Collective Bargaining: Unlawful inducement

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Collective Bargaining: Unlawful inducement

Published 3 julio 2019

THE FACTS

As we reported (available here), the EAT last year considered section 145B of the Trade Union Labour Relations (Consolidation) Act (TULR(C)A) for the first time. The EAT’s decision, which went against the employer Kostal, upheld 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. Kostal appealed to the Court of Appeal.

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 going over the head of 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 appealed to the EAT. Kostal argued that it had never intended to cease collective bargaining – indeed, a collective agreement was ultimately reached on pay and terms and conditions. The EAT dismissed the appeal. It held that, if acceptance of direct offers to workers means that at least one term of employment will, as a result, be determined by direct agreement (whenever that occurs), and not collectively (even if other terms continue to be determined collectively) that is sufficient to amount to the “prohibited act” under s145B. The fact that the result is temporary (in the sense of being a one off direct agreement following acceptance of the offer) rather than permanent does not affect this question. There is nothing in s145B that deals with the duration of the effect or requires a permanent surrender of collective bargaining in the future.
The EAT also held that the tribunal had not erred in making two financial awards to each claimant - an award in respect of the two unlawful offers made in the December and January letters respectively. They were two separate unlawful inducements, meaning separate awards could be made.

Kostal 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:

  1. Where an independent trade union is seeking to be recognised and the employer makes an offer whose sole or main purpose is to achieve the result that the workers’ terms of employment will not be determined by a collective agreement; and

  2. Where an independent trade union is already recognised and the workers’ terms of employment are determined by collective agreement negotiated by or on behalf of the union, and the employer makes an offer whose sole or main purpose is to achieve the result that the workers’ terms of employment (as a whole), or one or more of those terms, will no longer be determined by collective agreement. “No longer” clearly indicates a change which takes the term or terms concerned outside the scope of collective bargaining on a permanent basis.

The court held that the type of case relevant to Kostal did not come within the scope of S145B. These are cases where an independent trade union is recognised, the workers’ terms of employment are determined by a collective agreement negotiated by or on behalf of the union, and the employer makes an offer whose sole or main purpose is to achieve the result that one or more of the workers’ terms of employment will not, on this one occasion, be determined by the collective agreement. 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. The court considered that it was unlikely that this was intended by Parliament. In this category of case, union members are not being asked to relinquish, even temporarily, their right to be represented by a union in the collective bargaining process. All that has happened is that the employer has gone directly to the workforce and asked them whether they will agree to a particular term on this occasion.

WHAT DOES THIS MEAN FOR EMPLOYERS?

It is possible that this case will be appealed. However, in the absence of a successful appeal, this case is authority that employers will be able to break impasses in collective negotiations by making direct offers to the workforce, on the understanding that it is only intended to resolve the current impasse rather than end collective bargaining generally or over a specific issue. So, this decision removes the “veto” that the EAT’s decision had appeared to give recognised unions over employers making direct offers to employees to break a negotiating deadlock.

Kostal UK LTd v Dunkley [2019] EWCA Civ 1009 (13 June 2019)

Authors

Ceri Fuller

Ceri Fuller

London - Walbrook

+44 (0)20 7894 6583

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