The Supreme Court has held that an employer may only make an offer directly to employees who are covered by collective bargaining once the collective bargaining process has been exhausted. If an employer makes an offer whilst collective bargaining is ongoing, they will be liable to a fine for contravening section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) (s.145B). That section makes it unlawful for employers to make an offer to members of a recognised trade union (or a trade union in the process of seeking recognition) which is intended to result in one or more terms of employment being determined other than through collective bargaining.
The Supreme Court’s decision in Kostal UK (Kostal) v. Dunkley stems from ongoing negotiations between the trade union, Unite, and Kostal after Kostal put forward a package of pay increases and Christmas bonuses coupled with detrimental changes to employment terms. The package was rejected by Unite on behalf of its members. Kostal then wrote to its workers directly, offering them the same package and notifying them that, if they did not agree, they would not receive a Christmas bonus. Subsequently Kostal wrote to the employees again to tell them that their contracts might be terminated if they could not reach an agreement. In response a number of Unite members brought claims against Kostal alleging that this was an unlawful offer in breach of s.145B. For more detail on the facts and background of this case, please see our blog on the Court of Appeal’s decision.
Following the Court of Appeal’s decision in favour of Kostal, the union members appealed to the Supreme Court. Unite and Kostal agreed that offers which (if accepted) would require workers who are members of a trade union to renounce any collective bargaining rights, whether indefinitely or for a period of time, fall within and are prohibited by s.145B. However, while Kostal argued this was the only offer that fell within the scope of s.145B, Unite argued for a wider interpretation of the provision.
The Supreme Court’s decision
The Supreme Court, in allowing the appeal, rejected both parties’ interpretation of s.145B. The Supreme Court said the parties had mistakenly focused solely on the content of the employer’s offer. Instead, the Supreme Court made it clear that s.145B prohibits an offer would have a particular result if accepted by all the workers to whom the offer is made. A practical consideration of the potential consequences of the offer and the employer’s conduct is therefore required. If it is possible to establish a causal connection between the presumed acceptance of the relevant offers and a result that would mean the workers’ terms of employment will not (or will no longer) be determined by collective agreement negotiated by their union, the employer will likely have acted unlawfully.
The majority of the Supreme Court stated that this causal connection would only be established where there is a real possibility that, had the offer not been made and accepted, the relevant terms of employment would have been determined by collective agreement. Therefore, if there is a chance that the collective bargaining process will succeed, an employer cannot make an offer directly to its workers without risking liability to pay the penalty to each worker to whom the offer was made.
The Supreme Court has made it clear that employers cannot approach workers directly until they have exhausted negotiations with recognised trade unions. What will be enough to establish that the employer has exhausted the collective bargaining process? We foresee potentially technical and distracting disputes over this: employers will want to argue there was no longer any realistic prospect of agreement while unions will inevitably be keen to argue that agreement was still possible. The causation test is also likely to be difficult for tribunals to apply and may lead to protracted litigation. To avoid these difficulties, we may see employers taking more extreme action, such as seeking to derecognise unions (or threatening to), freezing pay (where pay increases are at the heart of the dispute) or simply imposing its offered deal.