UK labor law update - March 2022

News round-up

A challenging backdrop for collective pay negotiations

Figures from the ONS show a tight labour market with decreasing unemployment, high job-to-job turnover driven by resignations and a growing number of people who have left the workforce and are economically inactive (because of long-term sickness, retirement and other reasons). The number of job vacancies also rose to a new record, with the majority of industry sectors affected.

Meanwhile, pay growth is failing to keep up with rapid rises in inflation, and fears of persistent high inflation are growing. Against this challenging backdrop, collective pay negotiations are expected to be difficult. The ONS labour disputes statistics have not been maintained since 2020 (due to the effects of the pandemic), however, our experience suggests that the threat of industrial action is increasing.

Government acts on trade union obligations and costs

The Trade Union Act 2016 included a new power for the Certification Officer (CO – the statutory body responsible for regulating trade unions and employer associations) to impose financial penalties on trade unions for breaches of their statutory duties, such as a failure to conduct their elections properly. New regulations bring the power into effect from 1 April 2022 with penalties banded into three groups of £5,000, £10,000 and £20,000, according to the severity of the obligation breached. A reduction applies for unions with membership below 100,000 people.  

Enhanced powers to act and to investigate trade union breaches, including enabling the CO to act without having to rely on a complaint from a union member, are also fully commenced from April. In addition, regulations have been introduced requiring trade unions and employer associations to pay a levy to the CO by way of contribution to its costs (the CO will set the levy later this year and exemptions apply for lower-income organisations). Currently, the CO’s costs are met by the taxpayer.

Recent labor case law

Significant Court of Appeal judgment on industrial action: Mercer v AFG Ltd and Others

In Mercer v AFG Ltd and Others, the Court of Appeal has ruled against an Employment Appeal Tribunal’s (EAT) decision that UK strike law was incompatible with human rights law and should be reinterpreted to comply. This is a significant reversal and is particularly relevant where an employer contemplates taking action against those striking, other than deducting pay for work not done during the strike.

In Mercer, a Unison representative was suspended and disciplined by her employer for leaving her shift, to take part in strike action, and for speaking to the media about the strike without prior authorisation.

She complained that her suspension was a section 146 detriment. Section 146 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) protects workers against detriments short of dismissal imposed by their employer for the sole or main purpose of preventing or deterring them from taking part in union activities or penalising them for doing so.

However, the wording of TULRCA limits this protection to activities undertaken by the worker at an ‘appropriate time’, namely, outside working hours or at a time agreed with their employer. Given that most industrial action takes place during working hours (and employer consent is unlikely to have been given), case law had held that section 146 did not confer protection - until the EAT’s decision that such an interpretation breached Article 11 of the European Convention on Human Rights (ECHR).

The Court overturned the EAT’s decision and confirmed that section 146 provides no protection for detriments imposed in response to industrial action. It went on to note that this failure may breach Article 11, in the case of a private sector employer, if the detriment in question relates to official industrial action and strikes “at the core of trade union activity” (such as if employees returning to work were suspended without pay as a disciplinary measure). However, it would be impermissible for the Court to rewrite section 146, or to declare the legislation incompatible with the ECHR, and any such action should be left to Parliament.

Injunction to prevent employer from ‘firing and rehiring’: USDAW & Ors v Tesco Stores Ltd

This case involved an employer seeking to withdraw a benefit by means of dismissal and re-engagement (so-called ‘fire and rehire’). The court had to decide whether the employer was entitled to terminate each trade union member’s contract of employment and offer re-engagement on terms which did not include an entitlement to retained pay, against the background of its earlier assurances that such employees would have a permanent entitlement to retained pay.

The court decided that the retained pay, which had been the subject of collective bargaining negotiations, was incorporated as a term of the contract (for some employees it represented up to 40% of their wages). The employer had variously described it as “protection for life”, “guaranteed for life” and remaining “for as long as you are employed”. Given this permanent nature of the term, the court decided that it was necessary to imply into the contract a term to the effect that the employer could not terminate the contract to remove retained pay in the circumstances and it granted an injunction preventing the employer from going ahead with the dismissal and re-engagement. However, the injunction would not prevent the employer from dismissing the employee for other genuine reasons, such as gross misconduct or a redundancy. The employer is seeking to appeal the decision.

While based on unusual facts, the case illustrates the need to check closely all communications during restructuring. The retained pay was negotiated as a retention incentive during a reorganisation and, as the court noted, could have had a longstop date or it could have been made clear that it subsisted only for as long as the particular contact endured. Taken together with the recent Kostal Supreme Court decision (read our briefing) and the Government’s announcement of a new statutory code (which will detail how employers must hold “fair, transparent and meaningful consultations” on proposed contract changes and may result in an uplift of up to 25% of an employee’s compensation if an employer unreasonably fails to comply), employers need to review their approach to changing terms, redundancies and restructurings and should anticipate their dismissal reasons, and employee consultation process, being scrutinised more closely.

Labor case law appeal: mistakes in collective agreements

The Court of Appeal will  hear the case of Tyne & Wear Passenger Transport Executive t/a Nexus v RMT Union & Unite in July 2022. This case involves arguments over the construction of a collective agreement, with the union members claiming that, based on their understanding of the agreement, they had been underpaid, while the employer asserted that there had been a mistake as to its proper construction. The employer applied to the High Court to, in effect, add additional words to the terms of the agreement. However, the unions disagree that this remedy is available at law. While a technical decision, employers should take note of the appeal outcome as it may provide a potential remedy where conflicting constructions of collective agreements are causing disputes.