Pay up - unilateral pay award an unlawful inducement related to collective bargaining

Hogan Lovells

Hogan Lovells

In INEOS Infrastructure Grangemouth Ltd v Jones, the EAT in Scotland found that it was an unlawful inducement relating to collective bargaining for an employer to make a unilateral pay award to employees after pay negotiations with its recognised trade union broke down. The case is the first EAT decision to apply last year’s UK Supreme Court decision in Kostal UK Ltd v Dunkley.

Trade union members have a right not to be made an offer by an employer that means that their terms and conditions of employment will not or will no longer be determined by a collective agreement with a recognised trade union. Last year’s decision in Kostal UK Ltd v Dunkley was the first Supreme Court case considering the right.

In INEOS Infrastructure Grangemouth Ltd v Jones, the EAT in Scotland applied the Supreme Court’s decision to a situation in which an employer made a unilateral pay award to its employees when pay negotiations with its recognised union broke down.

What happened

Two INEOS companies recognised the Unite union for collective bargaining on pay, hours and holidays at its Grangemouth site. The relevant agreements did not include detailed collective bargaining procedures. For example, they did not set a minimum or maximum number of meetings that would be held during negotiations.

Pay negotiations took place over five meetings between late November 2016 and mid-March 2017. By the date of the last meeting, the tribunal accepted that the parties were relatively close to reaching an agreement and that the union expected that some form of disputes procedure would be followed if it did not accept the latest offer. However, when the union rejected it, INEOS decided that negotiations had been exhausted and wrote to employees informing them that its latest pay offer would be implemented unilaterally. It also terminated the collective bargaining agreement with Unite in accordance with its terms.

Several employees from both INEOS companies successfully claimed that the unilateral pay award was a breach of the provisions about inducements relating to collective bargaining. The EAT stayed the employers' appeal until the outcome of Kostal.

Unilateral pay award an “offer”

INEOS argued that a unilateral pay award could not be an “offer”. It was a unilateral promise that did not require acceptance as a matter of Scots law. The EAT disagreed. The word offer should be given its ordinary meaning. In this case INEOS was offering increased pay, which employees could accept by continuing to work. This also reflected how INEOS had communicated with its employees. The position was the same in England and Scotland.

Prohibited result and purpose

The EAT then considered whether the offer would achieve the “prohibited result” of meaning that terms would no longer be determined by collective agreement. After the decision in Kostley, the answer to that question depended on whether there was still a real possibility that the matter in question would have been decided by collective agreement if the offers had not been made and accepted. If there was no detailed procedural arrangement that would show whether collective bargaining had been exhausted, it was the tribunal’s role to ascertain objectively whether negotiations were as a matter of fact at an end. Here the tribunal was clearly entitled to find that the parties were close to agreement and that it was likely that agreement would have been reached through further collective bargaining.

It was also clear that achieving the prohibited result was INEOS’ sole or main purpose in making the offer. INEOS did not want to use the arrangements agreed with Unite for collective bargaining further and its termination of the collective bargaining agreement was a relevant factor to take into account when deciding what its purpose in making the offer was.

Accordingly, each claimant was entitled to a fixed compensation award of £3,830, the rate in force when the unlawful offer was made.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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