Viewpoint: ‘Provocative’ industrial relations measures put rail recovery at risk

Two developments have stood out this summer in the rail industry: Network Rail’s decision to exclude striking members of the RMT union from the discretionary bonus, and the introduction into law of the Strikes (Minimum Service Levels Act) 2023, known colloquially as the Strikes Act. Neither of these developments is going to have a positive impact on industrial relations in the rail industry.

Network Rail and RMT settled a long-running pay dispute in March this year. RMT members voted overwhelmingly to accept a 9% pay increase over two years. The Guardian reported that on a turnout of nearly 90%, 76% of its members accepted the offer which is an indication of how keen the workers were to go back to normal work after a long period of disruption.

However, in August, Network Rail announced that those who participated in the strikes from June 2022 would not receive a performance-related bonus.

The bonus scheme is discretionary which, on the face of it, would not give the employees a legal right to receive one. But a number of cases have been decided in the courts which make it clear that an employer’s discretion is not unfettered. The decisions are very much on their own facts, and the outcome depends on the terms of the scheme.

Case law

In Clark v Nomura (2000), discretionary bonuses were to be awarded based on personal performance. Clark’s performance in the year of his dismissal was excellent, yet he was awarded a nil bonus because in the meantime he had been dismissed. The court held that Nomura was bound to assess his entitlement to a bonus only by reference to his personal performance, his dismissal being irrelevant.

In Transco plc v O’Brien (2022), a term was implied into the contract that an employer must treat employees ‘even-handedly’ such that the reason for treating one employee differently from another is not capricious. Other cases have established that an employer must act reasonably and rationally and will apply the Wednesbury test, originally developed in public law, whereby a decision of an employer can be challenged on the grounds of illegality, procedural unfairness or irrationality. The courts will consider whether a particular decision was one that no reasonable employer would make.

So, in the case of the Network Rail’s workers, the question would be whether it was reasonable and rational to exclude strikers completely from the bonus scheme.

This will depend partly on the terms of the scheme. If it is truly performance related, perhaps Network Rail’s decision could be challenged on the basis that no reasonable employer would decide to completely exclude the employees from a bonus scheme simply for having participated in strikes on a few days in a year. This would be unreasonably ignoring the employee’s performance during the rest of the year. Instead, it might be considered more proportionate to award the strikers a lower bonus reflecting their performance the rest of the time.

Network Rail, on the other hand, would argue that it had made its position very clear and warned the RMT union and its employees that their entitlement to a bonus would be affected if they went on strike. Therefore it could claim the decision was rational and not capricious in the circumstances.

The employees were not able to use the trade union legislation to challenge the decision. The Trade Union & Labour Relations (Consolidation) Act 1992 prevents an employer from subjecting a worker to any detriment where the main purpose is to penalise the worker for participating in union activities. However, the courts have interpreted the meaning of ‘activities’ to exclude participating in industrial action, as opposed to the normal day to day activities of a union.

In sum, it does not look like the law will help Network Rail’s employees get their bonus in this case. However, good industrial relations depend on more than the exercise of legal rights and one wonders if Network Rail considered the potential impact of its decision on its relationship with the union and its workforce.

Minimum service levels

In the second development, the Strikes (Minimum Service Levels) Act 2023 came into force on July 20. This fulfils a 2019 Conservative manifesto promise to require the provision of a minimum level of service during transport strikes. However, in the light of increasing industrial unrest, the government has extended the act’s scope to the health, fire and rescue, education, transport, border control and nuclear decommissioning and radioactive waste management services sectors.

The act only applies to strikes and not to other types of industrial action, such as overtime bans, but it is going to have a significant effect on the practicality of walk-outs.

The legislation gives the government the unilateral power to introduce regulations which specify minimum services levels to be maintained in the applicable sector during a strike. A requirement for employers and unions to negotiate binding agreements over minimum service levels, which had been included in a previous version of the draft legislation, has not been included in the Strikes Act. But what civil liberties organisation Liberty has described as a ‘power grab’ is subject to some democratic control in that the government is required to consult with ‘such persons as the Secretary of State considers appropriate’ before making any regulations, and the draft regulations must be laid before and approved by a resolution of each house of parliament.

Minimum Service Levels must be set out in regulations to be published separately under the Strikes Act for the affected sectors. Once they have been published, the unions and employers will have to follow the procedure set out in the act.

Where a union calls a strike, the employer may serve a ‘work notice’ on the union. Before doing so, the employer must consult with the union about the number of persons to be identified and the work to be specified in the notice to ensure the minimum service level is met during the action; it must also ‘have regard’ for the union’s views. The employer must not specify more workers than are ‘reasonably necessary’ to meet the minimum service requirement.

Subjective decision

This requires a subjective decision which is going to cause confusion and uncertainty, and will likely lead to litigation if there is a dispute about the scope of the notice. The act does not specify any particular sanction on the employer if it misjudges the resources it needs to meet the minimum service requirement.

The union is then under a duty to ‘take reasonable steps to ensure that all members of the union who are identified in the work notice comply with the notice’. If they fail to do so, the union loses its immunity from liability in tort and could face claims for damages from employers.

A worker who is identified in a work notice must also be careful to comply with its terms. If they participate in the strike to an extent that is not permitted in the notice, they will lose their automatic protection from unfair dismissal.

The Trades Union Congress has described the Strikes Act as ‘cynical, draconian, and an assault on the right to strike’ which will poison industrial relations and make it harder to resolve disputes. It has vowed to fight the act ‘tooth and nail’, and said that it will not rest until the legislation is repealed. Angela Rayner, Labour’s deputy leader, said at the TUC annual conference on September 12 that a bill to repeal the Strikes Act would be introduced within 100 days of Labour taking office.

On the other hand, the government seems determined to limit the power of the unions to disrupt the key service areas to which the act applies. Whatever one’s political views, the act is clearly a provocation to the unions and its implementation is likely to be problematic for both unions and employers. It seems that the traditional adversarial approach to industrial relations in the UK will continue to blight our lives and our economy.

Stephen Morrall joined Hunters Law as a partner in 2011. He has a broad practice, advising companies, partnerships and entrepreneurs on business structures, governance and all commercial aspects of their business. He is interested in the structure and dynamics organisations in which commercial issues, personal relationships and cultural differences are inextricably linked and need to be addressed together.