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England and Wales Court of Appeal (Civil Division) Decisions
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Cite as:  EWCA Civ 1009,  WLR(D) 329
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ON APPEAL FROM EMPLOYMENT APPEAL TRIBUNAL
THE HON MRS JUSTICE SIMLER (PRESIDENT), MS K BILGAN & MISS S M WILSON
UKEAT/0108 / 0109/17/RN
Strand, London, WC2A 2LL
B e f o r e :
LADY JUSTICE KING
LORD JUSTICE SINGH
| KOSTAL UK LTD
|- and -
|DALE DUNKLEY AND OTHERS
Stuart Brittenden and Bruno Gil (instructed by Thompsons Solicitors, Newcastle) for the Respondents (Claimants)
Hearing date: 22 May 2019
Crown Copyright ©
Lord Justice Bean :
"7.1 Formal negotiations will take place between the parties on an annual basis. At this time the company and union will also agree to a member verification check with ACAS prior to negotiations commencing.
7.2 Negotiations will commence normally in October and with a normal effective date of 1st January.
7.4 Any matters related to proposed change of terms and conditions of employment will be negotiated between the Company and the Union."
"(b) During the procedural process, there will be no sanctions of any kind applied nor change imposed by either party…"
"if this was not paid in December, it could not and would not be paid in 2016, therefore it would be lost to employees and they would be left with either the 2% on basic or 4% on basic depending on whether their basic salary was greater or less than £20K…"
"……..I am writing to inform you that I now intend to write to each and every individual employee at Kostal UK in order to offer the company pay increase and term and condition changes.
I am doing this because otherwise we will run out of time to pay a "Christmas bonus" prior to Christmas in December's pay. Please be aware that any employee who rejects the pay offer will not receive the Christmas bonus and it cannot be paid at a later date even if we subsequently achieve an agreement between us".
"Unfortunately, the above offer was rejected by a ballot of Trade Union members.
Therefore, the Company has made the decision to write to every individual employee of Kostal UK in order to offer the above to each person directly.
We are doing this due to the short timeframe in order to pay a Christmas bonus, which can and will only be paid in December's pay.
Therefore…failure to sign and return [by no later than 18 December 2015] will lead to no Christmas bonus and no pay increase this year."
"However, the company does wish to reward our employees for their efforts in 2015 and therefore wish to offer the pay increase to each individual employee."
"he had distributed a letter……to all our employees because the pay offer had been rejected by TU members…"
"….my final point is to quote the Unite letter – 'Mr Johnson needs to listen to the voice of the workers' – I believe that I have, and that 91% of them have spoken, perhaps the Trade Union should follow their own advice and listen to the majority and not the minority."
"The relevant circumstances are, in summary, that negotiations forming part of collective bargaining, reached stage 3 in December last year with no agreement. We have made it clear that our parent company in Germany insists that payment of any Christmas bonus happens in December, and cannot be carried over into the New Year. This has been the case for many years. Therefore, we decided to write to the employees directly, clarifying that if they did not sign to accept their new terms, they would not be able to take the benefit of a Christmas bonus…
In my letter dated 15 January 2015, I made it clear that it was never the company's intention to induce people to opt out of collective bargaining. The only reason for making the offer to members was so that the Christmas bonus would be payable before the end of the year. If it was not accepted, the bonus would not be payable at a later date. There was absolutely nothing in the offer to staff that stated, or even implied, that acceptance of the offer would involve an agreement that they would no longer be subject to collective bargaining".
"Please be aware that the proposed changes will not be implemented without your express agreement and the consultation process will be full and open. However you should be aware that in the event that no agreement can be reached between the parties, this may lead to the company serving notice on your contract of employment".
Nothing was said about that action being followed immediately by re-engagement on the new terms. The letter went on:
"In consideration for your agreement to the proposed changes, the company is willing to pay a 4% increase in your basic salary backdated to 1 January 2016".
"save for the by then irrelevant issue of the Christmas bonus, the collective agreement endorsed the pay proposals which the [company] had put forward in November 2015 together with the three changes to terms and conditions".
