In October 2021 the case of Kostal v Dunkley was decided by the Supreme Court.
It is an important case for employers who recognise a trade union for collective bargaining purposes.
The case concerns section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA).
Section 145B is designed to prevent the employer offering inducements to employees with the aim of creating a situation where employment terms will no longer be collectively negotiated with the trade union. Or as the Supreme Court put it, to ban employers from “undermining the union’s ability to strive for the protection of its members’ interests.”
The legislation states that this aim (ending collective bargaining) must be the employer’s sole or main purpose in making the offers.
Breaching section 145B can result in high financial penalties for an employer – there is a mandatory fixed sum which at the time of the events in this case was £3,800 for each offer. It is currently £4,341 per unlawful offer.
In this case the employer was alleged to have made two prohibited offers to approximately 55 employees.
The employer recognised Unite for collective bargaining purposes. The recognition agreement provided that formal pay negotiations would take place annually, and that any proposed changes to terms and conditions of employment would be negotiated with Unite.
In short, the employer made direct offers to workers after a majority of union members voted in a ballot to reject the employer’s pay proposal.
Workers were offered a bonus if they agreed to new terms by a certain date. Letters were sent out setting out the offer and it was alleged that the offers made were in breach of section 145B.
Even though these offers had been made, a pay deal for that year was later agreed between the employer and the union. However, the Supreme Court found that there was a breach of section 145B in this case.
The key points from the Judgment are:-
- Unlawful offers may be intended to bypass collective bargaining permanently or only temporarily (e.g. for one annual pay round) or a short period.
- Where there is a recognised trade union, an employer can make direct offers to workers relating to a matter in scope of a collective bargaining agreement provided the employer has both followed and exhausted the agreed collective bargaining procedure.
- However, an employer cannot make direct offers to workers before the agreed collective bargaining process has been exhausted, where the aim is to bypass collective bargaining temporarily or permanently.
Practical advice
The Supreme Court was clear that this decision does not mean that if pay negotiations break down, employers cannot make offers directly to the workforce.
What is required is clarity that the agreed collective bargaining procedure has been exhausted.
As the Court suggested, the parties can create more certainty by ensuring that the relevant agreement between the employer and the trade union clearly defines the procedure to be followed, so that no one is in any doubt about when it is exhausted.
In addition, section 145B provides a second level of protection for the employer in that it will not be contravened unless the employer’s sole or main purpose in making the offers is to achieve the prohibited result of ending collective bargaining.
If the employer has another aim in making the offers the employer’s actions will not be unlawful. They will of course need to be able to produce evidence of such an alternative aim to show, if challenged, that this was genuinely the case.