Significant decision involving collective bargaining

United Kingdom

Employers who engage in collective bargaining arrangements with trade unions are unable to make direct offers to union members until they exhaust collective bargaining procedures. The Supreme Court decision of Kostal UK Ltd v Dunkley reverses the previous judgment of the Court of Appeal in the same case. Any employer who recognises a union should pay careful attention to this decision. By making the offer to individual employees (including union members) at that time the employer was in breach of s.145B and incurred a significant penalty totalling over £400,000.

The law

S.145B of the Trade Union and Labour Relations Act (TULRCA) 1992 was inserted in 2004 following a legal challenge in the European Court of Human Rights (ECHR); Wilson and Palmer v UK. The resulting statutory provision 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.

Facts

Details of this case are set out in our previous Law-Now. (Bypassing collective bargaining) The salient points involved two direct offer letters, one prior to Christmas 2015 and the other in January 2016 which were written by the employer to employees while pay negotiations were ongoing.

Previous stages of this case

Mr Dunkley and 56 other claimants who were all members of Unite brought tribunal proceedings, claiming that both the December and January offer letters amounted to an unlawful inducement contrary to s.145B of TULRCA. 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 who upheld their appeal on the basis that this was a direct offer which could be construed as temporary or applying on one particular occasion where the negotiation had reached difficulties. They did not consider that this was a permanent attempt to circumvent collective bargaining.

The Supreme Court decision

The Supreme Court rejected the Court of Appeal’s reasoning that this had been a temporary situation. Following an examination of the legislative origins of s.145B the Court sought to determine the purpose of the legislation.  The majority said that the offer had achieved a prohibited result and was in breach. However, the minority disagreed with this reasoning, although they reached the same conclusion.

The Court explained that one of the purposes of sections 145A-145F of TULRCA was to ensure that domestic law complied with the ruling of the ECHR in Wilson and Palmer v UK which was itself concerned to ensure compliance with article 11 of the ECHR (freedom of association and the right to union representation). When looking at s.145B the primary question must be to identify the nature and scope of the prohibited result. What is prohibited by the section is not the making of an offer which, if accepted, would constitute an agreement with a particular content. Rather, what is prohibited is the making of an offer which, if accepted, would have a particular result. 

Implications for employers

Employers cannot try to circumvent stalled negotiations by going over the heads of the union and contact employees directly. If there is a recognition agreement in place this should be respected and the procedure followed and exhausted before making any direct offer (and we would recommend that advice was taken before doing so).  What the employer cannot do with impunity is make an offer directly to its workers, including those who are union members, before the collective bargaining process has been exhausted.

Employers may want to ensure that new procedures for collective bargaining do not allow for long drawn-out processes. It should also be very clear when the process comes to an end, including any dispute resolution procedure. One of the issues raised in the case was the risk that if employers must wait for procedures to be exhausted, how will they know with certainty when they have reached that point?  The Supreme Court explained that employers have two means of protection against the risk that it was not clear when the process is finished.

  • The first is to ensure that the agreement for collective bargaining made with the union clearly defines and delimits the procedure to be followed.

  • A second level of protection is provided by the requirement of section 145B(1)(b) that the section will not be contravened unless the employer’s sole or main purpose in making the offers is to achieve the prohibited result. If the employer genuinely believes that the collective bargaining process has been exhausted, it cannot be said that the purpose of making direct offers was to procure the result that terms will not be determined by collective agreement when that otherwise might well have been the case.

We suspect, however, that the issue of when procedures are in fact exhausted will be an area where we see further debate.