"Inducements relating to collective bargaining
(1) A worker who is a member of an independent trade union which is recognised, or seeking to be recognised, by his employer has the right not to have an offer made to him by his employer if -
(a) acceptance of the offer, together with other workers' acceptance of offers which the employer also makes to them, would have the prohibited result, and
(b) the employer's sole or main purpose in making the offers is to achieve that result.
(2) The prohibited result is that the workers' terms of employment, or any of those terms, will not (or will no longer) be determined by collective agreement negotiated by or on behalf of the union.
(3) It is immaterial for the purposes of subsection (1) whether the offers are made to the workers simultaneously……….
(5) A worker or former worker may present a complaint to an employment tribunal on the ground that his employer has made him an offer in contravention of this section."
"(4) In determining whether an employer's sole or main purpose in making offers was the purpose mentioned in section 145B(1), the matters taken into account must include any evidence –
(a) that when the offers were made the employer had recently changed or sought to change, or did not wish to use, arrangements agreed with the union for collective bargaining,
(b) that when the offers were made the employer did not wish to enter into arrangements proposed by the union for collective bargaining, or
(c) that the offers were made only to particular workers, and were made with the sole or main purpose of rewarding those particular workers for their high level of performance or of retaining them because of their special value to the employer."
Wilson v United Kingdom
"1. Everyone has the right to freedom of peaceful assembly and to freedom of association with others, including the right to form and to join trade unions for the protection of his interests.
2. No restrictions shall be placed on the exercise of these rights other than such as are prescribed by law and are necessary to a democratic society in the interests of national security or public safety, for the prevention of disorder or crime, for the protection of health or morals or for the protection of the rights and freedoms of others…"
"41. The Court observes at the outset that although the essential object of Article 11 is to protect the individual against arbitrary interference by public authorities with the exercise of the rights protected, there may in addition be positive obligations to secure the effective enjoyment of these rights. In the present case, the matters about which the applications complain – principally, the employers' de-recognition of the unions for collective bargaining purposes and offers of more favourable conditions of employment to employees agreeing not to be represented by the unions – did not involve direct intervention by the State. ………..
47. In the present case, it was open to the employers to seek to pre-empt any protest on the part of the unions or their members against the imposition of limits on voluntary collective bargaining, by offering those employees who acquiesced in the termination of collective bargaining substantial pay rises, which were not provided to those who refused to sign contracts accepting the end of union representation. The corollary of this was that United Kingdom law permitted employers to treat less favourably employees who were not prepared to renounce a freedom that was an essential feature of union membership. Such conduct constituted a disincentive or restraint on the use by employees of union membership to protect their interests. However, as the House of Lords judgment made clear, domestic law did not prohibit the employer from offering an inducement to employees who relinquished the right to union representation, even if the aim and outcome of the exercise was to bring an end to collective bargaining and thus substantially to reduce the authority of the union, as long as the employer did not act with the purpose of preventing or deterring the individual employee simply from being a member of a trade union.
48. Under United Kingdom law at the relevant time it was, therefore, possible for an employer effectively to undermine or frustrate a trade union's ability to strive for the protection of its members' interests. The Court notes that this aspect of domestic law has been the subject of criticism by Social Charter's Committee of Independent Experts and the ILO's Committee on Freedom of Association. It considers that, by permitting employers to use financial incentives to induce employees to surrender important union rights, the respondent State failed in its positive obligation to secure the enjoyment of the rights under Article 11 of the Convention. This failure amounted to a violation of Article 11, as regards both the applicant unions and the individual applicants."
"193. In July 2002 the European Court of Human Rights delivered its judgment in the case of Wilson and Palmer……. The Court concluded that UK trade union law was incompatible with Article 11 of the European Convention on Human Rights (freedom of association) in that where a trade union was recognised by an employer for the purposes of collective bargaining about the terms and conditions of a group of employees, the law did not prevent the employer from offering inducements to the employees in the group to persuade them to surrender their collective representation and have their terms settled instead by negotiations between each individual employee and the employer. The Government believes that the principle underlying the decision of the Court extends beyond the facts in Wilson and Palmer and is applicable to a number of other comparable circumstances. The purpose of sections 29 to 32 is therefore to secure that these provisions deal not only with the facts in Wilson and Palmer but also with the other circumstances considered by the Government to be comparable." [emphasis added].
