Direct offer to employees was not unlawful inducement

The Court of Appeal has overturned the EAT's decision that an employer who directly offered its employees a package of increased pay and revised terms after failing to reach agreement with the recognised trade union did not unlawfully induce them to stop collective bargaining.

8th July 2019

The Court of Appeal has overturned the decision of the Employment Appeal Tribunal (EAT) and the Employment Tribunal in Kostal UK Ltd v Mr D Dunkley and Others to find that an employer's direct offer to employees, after failing to reach agreement with the recognised Trade Union, was not an unlawful inducement to cease collective bargaining – the negotiation of pay and other terms and conditions of employment between an employer and a recognised trade union.

Court of Appeal decision 

The Court of Appeal allowed the employers appeal, and identified that the ‘prohibited result’ referred to in section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 covers two scenarios:

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, 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, or one or more of those terms, will no longer be determined by collective agreement”.

The Court went on to clarify that ‘no longer’ means bringing the term(s) outwith the scope of collective bargaining on a permanent basis. 

The facts in the Kostal case were distinguished because the employees were not being asked to give up their right to be represented by the trade union in collective bargaining. Rather, the employer had made a direct offer to ask employees to agree to a term on this one occasion after they had been unable to reach agreement with the trade union following negotiations. 

The Court stated that if this were not the case, recognised trade unions with collective bargaining agreements would have a veto over any changes to terms and conditions of employment. The Court noted that this would go beyond what had been intended by the legislation, and that in any event the lack of a veto did not mean a trade union was ‘powerless’ because they could ballot members for industrial action. 

This case is authority that where collective bargaining breaks down an employer may be able to make a direct offer to employees, so long as they do not attempt to bring such term(s) out of collective bargaining on a permanent basis. 

Despite the recent Court of Appeal decision, employers should exercise caution in making direct offers to employees outwith collective bargaining, given the significant penalties if things go wrong. The current mandatory award for unlawful inducement is £4,193 per employee. 

The employees may appeal the decision to the Supreme Court, so the law in this area may not be settled yet.