In the latest instalment of the long-running Kostal UK v Dunkley case, the Supreme Court has held that the employer’s direct pay offer to its employees was an unlawful inducement as it bypassed the collective bargaining with Unite (the recognised trade union).
Section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) prohibits an employer from making offers to members of a recognised trade union where the employer’s sole or main purpose in making the offers is to achieve a "prohibited result". The "prohibited result" is that the employees’ terms of employment, or any of those terms, will not (or will no longer) be determined by collective agreement negotiated by the union.
Mr Dunkley and 56 other claimants were all members of Unite and were employed as shop floor or manual workers by Kostal. Following a ballot of workers, Kostal and Unite signed a Recognition and Procedural Agreement in February 2015.
In October 2015, Kostal began annual pay negotiations with Unite. Kostal made a pay offer, which was rejected by Union members. Kostal then made the same offer to its employees directly, bypassing Unite. Kostal subsequently made another similar offer to those employees who had not yet accepted the first offer. Kostal also informed those employees that, if no agreement was reached, "this may lead to the company serving notice on your contract of employment". In November 2016, by which time over 97% of employees had accepted one or other of the direct offers, Kostal and Unite reached a collective agreement for 2015 (on similar terms to the direct offers).
The claimants complained to an employment tribunal that the direct offers made to them by Kostal contravened section 145B of TULRCA. The tribunal upheld the complaints and made the statutory award of £3,800 to each claimant for each offer made to him. The case has now reached the Supreme Court.
The Supreme Court held that an unlawful inducement was made by Kostal, because it made a direct offer to its workers, including union members, before the collective bargaining process had been exhausted.
The majority decision of the Supreme Court said that section 145B TULRCA will only apply where there is a real possibility that, had the offer not been made and accepted, the workers’ relevant terms of employment for the period would have been determined by a new collective agreement. Therefore there is nothing to prevent an employer from making an offer directly to its workers in relation to a matter which falls within the scope of a collective bargaining agreement provided that the employer has first followed, and exhausted, the agreed collective bargaining procedure.
Where an employee succeeds in a claim under section 145B, the tribunal must make a mandatory award. The employer in this case is on the hook for awards to each claimant of £3,800, being something in the region of £217,000 in total for the 57 claimants. The current mandatory award has now increased to £4,341 per offer made. Given the potential significant financial impact, employers should beware not to seek to break impasses in collective negotiations by making direct offers to their employees unless the collective bargaining process has been genuinely exhausted.