Employers who bypass collective bargaining to make direct pay offers to union members risk substantial financial penalties. A recent Employment Appeal Tribunal (EAT) decision shows just how difficult it can be to justify doing so.In London North Eastern Railway Ltd and Hitachi Rail Ltd v Jiwanji and others, the EAT upheld a finding that the employer breached collective bargaining protections when it made a pay offer directly to union members instead of continuing to negotiate with their union. The case is a useful reminder that an employer who wants to go directly to its workforce must be able to show it genuinely believed it had exhausted the collective bargaining process.
What the law protects
Under section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992, workers who are members of a recognised trade union have the right not to be made a direct offer by their employer where accepting it would mean their terms are no longer determined by collective bargaining. This protection applies where achieving that outcome is the employer’s sole or main purpose. The protection is designed to stop employers from side-stepping a recognised union by dealing directly with its members and breaching it can be costly. If an employment tribunal upholds a section 145B claim, it must make a declaration to that effect and make a mandatory award of compensation, which increases annually (currently £5,993 per employee). The employment tribunal has no discretion to reduce the award.
What happened
The employer commenced pay negotiations with three trade unions (TSSA, Unite and RMT) under a collective bargaining agreement that provided for business-wide negotiations through a joint committee comprising employer and union representatives. While TSSA and Unite accepted the pay offer, RMT’s members voted to reject it. Rather than resume negotiations with RMT, the employer wrote directly to its entire workforce, setting out the pay award and inviting RMT members to opt out if they did not wish to accept it.
Approximately 1,250 RMT members brought claims for breach of section 145B. The employer argued that, by the time it made the direct offer, it had exhausted the collective bargaining process and there was no realistic prospect of agreeing the terms through collective bargaining. However, the employer did go on to have further meetings with RMT and a series of written communications, and ultimately the employer reached agreement on the pay award with RMT on slightly different terms to those accepted by TSSA and Unite.
Why the employer lost
The tribunal found, and the EAT agreed, that there was still a realistic prospect of the parties agreeing pay terms through collective bargaining when the employer made the direct offer. More importantly, it found that the employer did not genuinely believe it had exhausted the collective bargaining process. Instead, it had made a commercial decision to stop negotiating because the process had taken long enough, two unions had already accepted the deal and it wanted employees to receive the pay award before Christmas. Those commercial considerations did not provide a defence.
Practical considerations for employers
This decision reinforces the importance of being able to demonstrate a genuine belief that you have exhausted the collective bargaining process before making direct offers to employees. Where negotiations have become lengthy or difficult, it may be tempting to conclude that further discussions will serve little purpose. However, as this case demonstrates, a commercial decision to stop bargaining is not the same as a genuine belief that the agreed process has run its course. Before making any direct offer, assess whether you have completed all procedural steps under your collective bargaining agreement. Document your conclusions in a contemporaneous note.
The judgment also illustrates the benefits of clear and structured collective bargaining arrangements. Employers operating under agreements that identify the stages of negotiations and when the process is regarded as exhausted are likely to be in a stronger position if they later need to justify approaching employees directly. By contrast, flexible or informal arrangements may make it more difficult to establish that collective bargaining had genuinely come to an end. Consider reviewing your current collective bargaining agreement. Does it set out clear stages and a defined endpoint? If not, you may want to negotiate clearer procedural terms at the next opportunity.
The case further highlights the benefit of recording the reasons why an employer believed the collective bargaining process had been exhausted. If the decision to make direct offers is later challenged, records created at the time are likely to be important evidence. This should include a written record of all negotiation meetings, the positions taken, any deadlock and why you concluded no further progress was possible.
Given the fixed statutory award payable for each affected employee, the financial consequences of making direct offers prematurely can be substantial. Consider taking legal advice where there is any uncertainty about whether you have exhausted the collective bargaining process.
Checklist: before making a direct offer to union members
- Review your collective bargaining agreement to confirm you have completed all required procedural steps.
- Assess whether there is any realistic prospect of reaching agreement through further negotiation.
- Document at the time your reasons for concluding that you have exhausted collective bargaining.
- Consider whether the union has indicated it is unwilling to negotiate further, or whether discussions have simply stalled.
- Take legal advice if there is any doubt. The fixed statutory award applies per affected employee and can be substantial.
