Inducements to trade union members to forgo collective bargaining are normally unlawful and employers risk sanctions if a court finds them guilty of unlawful inducements, however this risk for employers has been reduced since the Court of Appeal decision in Kostal UK Ltd v Dunkley & Others [2019].
Section 145B makes any direct offer by an employer to a member of a trade union which is recognised or seeking to be recognised unlawful, where the effect of the offer (if accepted) and the employer’s sole or main purpose in making the offer is that the worker’s terms (or some of those terms) will not or will no longer be determined by collective agreement. This is known as the “prohibited result”.
Awards for unlawful offers under section 145B trade union and Labour Relations (Consolidation) Act 1992 (TULRCA) are considerable and are increased each year: since April this year workers can be awarded £4,193 for each separate unlawful offer. Following the Employment Appeal Tribunal’s (EAT) decision in this case, Kostal UK was found liable for a total of £418,000, with £7,600 being awarded to each of 55 claimants. This shows that significant financial penalties can follow from an employer’s direct offer of new terms to workers who are members of a recognised trade union (or one seeking to be recognised). The decision of the Employment Appeal Tribunal in Kostal UK Ltd v Dunkley and others in December 2017was great for trade unions since it showed that employers who decide to circumvent collective bargaining when an impasse in negotiations is reached would be liable.
That triumph has now been turned on its head by the Court of Appeal which has now overturned the decision of the Employment Tribunal (ET) and EAT.
Kostal UK Ltd had recently recognised Unite and entered into the first round of pay negotiations under their recognition agreement. The employer offered a pay rise and a Christmas bonus but proposed changes to breaks, overtime and to sick pay for new starters. Agreement with Unite could not be reached ahead of the Christmas break. Unite conducted a ballot by which its members rejected the offer. Kostal then wrote directly to all staff making the offer. After Christmas, the employer wrote to those employees who had not accepted the offer, proposing the same terms (with the exception of the Christmas bonus).
The ET Case
As a result of their actions, 55 Unite members brought a claim against Kostal UK in the ET under section 145B that Kostal UK had made two unlawful offers which (if accepted) would have the effect that those particular terms would no longer be determined by collective agreement and that Kostal UK’s purpose in doing so was to circumvent collective bargaining. The ET upheld their claims.
The EAT Case
Kostal UK appealed to the EAT which did not agree with them and upheld the decision of the ET. The EAT said that the effect of the offers (if accepted) was that the terms in question would not have been decided through collective bargaining but by direct agreement between the employer and the worker. The EAT held that this was the “prohibited result” even though the collective bargaining process would continue to apply to those terms in future.
The Court of Appeal Case
The Court of Appeal did not agree with the EAT. The Court ruled that the wording of section 145B applies in two particular cases:
Where an independent trade union is seeking to be recognised and the employer makes an offer whose sole or main purpose is to achieve the result that the workers’ terms of employment will not be determined by a collective agreement; and
Where an independent trade union is already recognised, the workers’ terms of employment are determined by collective agreement, and the employer makes an offer whose sole or main purpose is to achieve the result that the workers’ terms of employment (as a whole), or one or more of those terms, will no longer be determined by collective agreement.
The Court of Appeal stated that: “‘No longer’ clearly indicates a change taking the term or terms concerned outside the scope of collective bargaining on a permanent basis”. The shorter-term effect of the direct offer being determined by agreement with the individual worker is not the “prohibited result”.
The court specifically ruled that section 145B does not apply to cases “where an independent trade union is recognised, the workers’ terms of employment are determined by a collective agreement negotiated by or on behalf of the union, and the employer makes an offer whose sole or main purpose is to achieve the result that one or more of the workers’ terms of employment will not, on this one occasion, be determined by the collective agreement“.
The Court of Appeal did not agree that the section was intended to give a trade union an effective veto on any direct offers made by an employer to its members because of the threat of very large tribunal awards. It held that the section does not apply to offers which are intended in the short term to circumvent the collective bargaining process as long as the term will be negotiated as part of that process in the future.
What this means is that the Court considered the intention of Kostal UK in making that offer. In proposing new terms to its employees, Kostal UK did not intend to bring an end to collective bargaining of those terms in the longer term. For that reason, the Court said that there was no breach of section 145B.
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