In an important decision for employers who recognise trade unions, the Court of Appeal ruled in Kostal UK Ltd v Dale Dunkley that it was not unlawful for an employer to bypass the union and make a direct offer to employees. On the facts of this particular case, the employer was not seeking to permanently disrupt the collective bargaining process, but rather make a direct offer to all employees about a Christmas bonus. There was no unlawful inducement as prohibited by s.145B of Trade Unions and Labour Relations Act 1992 (TULRCA). To find otherwise would have given the union a veto over the most minor changes in terms and conditions.
S.145B is complex but it is essentially aimed at preventing an employer going over the heads of the union with a direct offer to workers, in order to achieve a “prohibited result” that one or more terms will not be determined by an existing collective agreement, if the offer is accepted. The provision was introduced in 2004 to remedy a gap in UK legislation exposed by Wilson v UK, that domestic law did not prohibit an employer from offering an inducement to employees to relinquish their right to union representation, (provided this was not about the employer preventing the employee from being a member of the union.)
In early 2015 the employer had entered into a recognition agreement with Unite. During the first round of formal pay negotiations towards the end of the year, the employer put forward a 2% increase in pay (4% for those earning less than £20,000), and a Christmas bonus in return for a reduction in sick pay for new joiners, a reduction in Sunday overtime and the consolidation of two 15 minute breaks into a 30 minute break.
The union balloted its members who rejected the offer. The employer then wrote directly to the employees explaining that they should reply before 18 December 2015 saying whether they agreed to the offer in order to receive their Christmas bonus. A further direct letter was sent in January to all staff saying that if an agreement could not be reached then termination and reengagement may follow. Sometime later in 2016 the union and the employer eventually reached an agreement, after working through the dispute resolution process and a ballot being called for an overtime ban.
55 employees who were all members of Unite brought tribunal proceedings, claiming that both the December and January letters amounted to an unlawful inducement contrary to s.145B. The Tribunal agreed with the claimants and awarded the mandatory fixed amount of £3,800 for each offer, totalling £7,600 for each claimant. The EAT agreed with the Tribunal that the letters breached s.145B. The employers appealed to the Court of Appeal.
The Court of Appeal considered the scope of s.145B and what the legislation was trying to prevent as a result of the Wilson case. They explained that if they accepted Unite’s position “It would amount to giving a recognised trade union with a collective agreement similar to the one in the present case a veto over even the most minor changes in the terms and conditions of employment, with the employers incurring a severe penalty for overriding the veto.” They overturned the Tribunal’s decision and allowed the employer’s appeal.
A clear factor in this case was the finding of fact made by the Tribunal that the employers were not motivated by hostility to trade unions. In making the direct offer to the employees although the employer was circumventing the collective bargaining process, this did not amount to a “prohibited result” in accordance with the statutory meaning.
The Court of Appeal clarified that s.145B (1) and (2) prevents two types of situations.
- The first is where a 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.
- The second applies where a trade union is already recognised, a collective agreement is in place 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 explained that “No longer” clearly indicates a change taking the term or terms concerned outside the scope of collective bargaining on a permanent basis.
The Court of Appeal rejected the idea that there was a third type of case, similar to the facts of this one where an 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.” This would mean that a union would always be able to veto any offer made by an employer. As the Court explained if the union do not agree with this approach they can ballot their members.
Implications for employers
This decision is good news for employers but does not give employers a green light to simply circumvent union negotiations where an impasse occurs. Given the potential legal and financial risks involved here, advice should be taken before writing directly to employees. While it is helpful to clarify the limited scope of s.145B this decision only affects a direct offer which could be construed as temporary or applying on one particular occasion. Any suggestion of a permanent change in approach may result in a breach of s.145B. Similarly, facts pointing towards union hostility may also change the position. Of course this may not be the end of the matter. Unite has said they are “extremely disappointed” with the ruling and will be seeking leave to appeal to the Supreme Court.