"3.12. The Government also confirms that the law should explicitly prohibit inducements or bribes being made to trade union members to forego union rights. These were the particular employer behaviours that gave rise to the Wilson and Palmer cases, and they should be made unlawful. The Government intends to make it unlawful for an employer to make an offer to an individual with the main purpose of inducing that person to relinquish rights to belong (or not to belong) to a union, rights to engage in trade union activities or the proposed right to use union services. In addition, offers should be made unlawful whose main purpose is to induce a group of workers, who belong to a recognised union, to accept that their terms of employment should be determined outside collectively agreed procedures. The result is that it would be unlawful for an employer to offer an inducement to the union members in such a group to have their terms of employment determined outside the framework set by any existing collective bargaining arrangements. This limits the scope of employers to offer individualised contracts. To avoid inflexibility however, the law should allow employers to make offers where the sole or main purpose of the inducement is unconnected with the aim of undermining or narrowing the collective bargaining arrangements. In particular, the law should give room for employers and individuals to enter individualised contracts designed to reward or retain key workers."
The findings of the employment tribunal
"it is not permissible for an employer to abandon collective negotiation when it does not like the result of a ballot, approach the employees individually with whom it strikes deals and then seek to show its commitment to collective bargaining by securing a collective agreement which is little more than window dressing – having destroyed the union's mandate on the point in question in the meantime. In other words, if there is a Recognition Agreement which includes collective bargaining, the employer cannot drop in and out of the collective process as and when that suits its purpose.
It follows that we prefer the interpretation of the provision sought by the Claimants which has the result that both the December 2015 and January 2016 offers would, when accepted, have the prohibited result."
"Although the burden of proof has not been debated in detail before us we take the approach that the Claimants need to establish a prima facie case that the employer had an unlawful purpose and if they do that the provisions of section 145D(2) come into play, so that it is for the employer to show what his sole or main purpose in making the offers was. On the basis of our conclusions above we are satisfied that a prima facie case has been established.
It was common ground before us that section 145D(4) was not felicitously drafted or, as Mr Brittenden put it was "a bit of a hash". For one thing it is not entirely clear which way evidence of the three matters referred to might point.
The Respondent's case is that their sole or main purpose – at least in relation to the December 2015 offer – was to ensure that employees did not lose their Christmas bonus. As Mr Brittenden points out, that is the only reason pleaded in the ET3 and we cannot discern any other reason from the Respondent's evidence. It follows that in relation to the second offer – made at a time when the recipients of that letter would already have "lost" their Christmas bonus the Respondent has not shown any benign reason.
With regard to the Christmas bonus reason, it has to be borne in mind that that was introduced into the negotiations by the Respondent, that is as a bargaining tool. In those circumstances we consider that it is somewhat disingenuous for the Respondent to say that it made an offer to save the relevant employees from the consequences of a threat which it had made. We also bear in mind that whilst Mr Johnson's evidence was consistently that under no circumstances would the parent company allow the Christmas bonus to be paid other than within December of the relevant year, we note from the General Notice introduced on day two of our hearing that because of concerns about the outcome of these proceedings the Respondent indicated that it might not be in a position to determine pay or bonus entitlements in either December or January – therefore indicating that December was not a deadline.
Looking at any evidence we might have in the category of section 145D(4), Mr Brittenden has fairly accepted that a case of union hostility has not been made out……….
As far as section 145D(4)(b) is concerned we find that even accepting the Respondent's explanation for Mr Johnson's statement that "the offer will be the offer" that does not indicate a lack of willingness to enter into meaningful negotiations. It says no more in our judgment than simply 'we do not want protracted negotiations.'
It is however significant that the contemporaneous correspondence shows that the making of the first offer was an immediate reaction to the rejection at ballot of the Respondent's proposal.
