The Supreme Court has delivered its judgment in the case of Kostal UK Ltd v Dunkley and ors that it was unlawful for Kostal to make direct offers to employees in connection with pay and changes to terms and conditions of employment while the collective bargaining process was still continuing. 


The employer should have followed and exhausted the collective bargaining process before it made the direct offers to its employees.  

BACKGROUND LAW

Unless the 'sole or main purpose' defence applies, it is unlawful for an employer to make an offer to members of a recognised trade union (or one which is seeking recognition) where acceptance of the offer would have the result that a term or terms of the worker's employment would not (or would no longer) be determined by collective agreement.  This is known as the “prohibited result” (section 145B, Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA)).  An employer does, however, have a defence when making an offer if it can show that the sole or main purpose of that offer is not to avoid the workers' terms of employment from being determined by collective agreement. The intention of the legislation is to prevent employers from undermining collective bargaining arrangements.

Where the employer is found to have made an unlawful offer, each affected worker may claim a mandatory award from the Employment Tribunal, currently set at £4,341, but at the relevant time of this case was £3,800.

FACTS

The claimant workers were members of the trade union Unite, recognised by Kostal for collective bargaining purposes.  Towards the end of 2015 Kostal entered negotiations with Unite over pay and proposed changes to terms and conditions, an offer was made but rejected in a ballot so Kostal wrote directly to its workers in December 2015 pre-empting the collective process offering a Christmas bonus to accept the pay award and revised terms and conditions.  

In January 2016, Kostal wrote again to the workers inviting them to accept the pay award and revised terms and conditions but this time with no mention of the Christmas bonus and indicating that the workers' employment may be terminated if agreement could not be reached.  After industrial action, collective bargaining resumed and agreement was finally reached on November 2016.

DECISION

The Supreme Court allowed the appeal and restored the awards made by the Employment Tribunal, which amount to in excess of £400,000 in total.  It held that Kostal's direct offers to its workers were in breach of s.145B TULRCA.

The Court held that for offers made by the employer to workers to be capable of having the prohibited result there needs to be at least a real possibility that the workers' relevant terms of employment for the period would have been made under a collective agreement if the offer had not been made and accepted.  As long as an employer has fully exhausted the process, there can be no real possibility that the matter would have been determined by collective bargaining if the offer had not been made and accepted, and as such there cannot be the 'prohibited result'.  Without the 'prohibited result' a s145B claim cannot be made out.  

IMPLICATIONS

In advance of this case there was a concern that s145B effectively gave trade unions a right of veto during collective bargaining.  The Supreme Court has, therefore, given some helpful clarity for employers in that a s145B claim cannot be successful if it can be shown that the collective bargaining process with the relevant trade union has been exhausted.    

Employers should now review any collective bargaining agreements, and where there is the opportunity ensure they have a clearly defined collective bargaining process, setting out the procedure to be followed, making sure that each stage of the process is clear and unambiguous, particularly on when each stage ends, and explicitly stating when the whole process is at an end.  Employers will then need to follow the process and clearly document when the process has been exhausted.  

Where no written agreement exists, employers should consider proposing that one is introduced, taking care to ensure it is clearly drafted.  It would also be a good idea to provide or refresh training for managers who are responsible for collective bargaining negotiations in light of this judgment.  

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