In the case of Kostal UK v Dunkley the Court of Appeal has held that by going over the head of the recognised trade union and directly offering its works a package of revised terms and conditions, an employer is not offering an unlawful inducement to forego collective bargaining rights.
The trade union in this case, Unite the Union (“Unite”), was recognised by Kostal UK (“KUK”) for collective bargaining purposes. In October 2015, Unite and KUK commenced formal pay negotiations.
KUK offered a package of pay increases and a Christmas bonus in return for a reduction in sick pay for new starters, a reduction in Sunday overtime and consolidation of two 15 minute breaks into a single 30 minute break. This offer was rejected by Unite’s members in a ballot.
As the Christmas bonus could only be paid in December’s pay, and due to the short time frame available for such payments to be processed in December, KUK decided to write to each of its individual employees. On 10 December 2015, KUK wrote to each employee offering the same package as before and stating that if the offer was not accepted, they would forfeit their Christmas bonus. Subsequently, KUK wrote again to its individual employees on 29 January 2016 and noted that if no agreement could be reached then their contracts may be terminated.
A number of Unite members brought a claim in the Employment Tribunal (“ET”) alleging that each letter constituted an unlawful inducement contrary to section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A).
Section 145B TULR(C)A prohibits employers from making an offer directly to members of a recognised trade union (or one that is seeking recognition) if the employer’s sole or main purpose for making such an offer is to achieve a “prohibited result”. A “prohibited result” is defined as one where “the worker’s terms of employment, or any of those terms, will not (or will no longer) be determined by collective agreement negotiated on behalf of the union”.
The ET held that both the December 2015 and January 2016 offers would, when accepted, have the prohibited result and upheld the claims. The ET awarded compensation of £3,800 in respect of each unlawful inducement offer, totalling £7,600 per claimant. In this case there were 55 claimants, meaning a total award of £418,000.00.
KUK appealed to the Employment Appeals Tribunal (EAT). The EAT held that on a straightforward reading of section 145B TULR(C)A, if the direct acceptance of an employer’s direct offer to workers meant that at least one term of their employment is determined by direct agreement, and not collective agreement, that is sufficient for a “prohibited result”. It also held that the fact that the result was temporary, as it was a one-off agreement, rather than permanent was irrelevant, as nothing in section 145B requires a permanent surrender of future collective bargaining rights. As such, the EAT dismissed KUK’s appeal.
KUK appealed to the Court of Appeal.
The Court of Appeal noted that it was highly unlikely that Parliament intended for section 145B to be given the literal interpretation that it was given by the EAT. A literal interpretation would amount to giving recognised trade unions’ a veto over even minor changes to employee’s contracts, effectively allowing workers to impose their will on employers. The employer would also risk significant penalties in seeking to override such a veto.
The Court of Appeal held that section 145B will only be engaged where, the workers’ terms of employment are determined by collective agreement, and the employer’s sole or main purpose is that the terms of employment, or any one of those terms, will no longer be determined by collective agreement on a permanent basis. The European law, on which section 145B is rooted, requires that employees must not be induced to surrender important union rights.
Where an employer makes an offer directly to its workforce and asks them to agree, on just one occasion, to a particular change in terms of employment, this is not sufficient to engage section 145B. The Court of Appeal held that such a case would not involve members of the union being asked to relinquish their right to be represented in a collective bargaining process, even temporarily.
In light of the above, KUK’s appeal was allowed, the claims were dismissed and the decisions of the ET and EAT were set aside.
This case is good news as it allows some limited flexibility to make an offer directly to a workforce, and ask them whether they will agree a particular term as a one off, avoiding the need to go through the collective bargaining procedure, especially for minor changes, or as here, where the timing of acceptance is important. However, due to the high levels of non-discretionary compensation awarded for unlawful inducement to forego collective bargaining rights, Employers should remain cautious and seek legal advice to avoid falling foul of section 145B.
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