The Employment Appeal Tribunal (EAT) has confirmed that offers made directly by an employer to its employees may constitute unlawful attempts to bypass collective bargaining contrary to Section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992. This was a costly exercise for the employer in Kostal UK Limited v Mr D Dunkley (UKEAT/108/17), as it was ordered to pay penalties exceeding £400,000.
The case involved an appeal by the employer, Kostal UK Limited, against a March 2017 Employment Tribunal decision (for further details please see "The risk for employers in bypassing collective bargaining").
In order to overcome a perceived impasse in negotiations with its recognised trade union, Unite, Kostal directly offered its employees an improved pay deal in return for changes to working hour patterns. It made two offers, one in December 2015 and one in January 2016.
Unite argued that Kostal's actions sought to bypass a newly agreed collective bargaining arrangement and that this was a breach of Section 145B of the Trade Union and Labour Relations (Consolidation) Act. The provision's purpose is to prevent employers from undermining the principle of collective bargaining and gives effect to a European Court of Human Rights ruling that employees should not be disincentivised from enjoying collective bargaining rights.
If an offer is made to employees that leads to terms and conditions no longer being determined by collective bargaining (the so-called 'prohibited result'), it is a breach of Section 145B. The penalty for this is £3,907 per affected employee (£3,800 at the time of Kostal's offers).
The Employment Tribunal agreed that Section 145B had been breached and found that the two offers were separate and distinct; therefore, each employee should receive two awards of £3,800. Kostal appealed in relation to:
- liability – arguing that its intention was not to cease collective bargaining; and
- remedy – arguing that only one award of £3,800 should have been made to each employee.
In its December 2017 judgment, the EAT upheld the Employment Tribunal's decision and rejected Kostal's appeals on both liability and remedy. This was the EAT's first decision on Section 145B.
The EAT held that the prohibited result occurs where offers – if accepted – result in new terms being agreed directly, rather than through collective bargaining. For a claim under Section 145B to succeed, there is no need for a particular term or terms to be permanently removed from the scope of collective bargaining. The fact that collective bargaining had continued at Kostal did not prevent the direct offers made in December 2015 and January 2016 from having the prohibited result. If accepted, those offers would have resulted in the relevant terms set out in the offer letters being agreed directly with employees, rather than through collective bargaining. While the change in terms may not have been permanent, they would have remained in place until a further change was implemented.
The EAT also agreed with the Employment Tribunal that the offers made by Kostal had been separate and distinct. Therefore, the relevant employees were entitled to two separate awards of £3,800 for two separate breaches of Section 145B.
Employers may be concerned that Section 145B creates a trade union veto which prevents them from making changes in any circumstances without union agreement. However, the EAT confirmed that unions do not enjoy a "practical veto" and indicated that "if collective bargaining breaks down, to the extent that the employer has a proper purpose for making offers directly to workers, there is nothing to prevent such offers being made". This is because Section 145B "does not prevent employers from making offers that would merely have the prohibited result; the employer must also have as his sole or main purpose an unlawful purpose".
Each case will turn on its facts. Whether collective bargaining has broken down and the employer's motives will be crucial in each case. Kostal was hampered by the factual findings that it had been "somewhat disingenuous" about its purpose, as it had acted in a way "intended to weaken Unite's negotiating position" without exhausting agreed dispute resolution procedures. This led Kostal to pay a heavy price, but may provide some comfort to employers without such motives that wish to make direct offers to employees in the event of a genuine impasse.
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For further information on this topic please contact Richard Moore or David Hopper at Lewis Silkin by telephone (+44 20 7074 8000?) or email ([email protected] or [email protected]). The Lewis Silkin website can be accessed at www.lewissilkin.com.
