial action). The upshot is that, until now, employees have not enjoyed protection from detriment short of dismissal for taking part in industrial action - for instance, through their employer withdrawing discretionary benefits. In contrast, employees have long had separate protection from being dismissed for taking part in protected industrial action (under provisions set out in sections 237 to 238A of TULRCA).

Departing from previous case law, the Employment Appeal Tribunal ("EAT") in Mercer v Alternative Future Group Ltd has held that workers are protected from detriment short of dismissal for taking steps to prepare for, and taking part in, industrial action. In this case, there was a trade dispute between support staff and their employer about payments for sleep in shifts. Strikes were called and Mrs Mercer, a member of the union, was involved in planning, organising and giving interviews in relation to the strikes.

Mrs Mercer was suspended, she claimed, because of her involvement in organising the strikes. The tribunal dismissed her claim having decided that case law from the late 1970s meant that 'trade union activities' did not include preparing for or taking part in strike action. While the tribunal recognised that the absence of any protection from detriment short of dismissal amounted to a breach of Mrs Mercer's human rights under Article 11 of the European Convention on Human Rights, section 146 TULRCA could not be read in a way that would be compatible. As a result, although it is automatically unfair to dismiss employees for taking part in protected industrial action under section 238A, TULRCA (as previously interpreted) contained no prohibition on subjecting employees to a detriment short of dismissal for having done so.

Overturning the tribunal, the EAT has held that protection from detriment for participating in industrial action should be read into section 146 TULRCA. The absence of any protection from detriment short of dismissal amounted to a breach of her human rights and it was possible to read section 146 in a way that was compatible. In particular, the EAT considered that the extensive powers given to courts under the Human Rights Act 1998 meant that it could read extra words into what is an "appropriate time" for the purposes of section 146, so that it could include "a time within working hours when [a worker] is taking part in industrial action".

This decision has highly significant implications for employers facing industrial action. It has long been common practice for employers to withdraw discretionary benefits from employees who take part in industrial action. Employers adopting practices of this kind are now at risk of being held to have acted unlawfully. Instead, they may only safely deduct from an employee's pay an amount that is commensurate to the period for which they were taking industrial action.

Given the implications of this case, unsurprisingly, the Court of Appeal will hear a further appeal on 20 January 2022.

2. Trade union unlawful inducement claims - the latest

Under section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992, employers are prohibited from making offers to employees with the sole or main purpose of undermining collective bargaining by the union (the prohibited result).

But just how wide is the scope of section 145B? When can lawful variation tip into being an unlawful inducement? Can, as the unions argue, section 145B include the situation of an employer who is otherwise committed to collective bargaining, but for economic/business reasons wishes to make adjustments to particular contractual terms derived from the collective agreement? In particular, if acceptance of a direct offer would mean that at least one term of employment will be determined by direct individual, rather than collective agreement, is that sufficient to amount to an unlawful inducement, even if only for a limited time and/or other terms continue to be determined collectively?

In 2019, the Court of Appeal in Kostal UK Ltd v Mr D Dunkley and Others set out the scope of section 145B. Finding against the union, the Court held that where workers' terms of employment are determined by collective agreement, s145B will only come into play if the employer's purpose is to achieve the result that one or more of the workers' terms of employment will no longer be determined by collective agreement on a permanent basis. It is not sufficient if the employer's purpose is merely to ensure that the term or terms will, on this one occasion, not be determined collectively. The Supreme Court heard the further appeal in this case in May this year with judgment expected to be handed down later this year.

In the meantime, the EAT sitting in Scotland has held that the three-month time limit for presenting an unlawful inducement claim starts to run from the date the employer makes the offer of the new terms and conditions, not on any later date when the employer indicates its intention to impose the new terms on employees who have refused the offer (Scottish Borders Housing Association Ltd v Caldwell and ors). Note this case simply concerned a preliminary issue on whether a potential claim was brought in time. If the claim had been made in time (the EAT held it had not), it may have still failed (depending on the particular facts) following the Court of Appeal judgment in Kostal.

3. Factors to consider for enhanced redundancy terms to be implied by custom and practice

In the recent case of Thomas and Others v FW Farnsworth Ltd (ta Pizza Factory), the EAT provides a useful reminder of the factors to be considered when considering whether an entitlement to enhanced redundancy benefits has been implied over time via custom and practice.

