The case is Jarvis & Others v British Gas Services Limited and although only a first instance decision (and non-binding) will be of great interest to all unionised employers wanting to change terms and conditions.

Background

The law on unlawful inducement (s145b TULRCA) prevents employers bypassing their recognised union and making offers direct to employees, outside of the collective bargaining process.  It is unlawful to offer or impose new pay or terms unless:

• They have exhausted negotiations with the union; or
• (as this case illustrates) they offer employees new terms at a point when they genuinely believe negotiations are exhausted.

Last year the Leeds Tribunal awarded £4.8 million to rail workers after finding their employer had breached s145b by moving forward with a pay award before negotiations had finished with all three recognised unions.

This British Gas case involved an even bigger group (more than 3000 employees) so had the claims succeeded, the payout would have been even greater. Once a breach of s145b is established the Tribunal does not have discretion over what award to make, here the award would have been a flat £4,294 per offer made, (the penalty will be £5,584 for offers made from 6 April 2024).

In this case, the employer wished to update both its collective agreements with recognised unions and individual terms and conditions. A collective consultation process launched and more than 300 hours of negotiation with its unions followed. Most of the unions signed up to the changes – GMB members in Field operations did not. After they rejected a 'final' offer, the Board decided on 2 December 2020 to force through the desired changes, by dismissing and re-engaging the employees. This decision was implemented on 11 December 2020 when the company wrote to each employee asking them to accept the new terms of employment.

It was this letter (sent to many thousands of employees) which was held to amount to an 'offer' under s145b.

Key findings

The Tribunal found:

• At the point the Board decision was made, 2 December 2020, negotiations had not, in fact, been exhausted. While the previous offer was said to be final, further talks then took place between management and GMB after this date, as negotiators sought to find a 'route through'.
• Therefore, the Tribunal found that the 'prohibited result' was established (para 208) following the leading Supreme Court authority of Kostal. An offer had been made direct to employees of British Gas, which if accepted by them and other workers, would mean that a term of their employment would not, or would no longer, be determined by collective agreement with the union.
• This finding meant the union members were halfway home. The saving grace for British Gas was that it was able to show that at the time of the Board decision (2 December 2020) its lead negotiator, and the Board, genuinely believed that negotiations were exhausted. There was no Board Minute produced but emails, file notes and other contemporaneous documents as well as direct witness evidence convinced the Tribunal this was the case. So the Tribunal found the employer's sole or main purpose was not to circumvent the union.
• The Tribunal considered whether genuine belief was enough, and whether that only counted where the belief was also reasonable. It concluded that genuine belief even if unreasonable would provide a defence to the employer.

Takeaways

Takeaways for employers are:

• This was a high stakes case worth £12m so it remains to be seen whether the losing union side will appeal.
• In another positive step for employers, the Tribunal confirmed that it is only actual 'terms of employment' – contractual terms – which are caught by s145b. Its scope does not extend to cover 'ways of working' or non-contractual working practices, as was argued for the employees.
• The previous s145b cases have concerned pay. This case is about changes to terms and conditions through dismissal and re-engagement, and how to navigate s145b in that (arguably tougher) context.
• The judgment briefly touches on the interplay of s188 (collective consultation process over mass dismissals) and s145b (unlawful inducement) and found at para 138 that a statutory consultation process under s188 did not necessarily need to conclude before negotiations are exhausted.
• Where collective bargaining agreements do not contain a Disputes procedure (as in this case) that does not enable union members to argue that the procedure cannot be exhausted.
• When conducting union negotiations, it is important that these are documented by the employer in detail, both formally (such as in a heads of terms document) and informally via contemporaneous file notes and emails.
• The previous orthodox view is that employers must exhaust collective bargaining before making offers direct to staff. That is still the case. This case also shows that a carefully documented and genuine belief that those talks are exhausted can also provide a total defence.