Collective bargaining must be exhausted before an offer to staff can be made

Case update on Kostal UK Ltd v Dunkley and others [2021] UKSC

In Kostal the Supreme Court considered for the first time whether an employer’s attempt to bypass a recognised trade union by making direct offers to individual employees amounted to unlawful inducement contrary to section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA).

This is a case we’ve been keeping a close eye on throughout its journey through to the UK Supreme Court. If the Supreme Court had followed the EAT in determining that making an offer direct to staff who are trade union members would amount to unlawful inducement contrary to section 145B of TULRCA, that would in effect give trade unions the ability to veto any proposed changes to terms and conditions via collective bargaining and significantly limit an employer’s options when faced with resistance from trade unions to proposed changes.

In Kostal however the Supreme Court has determined that employers can make direct offers to staff to change their terms and conditions, but only after collective bargaining has been attempted and the employer is satisfied that the process has been exhausted.

Facts

Mr Dunkley and 56 other claimants were members of Unite and were employed as shop floor or manual workers by Kostal UK Ltd. Following a ballot of workers, Kostal and Unite signed a (non-legally binding) Recognition and Procedural Agreement in February 2015. In October 2015, they began formal annual pay negotiations.

Following two preliminary meetings with Unite representatives, Kostal made a pay offer. Union members were balloted and rejected the offer. On 10 December 2015 Kostal made the same offer to its employees directly, bypassing Unite. Kostal made another similar offer to those employees who had not yet accepted the first offer on 29 January 2016. Kostal also said 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).

Decision

The Supreme Court allowed the appeal on behalf of the employees. It found that Kostal agreed, when it entered into the recognition agreement with Unite, to conduct annual pay negotiations and to follow the procedure outlined in the appendix to the agreement before making or proposing any change to terms and conditions of employment outside of that process:

• The direct offers made to employees were contrary to that agreement because they were made before the process had been exhausted.
• Kostal treated those employees who were not prepared to relinquish their right to have the agreed collective bargaining procedure followed less favourably; employees that did not accept the direct offer would not receive the 2015 Christmas bonus and employees that did not accept the second offer were threatened with termination of their employment contract.

In those circumstances, Kostal’s conduct could fairly be characterised as a disincentive or restraint on the use of union representation in collective bargaining to protect the employees’ interests, and the tribunal was entitled to find that the offers were made in contravention of section 145B of TULRCA.

Summary

An employer needs to be able to show that applicable collective bargaining procedures have been exhausted, or that they genuinely believe them to have been exhausted, before any offer is made directly to staff in order to avoid claims that section 145B TULCRA has been breached.

The decision gives much needed clarity for both employers and unions as to their options and obligations when agreement cannot be reached during collective bargaining.

For further advice on these cases or any employment law matters contact the Geldards’ Employment Team who are always available to help.