Further we agree with Mr Brittenden that the Respondent's true intentions can be gleaned from its publication via general notices of the percentage of employees who had already signed their acceptances "including trade union representatives and members"(page 81).
On the facts before us it is plain that having found the ballot result "disappointing if not unexpected" (Mr Johnson's email to Mr Coop of 9 December 2015 page 79) the Respondent took the conscious decision to by-pass further meaningful negotiations and contact with the union in favour of a direct and conditional offer to individual employees who were members of that union. We therefore agree with Mr Brittenden that it was "exceptionally improbable" that the Respondent did not intend to circumvent the collective bargaining process when it made the offers.
It follows that we find that both the December 2015 and January 2016 offers if accepted had the prohibited result and that that was the main purpose of the Respondent making those offers."
The appeal to the Employment Appeal Tribunal
"51. Two broad species of prohibited result are envisaged by s.145B(2). The first is that the entirety of the workers' terms of employment will not (or will no longer) be determined by collective bargaining and addresses the situation in Wilson and Palmer. The second is that 'any of those terms', in other words, one or more terms of employment will not or will no longer be determined by collective bargaining and addresses a situation where even just one of many collectively bargained terms would not, if offers are accepted, be determined by collective agreement, even if the vast majority would continue to be negotiated on a collective basis.
52. This appeal concerns the second of those two situations. We consider that on a straightforward reading of the words of the subsection, if as a matter of fact, acceptance of direct offers to workers means that at least one term of employment will or would as a consequence of acceptance be determined by direct agreement whenever that occurs, and not collectively (even if other terms continue to be determined collectively) that is sufficient. That term, if accepted, would no longer or would not be determined collectively, at least until a further change is negotiated, agreed or imposed. The fact that the result is temporary (in the sense of being a one-off direct agreement following acceptance of the offers) rather than permanent does not affect this question, as both sides agree. There is nothing in s.145B that deals with the duration of the effect, or requires a permanent surrender of collective bargaining for the future. We can see no warrant for reading into s.145B (2) a requirement that the terms if accepted will no longer in the future (or will not in the future) be determined collectively, still less a requirement that future here is to be understood as Mr Burns contends, as 'at least at the next collective bargaining round'. If that was Parliament's intention, it would have been easy to say so.
53. On this basis, we consider that the s.145B (1)(a) question will usually be a straightforward question of fact about the effect acceptance of the offers would have and is to be judged at the date when relevant offers are made. We do not agree with Mr Burns that this question can only be judged when offers have been accepted or rejected. The conditional tense in s.145B(1)(a) makes that clear because the offers need not be accepted at all.
54. Moreover, this is consistent with the three month time limit in s.145C(1) for claims in the employment tribunal, which begins with "the date when the offer was made" or in the case of a series of similar offers "the date when the last offer was made". Following the enactment of s.145B offers are less likely to state expressly what effect their acceptance would have on collective bargaining. In those circumstances, it must be possible for a worker to determine what the effect of acceptance would be within the time limit prescribed. The approach we adopt allows that and creates a coherent scheme…….
55. Furthermore, we agree with Mr Brittenden that the consequence of Mr Burns' construction is that each year the employer could table offers or inducements directly to employees to accept changed rates of pay or varied terms whilst at the same time maintaining union recognition and an expressed intention to bargain with the union about some or all of these matters in the next bargaining round, or in subsequent years. That seems to us to reduce the scope of s.145B almost to vanishing point
56. We consider that there is nothing in the enacting history or in the Government's Response that leads to a different conclusion. In the majority's view, the enactment of s.145A is no answer to the indication that the Government's intention was to introduce legislation to address situations beyond the facts in Wilson and Palmer and applicable to other comparable circumstances. The principle underlying the decision in Wilson and Palmer is not addressed by s.145A. It is applicable where conduct of an employer can operate to "undermine or frustrate a trade union's ability to strive for the protection of its members interests" by making offers of inducements for dealing directly with the employer in relation to some terms that lead to differential terms being made available and act as a disincentive to the exercise of Article II rights or undermine the mandate of the union. That is precisely what happened with the Christmas bonus on the Employment Tribunal's findings. Paragraph 3.12 of the Response underscores the wider intention of the Government in this regard. It makes no reference to foregoing union rights in future. We read the references to terms being determined outside collectively agreed procedures or outside the framework set by any existing collective-bargaining arrangements as consistent with the approach we have adopted and certainly not inconsistent with it. Moreover, this paragraph refers to the new legislation as limiting the scope of employers to offer individualised contracts but makes clear that where the sole or main purpose of the offer is unconnected with the aim of undermining or narrowing the collective-bargaining arrangements, such offers remain lawful.
