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Published 27 October 2021
As we reported, in 2019 the Court of Appeal considered section 145B of the Trade Union Labour Relations (Consolidation) Act (TULR(C)A) for the first time. The Court of Appeal’s decision, which went for the employer Kostal, reversed the employment tribunal’s decision that Kostal had offered employees unlawful inducements to cease collective bargaining when it directly offered them a package of terms and conditions, going over the head of the recognised trade union. The employees appealed to the Supreme Court.
Section 145B prohibits employers making offers to workers who are members of a recognised trade union, if acceptance of the offer would have “the prohibited result” and the employer’s sole or main purpose in making the offer is to achieve that result. The “prohibited result” is that the workers’ terms of employment, or any of those terms, “will not (or will no longer) be determined by collective agreement negotiated on behalf of the union”. The aim of the legislation is to prevent employers bypassing the union with direct offers to workers in order to achieve the result that one or more terms will not be determined by collective agreement.
The recognition agreement between Unite and Kostal provided that formal pay negotiations would take place annually, and that any proposed changes to terms and conditions would be negotiated with Unite. In 2015, Unite and Kostal entered into pay negotiations for the first time. Kostal offered a 2% increase in basic pay and a lump sum Christmas bonus in return for (amongst other things) a reduction of sick pay for new joiners and a reduction in Sunday overtime. Unite felt that it could not recommend the offer made by Kostal and gave its members a “free vote” in a subsequent ballot. Only 20% of those who turned out voted to accept the proposal. Kostal was disappointed in this result and it wrote to Unite informing it that Kostal was going to write to every individual employee to offer the pay increase and changes to terms and conditions. Kostal put up posters in the workplace explaining this and then wrote to every employee, setting out the pay offer and explaining that if the offer was not accepted by 18 December, employees would not receive a Christmas bonus.
In January, Kostal wrote again to employees who had not accepted the offer, this time offering a 4% increase in basic pay if they agreed to the proposed changes in terms and conditions and threatening dismissal if they did not do so.
In response, 57 employees who were members of Unite brought employment tribunal claims against Kostal, alleging that the December letter and the January letter each constituted an unlawful inducement and therefore a breach of s145B. The tribunal upheld these claims and awarded compensation of £3,830 per employee in respect of each of the letters.
Kostal unsuccessfully appealed to the EAT. Kostal then appealed to the Court of Appeal on the liability point only. The Court of Appeal upheld the appeal. It considered the wording of the legislation, and held that the provisions should be interpreted as dealing with two types of cases only:
The court held that the type of case relevant to Kostal did not come within the scope of S145B. The court held that the inclusion of this category of case would give a recognised trade union an effective veto over any direct offer to any employee concerning any term of the contract, major or minor, on any occasion. It also considered that it was unlikely that this was intended by Parliament. The employees appealed to the Supreme Court.
The Supreme Court allowed the employees appeal but for largely different reasons from those relied on by the employees, ET and EAT. The majority of the Supreme Court found:
Whilst Kostal were unsuccessful the Supreme Court’s decision is largely good news for employers. The message is “exhaust collective bargaining before making a direct offer to employees”. In more detail:
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