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15th September 2023

Stephen Morrall reviews whether employers can withhold bonuses from striking workers in Personnel Today

Stephen Morrall reviews whether employers can withhold bonuses from striking workers in Personnel Today
Stephen Morrall
Stephen Morrall
Consultant

Stephen’s article was published in Personnel Today, 15 September 2023, and can be found here.

Can an employer withhold a bonus from a striking worker?

Network Rail bosses have vowed to withhold bonuses from staff who took part in strikes this year. Stephen Morrall looks at whether there is legal precedent to this, and what the implications might be for labour relations in the UK.

In August, it was revealed that Network Rail would withhold annual bonuses from union members who took part in strikes a decision that could affect around 20,000 people.

The decision came after months where the rail sector has been plagued by industrial action. Relations between the employers and the unions representing different parts of the workforce continue to be adversarial.

In March this year, RMT members voted overwhelmingly to accept a 9% pay increase over two years.

From 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, six months later, Network Rail has now taken the provocative decision not to pay discretionary performance related bonuses to RMT members who took part in the strikes.

Was it lawful and what did Network Rail think it would do to improve industrial relations?

Case law

This year, apparently due to strike action, the bonus was reduced to about £300, down from previous highs of £1,000.

The amount per employee is modest. Network Rail said it had made it crystal clear to the RMT and its employees during the dispute that strike action would affect its performance-related bonus scheme.

But if a bonus scheme is discretionary, which most of them are, is the employer free to exercise its discretion in any way it chooses? This is an area of the law that is very case-specific and it will depend on the terms of the scheme.

In the case of Clark v Nomura (2000) discretionary bonuses were to be awarded based on personal performance.

Mr Clark’s performance at the bank 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.

‘Reasonably and rationally’

Other cases have established that an employer must act reasonably and rationally. They 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, despite warning its employees, 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.

The employees have not been not able to use the trade union legislation to challenge the decision.

The Trade Union and 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 trade union activities.

However, the courts have interpreted the meaning of activities to exclude participating in industrial action.

Strikes Act

Moving forward, the new headache for unions, employers and employees is the new Strikes Act, which passed in July.

This brings into law 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.

It only applies to strikes and not to other types of industrial action, such as overtime bans.

The Act 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.

However, the Act contains 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.

Once regulations have been published for a particular sector, the unions and employers will have to follow the procedure set out in the Strikes 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 work notice to ensure the minimum service level is met during the strike, and have regard for the union’s views. The employer must not specify more workers than are reasonably necessary to meet the minimum service requirement.

Confusion and uncertainty

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. However, 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 is also affected by the Act: 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 government seems determined to limit the power of the unions to disrupt the key service areas to which the Act applies.

Whether or not one agrees that the government is entitled to take measures to ensure that key services continue to be delivered even during a strike, the Act is clearly a provocation to the unions and its implementation is likely to be problematic for both unions and employers.

Do industrial relations in the UK need to be conducted on such an adversarial basis? Instead of adding fuel to the fire of industrial unrest, the government and the unions should be looking for ways to facilitate constructive dialogue. They should strike a deal, not a match.