In the recent case of Kostal UK v. Dunkley  EWCA Civ 1009, the Court of Appeal was asked to consider if the employer has the right to bypass a recognised trade union and make “a one-off offer” directly to workers.
The employer, Kostal, signed a recognition agreement with the union and agreed to give the union “sole recognition and bargaining rights”. Shortly afterwards, the union commenced formal negotiations with Kostal. The company offered the workers a pay increase and a Christmas bonus in exchange for certain concessions with regard to other benefits. The negotiated pay deal was overwhelmingly rejected by the workers following a consultation ballot. In response, Kostal approached the workers directly and asked them to either accept the new terms by 18 December or receive no Christmas bonus and no pay increase. The majority of the workers agreed to the new terms. In January, Kostal wrote to those workers who did not sign the new terms and advise them that, if an agreement could not be reached, the company may need to serve them notice on their contract of employment. Eventually, a collective agreement was reached to pay the amended terms and conditions. However, a group of workers decided to bring a claim against Kostal, citing the infringement of their rights under section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA).
What is the purpose of section 145B?
Section 145B makes it unlawful for employers to make an offer to members of a recognised (or seeking to be recognised) trade union, if:
“(a) acceptance of the offer (…) would have the prohibited result, and
(b) the employer’s sole or main purpose in making the offers is to achieve that result.”
The prohibited result under section 145B(2) is that “the workers’ terms of employment, or any of those terms, will not (or will no longer) be determined by collective agreement negotiated by or on behalf of the union.”
In other words, section 145B seeks to prevent employers from bypassing trade unions and negotiating offers directly with their workers, with the sole or main purpose of undermining collective bargaining. Such behaviour would amount to unlawful inducement and could result in compensation being sought by each worker to whom the offer was made.
Kostal’s position was that it approached the workers because it simply wanted them to have the opportunity to receive their Christmas bonus. They argued that their actions were outside the scope of section 145B, that they had never intended to induce the members and that, in fact, they had reached an agreement with the union as a result of collective bargaining. These arguments were unsuccessful when considered by the Employment Tribunal and the Employment Appeal Tribunal. Kostal appeal to the Court of Appeal.
Decision of the Court of Appeal
In considering the matter, the Court of Appeal focused on the meaning of “prohibited result”. In doing so, it distinguished the following categories:
i. where a trade union is seeking to be recognised and an employer makes an offer with the main and sole purpose of the workers’ terms of employment not being (will not) determined by a collective agreement; and
ii. where the trade union is already recognised and an employer makes an offer with the main and sole purpose of the worker’s terms of employment no longer (will no longer) being determined by a collective agreement.
The Court questioned whether there is also a further category following on from the above – namely, where an independent trade union is already recognised, the terms of employment are determined by the collective agreement, and the employer makes a one-off offer (“on this occasion”) which will not be determined by a collective agreement.
The Court concluded that such a category does not exist under section 145B. It was held that the members of the union were not asked to relinquish, even temporarily, their right to be represented by their union in the collective bargaining process and “all that has happened was that the employer has gone directly to the workforce and asked them whether they will agree a particular term, on this occasion.”
The union in this case has already announced that it is considering to appeal the decision to the Supreme Court. It is seen by the unions as a potential tool allowing employers to introduce the new terms to workers through the back door.
Although the decision is a useful reminder that employers are not allowed to induce workers in accepting the terms of a collective agreement, the actual meaning of “on this occasion” offer remains unclear and is likely to create confusion going forward.
It is possible that some employers will be trying to interpret the decision widely and to use it to pursue the change of terms and conditions in the event there is an impasse in their negotiations with the trade unions.
Only time will tell whether this decision will also put any strain on the unions and, if they may be required to take any additional actions if they feel that there is a risk that the employer may attempt to approach the workers directly.