Where employees are seeking to establish entitlement to an enhanced redundancy payment based on custom and practice, factors to be considered include:

  1. On how many occasions, and over how long a period, the benefits in question have been paid. The longer the payments have been made and the greater the frequency, the more employees are likely to understand them as payments made as of right.
  2. Whether the benefits are always the same. An employer may invariably make enhanced redundancy payments but if the amounts or the terms of payment are varied, that is inconsistent with an acknowledgment of legal obligation.
  3. The extent to which the enhanced benefits are publicised generally. If published to the workforce generally, that tends to convey they are paid as a matter of obligation.
  4. How the terms are described. Payments consistently described as ex gratia are likely to be just that.
  5. What is said expressly in the contract. No implied term should conflict with the express terms.

In this case, the employees failed to establish a contractual right to enhanced redundancy payments. While enhanced redundancy payments had been made on at least two previous occasions, on at least one occasion enhanced payments were not made. Also, the calculation of the enhanced payments which were made on the two occasions, while similar, were not identical and were described as ex gratia.

4. Employment status: The mutuality of obligation factor

There are three main categories of employment status for employment law purposes: employees, workers, and the self-employed. The rights and obligations in relation to each category of individual flow from their employment status, with 'employees' afforded the greatest level of protection at one end and the 'self-employed' at the other. In the middle are those classed as 'workers' who have the benefit of some important rights, including those in relation to NMW, working time/holiday pay, discrimination and whistleblowing.

When considering whether an individual is an employee 'mutuality of obligation' - the employer is obliged to provide work and the employee is obliged to undertake the work - is an important factor to establish. But what role does this factor play in establishing worker status?

In Nursing and Midwifery Council v Somerville, the EAT points out that rather confusingly, the phrase 'mutuality of obligation' has been used in the case law in two different senses:

  • Sense 1: simply denotes the exchange of promises or consideration from each party of a kind necessary to create any form of bilateral contract - best described as 'mutuality of obligation'.
  • Sense 2: refers to an obligation on an employee to accept and perform some minimum amount of work for the employer, who is obliged to offer some work and/or pay for the same - better described as 'irreducible minimum of obligation'.

The EAT has clarified that the absence of any obligation on an individual to accept and perform some minimum amount of work in sense 2 (required to establish 'employee' status) was not fatal to establishing 'worker' status. Once a contract is agreed between an employer and an individual to personally perform work on a particular occasion, 'mutuality of obligation' in sense 1 may be established for the duration of that contract.

While employment status for employment law purposes has three options, employment status for tax purposes is a binary question: either employed or a self-employed. In HMRC v Professional Game Match Officials Ltd, the Court of Appeal too has considered the importance of 'mutuality of obligation'. In line with the Somerville judgment, the Court of Appeal agreed that there was no mutuality of obligation in the overarching contract because PGMOL was not obliged to offer, and, if offered, the referee was not obliged to accept work (sense 2 above). However, it agreed with HMRC that mutuality of obligation was present in the individual (match-day) contracts (sense 1 above). Accordingly, the referees were 'employed' rather than self-employed for tax purposes.

5. Compulsory training before a job starts may attract NMW

Where a worker is required by an employer to undertake compulsory pre-employment induction training, does that training time attract the national minimum wage? According to the EAT, probably.

In Opalkova v Acquire Care Ltd, Ms Opalkova was made an offer of employment as a carer. The employer would not allow her to start working as a carer until she had completed a compulsory week of unpaid induction training that was provided by the employer. At the end of the compulsory training, Ms Opalkova was given and signed a contract of employment. She later brought a claim for a week's pay in relation to the training week.

The EAT held that while not yet an employee, individuals required to attend induction training will likely have worker status with the employer during the period of that training. As in this case, it will not matter that the individual had not yet started the main job (indeed she was not allowed to do so until the training was complete). Also, it did not matter that her main employment contract was not produced and signed until after the training; neither did it matter that that contract stipulated in it that the main employment started on the day after the training was completed.

The EAT makes clear here that a purposive interpretation of the NMW regulations is required and it is likely that the time spent completing employer-required 'pre-employment' training will attract the national minimum wage.

If you have any questions about this article, or about employment law in general, please contact Connie Cliff.

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