Unlawful Inducements and Collective Bargaining

The Supreme Court has its say (Kostal UK Ltd v Dunkley & Ors [2021] UKSC 47)

With their decision in Kostal UK Ltd v Dunkley & Ors [2021] UKSC 47, the Supreme Court has handed down a seminal ruling on collective bargaining rights, and its first interpretation of S.145B of the Trade Union & Labour Relations (Consolidation) Act 1992 (TULR(C)A).

The Court found that Kostal, the employer, had unlawfully offered inducements to employees in an attempt to bypass a union ballot decision that rejected Kostal’s pay proposals.

Background of the case

Kostal is a Rotherham-based automotive parts manufacturer. Formal pay negotiations began in October 2015 between Kostal and Unite the Union, who held sole recognition and bargaining rights for Kostal employees (the claimants in the Supreme Court case). Kostal took their pay proposals to the employees who voted by nearly 80% of members to reject the offer. In December of the same year, Kostal bypassed the collective bargaining process by offering the same terms to each employee individually.

Kostal also warned that those who did not accept the new terms were at risk of losing their Christmas bonus. Those employees that did not accept Kostal’s terms in December then received a second offer in January 2016, informing them that if they continued to hold out, it “may lead to the company serving notice on your contract of employment”.

Acceptance of either the December 2015 or January 2016 offer then stood at more than 97%. Mr Dunkley, along with 56 other claimants, took action against Kostal in the Employment Tribunal to the effect that the direct offers made to them by Kostal had breached S.145(B) TULR(C)A.

What is S.145B TULR(C)A?

Section 145B:

(1) A worker who is a member of an independent trade union which is recognised, or seeking to be recognised, by his employer has the right not to have an offer made to him by his employer if –

(a) acceptance of the offer, together with other workers’ acceptance of offers which the employer also makes to them, would have the prohibited result, and

(b) the employer’s sole or main purpose in making the offers is to achieve that result.

(2) 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 by or on behalf of the union.

Here then, the central issue was whether Kostal’s individual offers to employees had the prohibited result that pay discussions were not (or no longer) determined by collective agreement negotiated by Unite.

The Supreme Court’s decision

The Supreme Court unanimously allowed the claimants’ appeal. Lord Leggatt (with whom Lords Briggs and Kitchin agreed) wrote the leading judgment. Lady Arden and Lord Burrows came to the same result, but via alternative reasoning.

Throughout the case’s progression up the judicial ladder, both parties agreed that offers requiring trade union members to forego or relinquish collective bargaining rights, for any period, would fall within S.145B. A major pillar of Kostal’s argument was that this was the only type of offer to which S.145B applied. The claimants argued for a wider interpretation wherein, should an offer have the effect that if accepted, at least one term of employment would be directly and not collectively agreed (temporarily or permanently), section 145B would be triggered.

Lord Leggatt favoured a different interpretation to those advanced by the parties. He considered that the parties had not given sufficient attention to the required causal connection between presumed acceptance of the offers and the prohibited result specified in section 145B(2).

What therefore needed to be considered was, had the offer not been made by the employer, whether there was at least a real possibility that the relevant terms of employment (in this case the pay proposals) would have been determined by a new collective agreement.

Following Lord Leggatt’s reasoning, had Kostal exhausted the collective bargaining procedure, they would have been within their rights to make individual offers to employees, as there would no longer be a real possibility that the pay proposals would have been determined by a new collective agreement.

In this case however, Kostal had not exhausted the collective bargaining procedure, and therefore their direct offers to employees constituted an unlawful inducement.

This was the reasoning followed by the majority of the Supreme Court

Interestingly, the reasoning advanced by Lady Arden and Lord Burrows follows much more closely that of the claimants, ET, and EAT. The two judges questioned why an employer should escape liability under S.145B just because the collective bargaining process has been exhausted. They consider that when S.145B(1) is met, it is for the employer to establish that the offer was made with the sole or main purpose being a genuine business purpose.

Why does this matter?

In many ways, it is a shame that the wider construction of S.145B advanced by Lady Arden and Lord Burrows was not accepted by the majority in the Supreme Court; not least because employers intent on thwarting the collective bargaining processes may benefit from the more restrictive approach taken by the other three judges. Nevertheless, this judgment should be hailed for the victory it is: the Supreme Court has unanimously affirmed a union’s right to a “seat at the table”, and provides an encouraging yardstick of progress since the European Court of Human Rights decision in Wilson and others v UK (30668/96) [2002] IRLR 568, which held that UK law, as it then stood, violated the Article 11 right to freedom of association by ”[permitting] employers to use financial incentives to induce employees to surrender important union rights”.

Monetarily, these claims are also significant. Where an employer is found to have breached S.145B, an employee is entitled to a lump sum award. At the time of the original action, each claimant was entitled to £3,800, with two awards being given to employees who received both the December 2015 and January 2016 offer, with the overall award against Kostal being £421,800. Employers should note that the lump sum figure per employee has now increased, and is currently set at £4,341.

Article by Michael Green – Paralegal: didlaw