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UK labor law quarterly update - October 2022

  • United Kingdom
  • Employment law
  • Labor law and trade union issues


Welcome to our October UK labor law quarterly update. This edition contains the following content:

News round-up

Recent labor case law

Eversheds Sutherland labor law publications, events and training

News round-up

July’s changes to industrial action law: unions launch judicial review proceedings

In July 2022 the Government repealed restrictions which prevented temporary agency workers backfilling employees who take part in industrial action, and it raised the maximum damages that courts can award against a trade union when strike action has been found to be unlawful (from £250,000 to £1 million for large trade unions). Hiring agency workers to replace those on strike may assist some employers with their contingency planning. However, this may not be appropriate for certain skilled roles and is not without industrial relations and reputational risk, including a potential escalation of a dispute.

In response to these changes, the TUC issued a report to the International Labour Organisation (ILO) detailing alleged Government infringements of the right to strike under international treaties, including the changes made in July. The ILO has limited power to intervene and, in the meantime, 13 trade unions and the TUC issued judicial review proceedings in the High Court. They argue that the legislative changes permitting the supply of agency workers during strikes are procedurally flawed (including a failure to consult as required by the regulations) and breach trade union rights under the European Convention on Human Rights. The Government is expected to respond to the legal action in October.

The Government announces further significant changes to labor law

Draft legislation aimed at introducing minimum service levels (“MSLs”) in parts of the transport network during strikes has been published. This was a 2019 manifesto commitment. It is unlikely that any change will happen until well into next year, reflecting the requirement for further enabling regulations and MSL agreements. 

More broadly, unionised employers will be interested in a second announcement promising legislation to “require unions to put pay offers to a member vote, to ensure strikes can only be called once negotiations have genuinely broken down”. A BEIS statement added that “this requires defining the calling of a strike as a breakdown in negotiations, allowing employers to engage employees directly.” Given that the announcement was made under the Truss Government, we await confirmation as to whether it will be taken forward given recent changes. In the meantime, we provide some commentary below.

Mandatory member votes

The announcements suggest that trade unions will be required by new legislation to ballot their members on any pay offer and that such a ballot must take place before any strike ballot on the pay offer. It is currently unclear whether such a pay ballot is only required if a union wishes to call a strike, or for all pay offers. It appears that the Government is concerned to ensure that trade union pay negotiators are representing the majority of their members’ wishes, in particular, when deciding to reject employer pay offers and to call a strike.

Direct pay offers to employees and Kostal

While we await further details and draft legislation, it appears that this proposal may address aspects of the recent Supreme Court decision in Kostal Ltd v Dunkley (for background on Kostal, read our briefing). The Kostal case considered when employers can lawfully resolve impasses in collective bargaining, such as during pay disputes, by making offers directly to their workers (under s145B TULRCA). The Court decided that a direct offer to workers, in relation to a matter which falls within the scope of a collective bargaining agreement, cannot be made lawfully unless the employer has first followed, and exhausted, the agreed collective bargaining procedure.

In practice, identifying the point at which collective bargaining is exhausted, to know when a direct employee offer may lawfully be made, can be challenging. The risks of getting this wrong include a £4,554 award to each union member involved. Where a number of employees are affected, this figure can quickly escalate.

The Government’s latest announcement suggests that legislation will clarify that the calling of a strike is, in Kostal terms, a point at which collective bargaining is exhausted and the employer may then engage directly with its employees.

Initial reflections

It is difficult to judge the proposals without seeing the draft legislation. It is also unclear how this would apply to pay bargaining involving multiple employers, national agreements and other more complex arrangements.

However, if enacted, future pay negotiations might include mandatory balloting of members (not necessarily all employees in the bargaining unit – just the members) and, only if the majority reject the pay offer, may a trade union ballot for a strike. This might cause unions to review their approach to the timing of strike ballots.

A strike ballot (or at a point defined in legislation) would, it would appear, permit the employer to make a pay offer directly to all affected employees, members and non-members, or to impose the pay award, without risking a s145B penal award (although other legal, reputational and ER risks may arise and careful consideration of all such risks will need to be undertaken). The tactics around whether to make such an offer would be informed by the outcome of the members’ vote.

A new EU Bill may roll-back some labor law, including collective consultation

In September, the new Government published the Retained EU Law (Revocation and Reform) Bill which makes provision for significant changes to the current status and operation of certain retained EU law, including some being automatically being revoked at the end of 2023 (which can be extended to June 2026) and a power to preserve or replace certain provisions.

Some domestic labor law is derived from EU law and may be affected by the Bill. For example, collective information and consultation provisions during TUPE transfers as well as regulations providing for staff forums upon employee request.

However, the practical impact of the Bill will depend on a number of factors, including how the EU law initially entered our law (by regulation, Act, a case law decision etc) and, in some circumstances, whether the Government is minded to amend or retain it. For now, employers should be aware of the potential for change next year under this legislation.

The TUC calls for a £15 minimum wage

The TUC is supporting a £15 an hour minimum wage in the coming years, calling on the Government to set a new minimum wage target at 75 per cent of median hourly pay and to extend the statutory minimum to all workers, regardless of age, by removing the current lower rates for young workers. Acknowledging the need to avoid sudden hikes in the rate, the TUC wants the LPC to be tasked with charting the exact path to £15.

Recent labor case law

USDAW & Ors v Tesco Stores Ltd: injunction against an employer overturned

In a significant decision, the Court of Appeal overturned an injunction imposed by the High Court which had permanently prevented an employer proceeding with ‘fire and rehire’ proposals to remove a pay enhancement. While the case involved unusual facts and contractual terms, the Court’s decision appears to make it extremely difficult for workers and unions to obtain injunctions to prevent ‘fire and rehire’ dismissals. For further information, read our briefing.

Tyne & Wear Passenger Transport Executive t/a Nexus v RMT Union & Unite: mistakes in collective agreements

The Court of Appeal has given its judgment in this case. It 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. The employer was unsuccessful with the Court of Appeal deciding that rectification in an action involving the trade union is not available in respect of a collective agreement which is not legally binding (most are not).

Pending appeal updates: Mercer, Cox and Crane cases

In Mercer v AFG Ltd and Others, the Court of Appeal overturned an Employment Appeal Tribunal’s decision that UK strike law was incompatible with human rights law and confirmed that it provides no protection for detriments imposed in response to industrial action. This is particularly relevant where an employer contemplates taking action against those striking, other than deducting pay for work not done during the strike. Permission to appeal to the Supreme Court has been sought.
In Cox and Others v Sec. of State for the Home Department, the claimants were employed by the Home Office and were members of the PCS union. PCS subscriptions were collected by means of 'check-off' arrangements whereby deductions were made directly from their salaries through the payroll system and paid to PCS. The Home Office decided to remove check-off. Based on an analysis of the contracts, handbooks, collective agreements and other relevant employment documentation, the High Court decided that the individual claimants had a contractual entitlement to check-off which had been breached. In another case (Crane), the Court found that claimants working for the Department of the Environment also had a contractual entitlement to check-off. Appeals in both cases will be heard before the end of March 2023.