57. That is important because the terms of s.145B make clear that it does not prevent employers from making offers that would merely have the prohibited result; the employer must also have as his sole or main purpose an unlawful purpose, namely achieving the prohibited result. Under s.145B (1)(b) (which is likely to be more difficult to determine) the question is whether the employer's sole or main purpose in making the offers is (or was) to achieve the result that if accepted, one or more of his workers' terms will no longer (or will not) be determined collectively. A plain reading of the words of s.145B(1)(b) shows that if reaching agreement directly takes one or more terms outside the collective agreement process and is (at least) the main purpose of making direct offers, it is unlawful.
58. The legislation does not limit or qualify the purpose in any way as it could have done by seeking to identify the employer's future rather than immediate purpose. The employer's purpose must be distinguished from the effect acceptance of the offers would have; in many cases they are different. Purpose connotes an aim, object or desire which the employer subjectively seeks to achieve, whatever the effect of the offers involved. Again this is essentially a factual question to be assessed by reference to any evidence that sheds light on the employer's sole or main purpose and any inferences that can properly be drawn from that evidence and the findings of fact properly made. We can see no warrant for interpreting the purpose in a way that restricts an employment tribunal's consideration to the next collective bargaining round or ignores the immediate effect of acceptance of offers in the context of considering the employer's aims or purpose………………..
60. There are three mandatory factors in s.145D(4) to be considered in determining purpose: two pointing towards a purpose designed to achieve the prohibited result; and the third pointing in the opposite direction. Contrary to Mr Burns' contention, we consider that these factors underline the fact sensitive nature of the question posed by s.145B(1)(b), including the need to consider and assess the employer's attitude towards collective bargaining and its past dealings in that regard. We do not agree that these factors are more consistent with Mr Burns' construction of s.145B(2) than the one we have adopted. To the contrary, they focus on the circumstances that exist when the offers are made by the employer and underline the fact sensitive nature of the enquiry required by the legislation as we have described.
61. There is an infinite spectrum of facts that might have to be considered in a s.145B case: at one end of the spectrum there may be cases where the employer has sought to change collective bargaining arrangements and then, without entering into collective negotiations or acting precipitately in the midst of such negotiations, and absent some pressing business aim, makes offers that would have the effect that all employment terms will be agreed directly if accepted. At the other end of the spectrum will be employers who have engaged in lengthy and meaningful collective consultation and reached an impasse before considering making direct offers; or who can demonstrate a strong history of operating collective bargaining arrangements with the union and/or have no wish to avoid entering into such arrangements when the offers are made; and there will be cases where employers can show genuine business reasons (unconnected with collective bargaining) for approaching workers directly outside the collective bargaining process. There may also be difficult cases in the middle where the employer has mixed aims or objectives it seeks to achieve, or the evidence is unclear. The question in each case is a question of fact and degree. As with other detriment cases, where an employer acts reasonably and rationally and has evidence of a genuine alternative purpose, tribunals are likely to be slower to infer an unlawful purpose than in cases where the employer acts unreasonably or irrationally or has no credible alternative purpose.
