This decision overturns the previous ruling of the Court of Appeal, enabling the union to sue for the loss of ‘check-off’, a practice long utilised by civil service employees to pay union dues directly through payroll deductions. The amount deducted was then forwarded to the union or relevant third party, such as a charitable fund or loan repayment institution.

For unions, check-off arrangements streamline membership dues collection, ensuring that unions receive dues regularly without requiring individual members to make manual payments.

For employees, check-off provides a convenient way to pay their dues directly from payroll. For unions, it offers a reliable income stream that supports their ability to represent and provide services to members.

The case began following UK government departments' unilateral withdrawal of the check-off system between 2014 and 2015. During this period, the Cabinet Office advised government departments to cease providing payroll deduction services for union dues.

Specifically, the Home Office ended check-off in September 2014, the Department for Environment, Food and Rural Affairs (DEFRA) in January 2015, and HM Revenue and Customs (HMRC) in April 2015.

The removal of the check-off system had a significant financial impact on unions, including the Public and Commercial Services Union (PCS), as it disrupted the collection of membership dues, forcing employees to arrange alternative payment methods, typically direct debits.

After lower courts offered mixed rulings, the Supreme Court has now set a clear precedent that check-off arrangements, once incorporated into individual employment contracts, are enforceable by unions under the Contracts (Rights of Third Parties) Act 1999 (1999 Contracts Act).

In a decisive judgment, Lord Sales and Lady Rose agreed with the dissenting judgment of Stuart-Smith LJ in the Court of Appeal that “unless the contract demonstrates the joint intent of the employers and employees to be different, the term [check-off] is enforceable by [the Union]” (paragraph 101), underlining that the presumption of enforceability of third-party rights is a strong one.

Key Ruling: The 1999 Contracts Act’s Presumption of Enforceability: In today’s judgment, the Supreme Court has confirmed that where the criteria in sections 1(1)(b) and (3) of the 1999 Act are met, there is a strong presumption that the contract will be enforceable by the third party - in this case, the union — unless explicitly excluded. No such exclusion was present in the individual employment contracts of civil servants; the union had a right to check-off, and the removal of that right was a breach of contract.

Ann Rooney, the lawyer at Thompsons Solicitors representing the PCS, explained:

 

This judgment marks the first time the Supreme Court has examined the Contracts (Rights of Third Parties) Act 1999. The Court confirmed that where the Act’s requirements are satisfied, there is a strong presumption in favour of enforceability by the third party.

In this case, the government departments failed to rebut that presumption. Notably, the Supreme Court found that, even though the relevant term originated in an unenforceable collective agreement, this did not imply that the contracting parties (the employer and individual employee) intended the check-off term to be unenforceable by the union. ”

PCS general secretary Fran Heathcote said:

“Today's decision is a vindication of our position. The attack on check-off was a naked attempt by the coalition government to bankrupt our union, thereby denying PCS members a collective voice in the workplace.

“It was a shameful period in the history of industrial relations in the civil service. We hope the new government will signal its intent to improve matters by now doing the right thing and agreeing appropriate damages with us.

“I pay tribute to all PCS members, representatives and staff who saw off this attack. Our decade-long legal battle through the courts demonstrates our determination to ensure that our union will leave no stone unturned in fighting for justice."

 

Judgment: https://www.supremecourt.uk/cases/uksc-2023-0077.html

This is the second successful Supreme Court judgment that Thompsons Solicitors have taken to the Supreme Court in a week, and the third in the past three months. The previous two judgments are as follows:

  1. Unions Win Supreme Court Ruling in Collective Bargaining Case – 13 November 2024 
  2. Supreme Court Rules in Favour of Usdaw workers over Tesco ‘Fire and Rehire’ scheme - 12 September 2024