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Offers Made Directly to Employees During Collective Bargaining Process Amount to Unlawful Inducement

on Friday, 05 November 2021.

In Kostal UK Ltd v Dunkley and Ors, the Supreme Court has held that any offer made to change the terms and conditions of an employee's contract where a collective bargaining process is still ongoing will constitute an unlawful inducement.

The Law

Where an employer recognises a trade union as having collective bargaining rights in relation to some or all of its workers then, if the employer wishes to change those workers' terms and conditions relating to pay, hours or holidays, it must negotiate those changes with the union. Section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 ('s145B') prohibits employers from bypassing this process by making offers directly to the employees. Specifically, s145B provides that such offers are unlawful if the purpose of the offer is to achieve the result that the employees' terms 'will not (or will no longer) be determined by collective agreement negotiated by…the union.' This is known as the 'prohibited result.' If a worker, or the relevant union, considers that an employer has breached this requirement it can bring a claim, known as an unlawful inducement claim, within three months of the offer. 

The Facts

In the above case, Kostal UK (KUK) had been trying to reach agreement with Unite, the recognised trade union, regarding a package of changes. The proposed changes had been rejected following a ballot of the members and, although the recognition agreement contained a process for resolving disputes, KUK wrote directly to the employees offering them the opportunity to individually agree to the proposed changes and stating that, if they did not accept the deal before 18 December, they would lose their Christmas bonus. The same offer was then repeated by a further letter sent to each of the employees several weeks later.

A number of Unite members brought claims arguing that KUK's actions were in breach of s145B. The Employment Tribunal agreed, holding that each letter sent amounted to a breach, with the result that KUK was ordered to pay damages of £7,600 (representing £3,800 for each letter) to each of the Claimants - a total of £421,800. KUK appealed unsuccessfully to the EAT, but then appealed again to the Court of Appeal, that time successfully. The Court of Appeal concluded that the aim of s145B was to make it unlawful for employers to offer inducements to employees to permanently give up collective bargaining rights, rather than to give them up on one occasion. On that basis, the Court of Appeal concluded that, since KUK's employees would have continued to be represented by Unite regardless of whether or not they accepted the direct offer, there had been no breach. The employees appealed to the Supreme Court.

The Decision of the Supreme Court

This was the first occasion that the Supreme Court had considered the provisions of s145B and it allowed the appeal. It concluded that whether an offer is contrary to the provisions of s145B is not dependent upon whether union members are being offered an inducement to surrender their collective bargaining rights indefinitely, or for a short period. Rather it stated that what mattered was whether, if the offer was accepted, it would have the prohibited result and that, it held, was a question of causation. It noted that the state of affairs described in s145B could not be regarded as the 'result' of an employers offer if it would have happened in any event. Therefore it stated that, for an offer to be capable of having the prohibited result, there had to be a possibility that if the offer was not made and accepted, then the terms would have been determined by collective agreement negotiated with the union. Otherwise, if there were no such possibility, then there could be no causal connection between the offer and the prohibited result. In the present case, since the offer had been made to the employees before the collective bargaining process had been exhausted, it could not be said that, when the offers were made, there was no possibility that the matters would have been determined by collective agreement had the offers not been made and accepted, so KUK's actions amounted to unlawful inducement.

What Does This Mean for Employers?

This case brings a welcome end to the uncertainty on how employers can make direct offers to their staff in relation to matters which fall within the scope of collective bargaining. It is now clear that, where there is a recognised trade union, employers can make direct offers to the workers but only once the collective bargaining process has been followed, in good faith, and exhausted. Employers will therefore want to be sure that their recognition agreements clearly define the limits of the collective bargaining process so that the parties are clear when it has been exhausted. 

However, employers should not read this judgment as giving them the ability to simply go through the steps of a collective bargaining process without making any genuine attempt to reach agreement, with the intention of making direct offers once the process has been exhausted. This would not only undermine the relationship with the union but could arguably still result in a breach of s145B as it is possible that, had they not thwarted the process, the terms could have been determined by a collective agreement and the causal connection between the employers conduct and the prohibited result could therefore be established.  


For legal advice on employee terms and conditions, please contact Lorna Scully in our Employment Law team on 07500 846624, or please complete the form below.

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