Welcome to Prospect’s “weekly constitutional”, where a recent or non-recent legal case will be used to show how law and policy work—or do not work—in practice.
This week’s post is drawn from the unanimous United Kingdom Supreme Court decision handed down late last year but which—other than this Byline Times report—received very little news coverage.
The case is about moves made by some government departments in 2014-15 under the Conservative-Lib Dem coalition to end the “check-off arrangement” for collecting their employees’ union subscriptions. In the succinct summary of the Supreme Court:
“The individual claimants chose in the past to have their union subscription deducted from their salary at source through the pay roll system. The sum deducted would then be paid over to the [Public and Commercial Services] Union by the employer. This is referred to as a check-off arrangement.”
Three government departments made the unilateral decision to end this arrangement. The move was instigated by the Conservative Cabinet Office minister Francis Maude, who in December 2013 sent this letter to Whitehall departments.
That letter contains an attempt to justify the move on administrative and costs grounds, but few doubted the substance of the decision: it would be a wounding if not fatal attack on the funding of irksome public sector unions, such as the PCS. As a spokesperson for Eric Pickles, another Tory minister involved in the shift, said, it was “ministers’ intention to abolish check-off, which is an outdated and unnecessary practice given to trade unions, and epitomises a cosy and unhealthy relationship between the unions and the state”.
It was never about costs and administration—and indeed the unions offered to pay for the administrative costs. It was a cynical political move dressed up to look otherwise.
Maude’s letter was promptly leaked, as was this extraordinary counter-letter from the then Liberal Democrat chief secretary to the Treasury Danny Alexander. To his credit, in July 2014 Alexander warned about Maude’s proposal: “Departments should be aware that there is no fiscal case for doing this, as the unions have offered to pay any costs associated with check-off, which are in any case minimal. In addition, [...] any attempt may ultimately fail as a result of legal action being brought by the unions, at considerable cost to the public purse.”
Alexander was right. The point was litigated, and for 10 years the government has had to fund expensive and extensive litigation where this decision was challenged. Any supposed efficiency from the measure was more than offset in years of legal fees. There were arguments on complex points of employment and trades union law from specialist barristers. Such cases are not cheap.
By last year the case reached the Supreme Court. The government had by now admitted that the unilateral move was a breach of the employment contract between the employee and the government. As such, the government averred, it was for the individual employees to sue for the breach.
This, of course, was unrealistic. Few if any individual employees would want the cost and expense of suing, and in any case the damages were caused to third parties, the unions, which the government insisted were strangers to the contract. The government even got some judges to nod along with this defence.
But the Supreme Court was having none of it. For the final appeal court judges, the case did not need to be determined on the basis of complicated employment and trade union law, but on an elementary point of contract law. Indeed, it is something taught in the first few weeks of a contract law course.
Yes, the trade unions were third parties to the contract, and therefore under the classic legal doctrine of “privity of contract” could not sue to enforce a benefit to them agreed between the employees and the state.
This doctrine, however, was fundamentally modified by the Contracts (Rights of Third Parties) Act 1999, perhaps the most important statutory intervention into the common law of contract in modern times. It is a famous piece of legislation—and indeed it is usually the only statute expressly mentioned in many contracts, if only to disclaim it.
Yet for some reason, government lawyers had not disclaimed it in employment contracts. This meant that the PCS was fully entitled to sue for the benefit of the union contributions, and that it was in a better position to fund and bring the cases.
And in one splendid detail, the Supreme Court knew what it was doing by applying the 1999 act, which had been based on a 1996 Law Commission report by Professor Andrew Burrows. One of the Supreme Court judges that heard this appeal was Lord Burrows, the author of the report.
A simple act of spite by the government had resulted in what was a simple application of law. What must have seemed a clever political wheeze will now, it seems, result in a substantial legal payout to the public sector unions.
Presumably, the legal risks were clear at the time, as is shown by Alexander’s letter—and also by the elaborate provisions for legal advice set out in Maude’s letter. The instigators knew it was legally risky, but they did it anyway.
And this is what often happens with politically led manoeuvres with unsound legal bases. The presumed short-term benefits can be offset by immense legal costs. And this is why, despite recent attempts to relax the standard of internal government legal advice, there is a public interest in ministers being told when a legal course of action is unwise and unlikely to survive challenge.
The author is a former central government lawyer on commercial matters.
