David Bradley looks at the role of pay and benefits in industrial disputes and explains what companies can do to mitigate the impact.
Reports of threatened strike action and union activity are never far from the news headlines these days.
In a volatile economic climate, 2010 saw a significant level of high-profile industrial unrest, from the long‑running disputes at Royal Mail and British Airways (BA) to threats of strike action at Network Rail, BAA and BT.
Further industrial action is expected this year, particularly in the public sector where the Government’s economic austerity measures announced on 20 October 2010 are beginning to have a significant impact.
In September and October 2010, DLA Piper, in partnership with YouGovStone, conducted a research study of more than 500 senior UK decision makers drawn from public and private sector clients.
The aim is to gauge the current mood in employee relations and to identify the impact industrial unrest is having on UK businesses.
The study report, Economics of Employee Relations, highlights that 88 per cent of respondents anticipate increased industrial action in the coming months and 66 per cent of employers believe that industrial disputes are in danger of stifling Britain’s economic recovery.
Causes of industrial disputes
Just over a quarter (26 per cent) of respondents to the study had been involved in an industrial dispute in the last five years. By far the most common cause of those disputes was pay and benefits.
Around 47 per cent of respondents said that the primary cause of the most recent industrial dispute was pay and benefits, rising to 60 per cent if disputes over pensions were included.
These findings were in line with national statistics for the UK as a whole. According to recent Office for National Statistics figures, the main cause of industrial action in 2009 was wage disputes, particularly over wage rates and earnings levels, together with redundancy issues.
The economic downturn has led to the need for many employers to make changes to terms and conditions in order to cut costs, and it is perceived by many that this has led to an increase in the tendency for trade unions to take (or at least threaten) industrial action in order to protect the interests of their members.
Of the study respondents who had been involved in a dispute in the last five years, 78 per cent said that those disputes resulted in a threat of industrial action.
The future outlook
Although the frequency of full-scale industrial disputes remains relatively low, there is clearly a sense of unease among the business community, which cuts within the public sector are likely to exacerbate.
As mentioned earlier, 88 per cent of business leaders responding to the study anticipate increased industrial action over the coming months.
Options for employers
The best option for any employer is to seek to prevent collective disputes arising or to resolve them early through existing consultative or dispute resolution procedures. When the dispute is over (as it will invariably be at some time), the company has to rebuild its relationships with its workforce and trade unions.
While the potential for disputes over pay and benefits is clear, there is evidence from the research study that managers may not be giving this issue the attention it merits.
When asked to rank management issues in order of importance, business leaders cited pay and benefits as third (19 per cent) from a list of five issues. Employee relations were first at 39 per cent, employee commitment second at 23 per cent, and absence management fourth at 15 per cent.
Equality and diversity was last at just four per cent. This reveals a conflict between the main causes of industrial disputes and the areas where management are investing their time and focus.
Where a dispute does arise, in many cases the key to resolving it is through negotiation with trade unions, while maintaining engagement with employees.
However, where talks break down, employers may need to resort to the law to prevent or delay action which could otherwise be very costly in terms of both the immediate financial impact and the employer’s reputation.
Increasingly employers are prepared to take a stand against unlawful industrial action and there have been several high-profile legal cases pursued against unions in 2010 seeking injunctions to prevent industrial action from going ahead.
When industrial action is threatened, an employer needs to consider its legal position in respect of both the trade union and the employees.
The rules for each are distinct; the fact that a union is protected from legal action for organising a strike does not mean that participants in that strike are protected from being dismissed or having their pay stopped, and vice versa.
The key elements in assessing a trade union’s liability in relation to industrial action are whether employees have been induced to breach their employment contracts and whether the correct procedures have been followed by the union in bringing the action (which could affect the union’s immunity from claims).
Strike action will almost always be a breach of contract, but other industrial action may or may not be depending on the circumstances and the terms of employees’ contracts.
If a trade union is deemed to have endorsed or authorised industrial action that involves breach of an employment contract, it will be liable in tort.
However, the union may be immune from litigation if it can show that it has complied with the following conditions:
- the industrial action was taken in contemplation or furtherance of a trade dispute
- the industrial action was not for a prohibited purpose (for example, to force workers to join a union, or over the dismissal of workers for taking unofficial industrial action)
- the industrial action was supported by a secret ballot
- valid ballot notices were sent to the employers of each of the union’s members who the union has reasonable grounds to believe would be induced to participate in the industrial action
- the balloting arrangements were valid
- the independent scrutineer produced his report on the ballot arrangements and how it was conducted
- valid notices of industrial action were validly served on the relevant employers at least seven days before the industrial action was to commence
- the action started within four weeks of the date of the ballot approving it
- it did not amount to secondary action or unlawful picketing
- employees who are faced with a threat of industrial action need to scrutinise all stages of this process carefully in order to identify the potential for legal challenge.
Deducting pay and removing benefits
Employers are entitled at common law to demand full performance of an employment contract or that the employee not work at all.
If employees take strike action, they are not entitled to be paid for the period of the strike. If employees take industrial action short of a strike and which is not also a breach of contract, they are entitled to be paid in full.
Where employees take action short of a strike which is in breach of contract the employer can either:
- pay the participants for those periods when they are performing their contracts and withhold pay when they are not; or
- demand that the participating employees either comply with their contracts in full or stay away from work (and not be paid) until they are prepared to comply with their contracts in full.
Most employers take a middle course and, at least in the early stages of a dispute, are prepared to accept partial performance of the contract or the undertaking of alternative duties. In that case, the employer must pay for the performance it has received.
One of the remaining sources of tension in the long-running BA cabin crew dispute is over BA’s decision to remove travel benefits from striking workers.
The Unite union has backed a High Court claim against BA that the airline acted unlawfully in taking away flight privileges from the cabin crew who participated in the strikes during March 2010.
Employers are not entitled to remove contractual benefits in retaliation for employees taking industrial action, but can remove or suspend non-contractual benefits.
Potential for further action
As the Government’s austerity measures begin to bite and the threat of a double-dip recession remains, the potential for further industrial unrest is clear. The two-year public-sector pay freeze announced in the emergency Budget, efficiency drives and steps to tackle burgeoning pension deficits in the private sector potentially place all employers at risk of action.
Many employers in the private sector froze pay as one measure to cope with the recession and it seems likely that pay deals will remain low at best in the coming months.
Some workers may be willing to accept below-inflation increases or continued pay freezes in order to preserve jobs, but this is not universally the case, as demonstrated by the strike ballots over pay at BAA and BT earlier this year.
Employers will need to be wary of the potential for industrial action in response to employee dissatisfaction over pay, and ready to take action to prevent or minimise the impact of such action when the threat arises.