62. This does not, as Mr Burns submits, give trade unions a veto over changes to terms and conditions that an employer seeks to make with employees or allow trade unions to block changes simply by failing to agree. If collective bargaining breaks down, to the extent that the employer has a proper purpose for making offers directly to workers, there is nothing to prevent such offers being made. What the legislation seeks to prevent is an employer going over the heads of the union with direct offers to workers, in order to achieve the result that one or more terms will not be determined by collective agreement with the union if offers are accepted. Mr Burns complains about the risk an employer must take on this approach, in making direct offers to workers in circumstances where these arguments are open to the union. He submits that even if there is no veto as a matter of law, in effect the trade union has a practical veto. We disagree. Although inevitably in cases that depend on questions of fact and degree there is less certainty as to the outcome and more risk, we consider that employers who act reasonably and rationally for proper purposes and are able to demonstrate that their primary purpose in making individual offers is a genuine business purpose, retain the ability to make offers directly to their workforce without fear of contravening s.145B."
"64. Finally, we do not accept that our interpretation undermines or is inconsistent with other legislation as Mr Burns submits. Section 145B does not act as a veto preventing direct offers to workers as we have already stated and for the reasons we have given. Indeed Mr Burns appeared to accept as much by contending that the practical as opposed to the legal effect of the construction we have adopted is to create such a veto.
65. The minority member of the Appeal Tribunal (Ms Wilson) accepts the arguments advanced by Mr Burns as we have summarised them above. She considers that Parliament cannot have intended that s.145B would prevent an employer by law from implementing changes to terms and conditions directly, when there is a failure to agree. She considers that the prohibited result concerns whether in future, terms will be negotiated by collective bargaining and finds support for this conclusion in both the Government's Response and the Hansard material."
The appeal to this court
a) The majority of the EAT and the ET erred in interpreting "prohibited result" as meaning that one or more terms of the workers' contract are – immediately on acceptance by the worker – determined directly and not by collective agreement;
b) The EAT and the ET ought to have held that "prohibited result" means that the terms after acceptance by the worker will not (or will no longer) (i.e. in the future) be determined by collective agreement negotiated by or on behalf of the union;
c) Contrary to the conclusion of the majority, the Appellant's argument did not require words to be read into s.145B: "will not in the future" is simply the natural meaning of "will not";
d) The majority of the EAT erred in failing to recognise that there are two future tenses in s.145B. In s.145B(1)(a) (acceptance of the offer… would have the prohibited result), "would" is focused on the moment of acceptance; whereas in s.145B(2) ("the prohibited result is that the workers' terms will not (or no longer) be determined by collective agreement.") the words "will not or will no longer" look into the future from and after the moment of acceptance. Viewed at the time an offer is made, acceptance must always be in the future. The prohibited result is not the effect the offer had at the moment of acceptance but the effect it will have on collective bargaining in the future after the time of acceptance. It is submitted that the majority erred in using the words "will not" and "would not" interchangeably in their judgment, and in failing to identify that "will not" looks to the future from the moment of acceptance and not from the time of the offer.
e) Having correctly held that s.145B must distinguish between situations where an employer has a sound business reason for making an offer direct to employees and situations where the employer intends to subvert collective bargaining, the majority of the EAT and the ET erred in finding that in both these situations the employer's purpose would "the prohibited result".
f) The majority of the EAT misdirected itself in holding that the effect of Wilson v UK was to prevent direct offers outside the collective bargaining process, rather than only to prevent inducements to relinquish collective bargaining.
a) The EAT's construction of the plain natural wording of s.145B is undoubtedly correct. The Appellant unnecessarily over-complicates this straightforward issue of construction with references to 'Immediate Result' and 'Future Result'.
b) The Appellant's construction renders the rights conferred by s.145B inaccessible, and yields absurd results.
c) Furthermore, the Appellant's construction is one which ill-accords with ECtHR jurisprudence as to the Claimants' rights to associate under Article 11. The inevitable consequence of the arguments deployed by the Appellant would mean that s.145B would permit employers to treat members of a recognised union who do not accept direct offers made outside of collective bargaining less favourably than those who do. S.145B would therefore be incompatible with Article 11.
d) Further, the Appellant's appeal is necessarily academic because:
i) (i) Based upon the ET's unchallenged findings of fact, it failed to establish any valid purpose pursuant to s.145D(2); and/or
ii) (ii) Even on the Appellant's own construction, it has necessarily contravened s.145B.
Lady Justice King:
Lord Justice Singh: