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UK labor law update - December 2021

  • United Kingdom
  • Employment law

29-11-2021

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

News round-up

  • The labor exchange podcast: in our latest quarterly podcast we consider how employers should respond to Kostal Ltd v Dunkley, including the need to review collective bargaining agreements

Recent labor case law

Eversheds Sutherland labor law publications, events and training

News round-up

Fire and rehire under further scrutiny

So-called “fire and rehire” (involving dismissal and re-engagement on new terms) has come under further adverse scrutiny this autumn. A Private Member’s Bill, seeking to discourage such practices, attracted attention in the media and Acas published guidance for employers, at the request of the Government. The Government blocked the Bill, preferring to focus on the new guidance.

The guidance states that employers should thoroughly explore all other options before deciding to dismiss and re-engage employees, when contract changes cannot be agreed, and it should only be considered as a last resort given that it is an “extreme step”. It highlights the legal and other risks, including the risk of reputational damage, strikes, retention challenges and of immediate and long-lasting damage to trust and working relations. Employers in Great Britain contemplating dismissal and re-engagement should carefully evaluate the risks before taking any action, taking into account the Acas guidance, case law principles and the need for effective, genuine and constructive consultation and evidence of sound good business reasons. In addition, employers in Northern Ireland should refer to the LRA guidance and code of practice in relation to dismissal, and also remember the requirement to follow the statutory dismissal procedures when contemplating dismissal (if fewer than 20 employees) so as to avoid potential automatic unfair dismissal claims.

Labour’s new industrial relations policy announcements

The Labour Party published an Employment Rights Green Paper which included the following industrial relations policy proposals to:

  • establish Fair Pay Agreements (a form of sectoral collective bargaining agreements), setting binding minimum employment terms including pay, pensions, working time, holidays and more
  • strengthen collective information and consultation requirements
  • end fire and rehire
  • repeal “anti-trade union” legislation including the Trade Union Act 2016, simplify the recognition process, allow electronic ballots and establish a reasonable right of entry to organise in workplaces

The Paper envisages building on these commitments in the period leading up to the next General Election.

Significant case appeal involving industrial action principles to be heard in the New Year

In Mercer v AFG Ltd and Others, the Employment Appeal Tribunal (EAT) held that UK strike law is incompatible with human rights law and it must be reinterpreted to comply. This was a significant change in the law and is particularly relevant where an employer contemplates taking action against those striking, other than deducting pay for work not done during the strike (for further information, read our briefing). The appeal is scheduled to be heard before the Court of Appeal on 26 or 27 January 2022, meaning that a decision should be available next year. Another case involving some of the legal arguments raised in Mercer (Ryanair, see below) has been decided recently by the EAT.

Recent labor case law

Making direct offers to employees covered by collective bargaining: Kostal Ltd v Dunkley

The Supreme Court allowed the appeal in Kostal Ltd v Dunkley, a case concerning legislation prohibiting inducements which undermine collective bargaining rights. The specific issue in the case is of importance to industrial relations – when can an employer, which seeks to make changes to pay or other collectively bargained issues but has reached an impasse in negotiations with its unions, lawfully step outside that collective bargaining process and make a direct offer to its workers?

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. Read our briefing and listen to our Kostal podcast.

Strikes, blacklisting and detriments: Ryanair DAC v Morais and ors

This case involves Ryanair’s decision to withdraw travel benefits from pilots after they participated in industrial action. The pilots claimed that this amounted to an unlawful detriment, relying on human rights arguments (Article 11 of the European Convention on Human Rights) to support their claim under domestic legislation. They also argued that compiling the list, to facilitate the withdrawal of the benefits, amounted to a prohibited blacklist under the Blacklisting Regulations.

In a preliminary hearing, a tribunal decided in their favour. The EAT dismissed the employer’s appeal and allowed a cross-appeal from the pilots. The decision goes further than Mercer (above) in extending detriment protections to those taking industrial action, given the successful blacklisting claims and the rejection of arguments that employee protection was limited to cases of protected industrial action (in broad terms, protected action provides certain legal immunities for the union and dismissal protections for striking employees).

Given that the case law on detriment and blacklisting in the context of industrial action is rapidly evolving, and that appeals are underway in both Mercer and in this case, employers responding to threatened or actual strikes should take advice before taking action in relation to participating employees.

Special circumstances and collective consultation: Carillion Services Ltd (In compulsory liquidation) and others v Benson and others

Employers are required to collectively consult when proposing to make 20 or more employees redundant at an establishment within 90 days or less. A special circumstances defence exists if it is not reasonably practicable for an employer to comply. Whether circumstances are special depends on the facts, but requires something out of the ordinary and insolvency is not of itself a special circumstance.

In this case, C began to face serious financial difficulties in July 2017, with the situation steadily deteriorating from that date, culminating in liquidation in January 2018 and employee dismissals. C accepted that there had been a failure to consult, but claimed that special circumstances applied. The EAT disagreed. The decision confirms the high benchmark for successful use of the defence and is a reminder that the mere fact that a circumstance has an effect on an employer's ability to comply with collective consultation does not necessarily render it special.

The criminal offence of failing to file an HR1: R (Palmer, Forsey) v Northern Derbyshire Magistrates' Court

As well as collectively consulting in larger scale redundancies (outlined above), an employer must notify the Secretary of State (or Department for the Economy in Northern Ireland) in advance using the HR1 form. Failure to do so is a criminal offence, exposing the employer, and potentially a director or manager, to a fine. This criminal element is sometimes overlooked when assessing redundancy risks.

P and F were the director and administrator of a company in circumstances where there was an alleged failure to notify in accordance with the law. P and F challenged their subsequent criminal prosecution in a judicial review and the decision was published in November. Reflecting the relative lack of guidance on how this criminal offence applies, the court reviewed aspects of the legislation as part of their judgment. For example, reminding practitioners that the offence is complete earlier than later in the chain of events (notification should be given before serving notice and at least 30/45 days before the first of those dismissals takes effect) and not when the dismissals take effect. A substantive decision on the facts of the case will follow when it returns to the magistrates court.