In a statement, the council said it had believed it had “a strong case and good prospect of a positive outcome”.
It added that it would continue to consider legal options, including whether to appeal against the decision.
Unite criticised the council for taking legal action, describing it as a “massive waste of taxpayers’ money”.
The union had previously said a pay offer agreed nationally was not enough and some of its members were “living hand to mouth” while some were reliant on food banks.
