Rebecca McGuirk acted on behalf of the employer recently in a case involving unlawful inducement, collective bargaining and unfair competition. McGuirk explains how their case was successful at demonstrating that the intention of the employer was not to circumvent the process.
The recent case Adams V Walsall Housing Group was about the employer’s making two “offers” to employees or inducing them during a collective bargaining period.
The housing group initially offered a lump-sum payment that it said was due to the fact that the financial year would soon be ending and it could not be carried forward, but later, it proposed a 3.1% pay increase, which they claimed was the minimum wage it would accept through collective bargaining.
This claim was brought by Walsall Housing Group. It’s an important one for anyone who is claiming under section 145B (Consolidation of Trade Union and Labour Relations Act 1992).
This decision shows that employers are not in violation of the law if they make direct offers to their employees during collective bargaining, as long as they can prove that the offer is not intended to circumvent collective bargaining.
The law on illegal inducement
The section 145B prohibits employers from making direct offers to employees if the acceptance of these offers means that workers’ employment terms will no longer be determined through collective agreements, and if the purpose of making such offers is for the employer to circumvent collective bargaining.
In Kostal UK and others the Supreme Court ruled that an employer’s direct payment offer to employees, bypassing the stalled collective negotiations with the recognized trade union, constituted an illegal inducement under s.145B.
The Employment Appeal Tribunal (EAT), in Ineos Grangemouth v Jones, and others, followed the decision in Kostal. In this case, the EAT determined that the employer’s imposition a wage award at a point when the pay negotiations with the recognized union were at a deadlock amounted an illegal inducement.
In both cases, the terms of the agreements were not determined by the collective agreement in place.
They did not consider if the offer was made to circumvent the collective bargaining process.
What are the facts in the case?
Walsall Housing Group participated in collective bargaining over an annual salary award. The unions were pushing for a larger award. The negotiations had reached an impasse, despite the fact that collective bargaining continued.
The respondent sent an email to all employees to inform them that it would pay a PS300 one-off payment in addition to the 3.1% pay award, but added that the award could only be agreed on in the financial year 2022-23 as the budget was not available for the following year.
The respondent decided on the 21st March, after further negotiations with the Unions, that the PS300 payment will be paid to every employee in the payroll for March. This was because it needed to be paid before the end of the month, or it would have been lost. All employees were notified of this decision via email.
In May, the decision was made to proceed with the 3,1% pay hike, retroactive to 1 April 2023. This was despite continuing union opposition.
The decision was made in light of the increasing cost of living crisis, which led the employer to feel that it was vital that staff receive a wage increase as soon as possible. The second offer was sent to all employees by email on the 11th of May.
The court’s findings
The Tribunal considered the first offer, and concluded that it was the sole purpose of the respondent to make the offer to ensure that PS300 from the budget for 2021/22 allocated to pay in the 2022/23 financial year was spent by March 2022.
The tribunal found no evidence that the decision to pay PS300 to employees without their unions’ agreement to the total pay offer was taken to temporarily halt the pay being determined by the Recognition Agreement. Pay negotiations continued immediately after the initial offer.
The tribunal found that, in the case of the second offer, the respondent had proven that its sole or primary purpose was to provide the workers with the immediate benefits of the 3,1% increase it had budgeted to reduce the impact of cost of living on their staff.
The tribunal agreed that Walsall Housing intended to assist its employees and planned to continue the collective bargaining (a higher wage award was eventually achieved and implemented in Nov. 2022).
Why this decision was made
The tribunal heavily relied on contemporaneous proof of ongoing discussions relating to the pay award.
“As long as the employer is not trying to bypass the collective bargaining process, they can make an offer while it’s still going on.”
This evidence showed that the employees were concerned about being treated unfairly during negotiations, but that nothing indicated that they had ended.
The tribunal stated that “the process of pay negotiations was still active and continuing”. The respondent did not circumvent collective bargaining by making these offers.
After the Kostal and Ineos decisions, employers cannot bypass a stagnant collective bargaining by making direct offer to workers until it is obvious that the collective bargaining has been exhausted.
The decision in this case indicates that, as long as an employer does not intend to bypass the collective bargaining process, they can make offers while the process is still underway.
It’s important to note that this decision is made in the first instance and should therefore be treated with caution. If a company makes an offer outside of the collective process, it should be documented clearly and the reason for the offer explained.
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