In the recent Court of Appeal case of Kostal UK v Dunkley & Others UKEAT/0108/17/RN, the Court was asked to consider whether a business could offer its employees inducements in relation to collective bargaining in order to influence their relationship with a trade union (Unite).
Case background
Kostal UK, an automotive parts company, sent letters to its workers in November 2016 in relation to a pay deal, which included a 2% pay increase but a reduction in certain other employment entitlements. This deal had previously been sent to the employee’s union representatives, Unite, but was rejected following a member ballot. The letter sent to the workers asked that they agree to the deal on offer, or they wouldn’t receive their Christmas bonuses and they would lose their pay increase.
After Christmas, the employees who did not respond to the initial letter, received a second notice from Kostal UK which stated that if no agreement was reached then ‘this may lead to the company serving notice on your contract of employment’.
Section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992, prohibits offers from a business to members of a union in which it proposes to stop collective bargaining in order to achieve a ‘prohibited result’.
Employment Appeal Tribunal (EAT) decision
In December 2017, the EAT referred to section 145B when it heard this case, upholding the original Employment Tribunal (ET) decision which stated that the employer had offered an unlawful inducement to its employees by sidestepping collective bargaining with their union and making a direct pay offer to them. The EAT also stated that the fact that the result was temporary, e.g. a one-off direct agreement, rather than permanent, didn’t have any relevance in this instance.
The result of this ruling was that the employer would have to pay a penalty for each offer made to the employees (this fixed amount was then £3,800 per person per penalty, but is now £4,193).
Court of Appeal decision
Following an appeal from Kostal UK, the Court of Appeal overturned the above ruling due to the ET and EAT’s literal interpretation of Section 145B of the Act. The Court of Appeal stated that this section doesn’t cover circumstances where an employer makes an offer with the principal aim being, on a one-off occasion, that one or more of the employees’ terms of employment will not be determined by a collective agreement, and that it should not be construed in a way that could give a trade union a refusal over any variations to the terms on offer.
The Court of Appeal deemed that the offer put forward to the union members in this instance, which was rejected, did not allow them the right to call a ballot over it, or to require members to renounce their right to union representation.
Importantly, Kostal UK was not motivated by hostility to trade unions and it was also significant that the offers were made to the whole workforce and that each individual, whether they accepted the offer or not, and whether a member of Unite or not, would continue to be represented under the collective agreement.
How Nelsons Can Help
For further information or to comment on this article, please contact our Employment Law team on 0800 0241 976 or via our online form.