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Eversheds Sutherlands UK Labour Law E-briefing - Court of Appeal upholds small single collective bargaining unit

  • United Kingdom
  • Labor law and trade union issues


Court of Appeal upholds single collective bargaining unit for only 1.2% of employees in an otherwise non-unionised employer

In a significant development for employers, particularly those without recognised trade unions and those with dispersed business units such as shops, distribution centres and other regional locations, the Court of Appeal has upheld a Central Arbitration Committee (CAC) decision on the ‘appropriate bargaining unit’ in a statutory recognition application (R on the application of Lidl UK v CAC & GMB).
Significantly, the Court confirmed that the CAC acted correctly when it rejected Lidl’s concerns about the adverse impact of recognition for a small number of employees, based at a single site, on its low-cost, standardised “One Lidl” business model. While legal precedent existed for the approach taken by the CAC, this decision makes it potentially harder for employers to argue against small, single site bargaining units. It underlines the importance of thorough preparation when appearing before the CAC, as well as the importance of strong and positive employee engagement at a local level.
Lidl’s UK operation is divided into nine geographical areas, each with its own regional distribution centre (RDC) and management team to deal with local problems. Decisions on pay, hours and holidays are taken by an international group company in Germany and employees are categorised across the global business into eight principal categories. There are no existing UK national or local bargaining arrangements in place and no staff representative group.
GMB submitted a statutory recognition application for a bargaining unit (‘BU’) comprising warehouse operatives at Lidl’s Bridgend RDC. As Lidl and the GMB failed to agree the BU the CAC had to determine whether the BU was appropriate. In making such a determination, the CAC must take into account the need for the unit to be compatible with effective management and the following matters, so far as they do not conflict with that need:

  1. the views of the employer and the union
  2. existing national and local bargaining arrangements
  3. the desirability of avoiding small fragmented bargaining units within an undertaking
  4. the characteristics of workers falling within the bargaining unit under consideration and of any other employees of the employer whom the CAC considers relevant
  5. the location of the workers.

Case law has established that the CAC cannot reject the union's proposed bargaining unit because it feels that a different unit would be more appropriate.
Lidl objections were, first, that the BU was artificial and negligible in size (comprising 1.2% of employees) compared with the employer's business as a whole and, second, that it was unworkable to require the employer to consult and negotiate over pay, hours of work and holidays with such a small sub-section when pay and holidays were set by the international parent company, not by the UK employer. Lidl’s objections emphasised the importance of the standardised ‘One Lidl’ culture - one organisation with ‘single status’ terms and conditions. Warehouse operatives are classed as ‘category 6’ staff, together with 81% of the workforce, sharing essentially the same terms and conditions to keep costs low and which, according to Lidl, would be destroyed by a BU comprising only 1.5% of category 6 employees.
These objections were rejected by the CAC. It identified exceptions to the standardisation principle, including enhanced regional rates and allowances at some of the warehouses, as evidence that Lidl was able to manage differences in its structures and payroll systems. Also, it noted that warehouse operatives were treated as a distinct group, with a separate contract, were easily identifiable (and, for this BU, were based at a single location) and did not, in practice, move with any regularity between different parts of the business in Lidl. As such, a BU comprised solely of warehouse operatives at the Bridgend RDC was, in its view, consistent with effective management. Finally, in taking into account the desirability of avoiding small fragmented BU’s within Lidl, the CAC noted that this would be the sole BU and there was no evidence of demand elsewhere.
Court of Appeal’s decision

The Court stated at the outset that it should be very cautious in entertaining legal challenges to CAC decisions (reflecting Parliament’s intention to ‘allow full range to the expert judgment of the CAC’). The appeal focused on the interpretation of ‘avoiding small fragmented’ BU’s, as set out in the list of factors that the law requires the CAC to take into account (see bullet point 3 above). The Court stated that this is concerned with fragmentation of collective bargaining, including between unions and between BU’s, and not Lidl’s fragmentation concerns about ‘a small island of union recognition in a sea of non-recognition’ (which, instead, would be considered under the general test of compatibility with effective management and appropriateness).

Unions will be encouraged by this decision and are likely to be emboldened when seeking statutory recognition for small discrete units, such as shops and DC’s. This judgment confirms that a trade union is in a favourable position when determining the BU. Providing the BU is compatible with, or can co-exist with, effective management then that will be enough for the CAC to rule in their favour even if that BU is not the most compatible or desirable unit for the employer.
An employer seeking to challenge such a CAC decision faces a steep hill to climb. The Court confirmed it is reluctant to interfere with the decision of a specialist labour body like the CAC, reflecting the broad criterion of ‘appropriateness’, rather than hard-edged criteria, entrusted to the CAC to decide.
In particular, where employers are relying on a standardised, ‘one-company’ approach to argue against the proposed BU, the CAC will take regional and local exceptions into account, such as local pay or holiday arrangements, to decide whether standardisation genuinely exists. Only two exceptions led the CAC to dismiss the ‘one-company’ argument in this case. In addition, the Court gave useful clarification on the interpretation of the ‘desirability of avoiding small fragmented’ bargaining units which should be taken on board by employers preparing to give evidence before the CAC.
The importance of strong and positive employee engagement at a local level, such that employees do not feel the need for union representation, cannot be over-stated. Companies should continually reassess their preferred model for engaging, and informing and consulting, with employees and ensure that it is addressing the needs and concerns of employees.


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