Can you bypass collective bargaining?

If you are in the process of agreeing terms via collective bargaining, or already have agreed collective terms through an established bargaining unit, stringent restrictions apply on negotiating directly with employees. 

The first appellate decision on the extent of these restrictions was published recently, in Kostal UK Limited v Dunkley.

Direct offers to employees may be 'unlawful inducements'  if they are intended to

• prevent terms being determined by collective agreement; or
• ensure that terms will no longer be determined by collective agreement (section 145B, Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA).

There are severe financial consequences for breaching these rules. If an unlawful inducement is made, each affected employee is entitled to claim £3,907 per offer. 

Summary of Kostal UK Limited v Dunkley

In this case, the employer, Kostal UK Limited ('Kostal'), recognised the union Unite and established an agreement for collective bargaining. The agreement provided for annual pay negotiations, which would be agreed through Unite.

Kostal reached an impasse in negotiations with Unite over a number of proposed changes to employees' terms of employment, which included (amongst other things) a pay increase and a Christmas bonus.

As a result, the employer approached staff direct, posting the proposed new terms on notice boards and writing to individual employees. The employer argued that it took this course of action so that its employees would not miss out on receiving a bonus and pay increase in time for the Christmas holidays.

The key question for the Court of Appeal to consider was whether the pay offer was an 'unlawful inducement', intended to bypass collective bargaining.

The court found that the use of the phrase 'no longer', in section 145B of TURLCA, suggested that an offer would only be an unlawful inducement where there was on on-going attempt to take terms outside of collective bargaining, on a permanent basis.

So, if an employer makes an offer which means that employees' terms of employment will not, on this one occasion, be determined by a collective agreement, this will not amount to an 'unlawful inducement'.

The court's reasoning was that if this type of offer could amount to an unlawful inducement, it would effectively mean that unions would have a veto over any terms offered by an employer to employees. The court felt that this cannot have been the intention of parliament when it enacted section 145B of TURLCA. 

On the facts of this case, Kostal had made a one-off offer which was intended to break a deadlock in one particular round of collective bargaining.  Another round of collective bargaining would take place the following year.  Kostal's direct approach to employees could not, therefore, be characterised as an on-going attempt to prevent collective terms applying and was not an unlawful inducement.

Comment

This decision will be welcomed by employers, as the scope of 'unlawful inducement' has been interpreted narrowly. Provided that an employer does not attempt to circumvent collectively agreed terms permanently, or on an on-going basis, then it is unlikely to have made an unlawful inducement. 

The key question will be whether the employer's intention is to encourage employees to forego union rights: the 'mischief' that section 145B of TURLCA was designed to prevent.

That said, employers must tread carefully and take advice when considering making contractual offers outside of any collective bargaining arrangements, as the cost of getting this wrong can be considerable, especially for large employers. 

TLT's Employment team regularly advises employers on navigating collective workforce rights, so please do get in touch with me, or another member of the team, if you have any questions or require further guidance.

Contributor: Sarah Maddock

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at July 2019. Specific advice should be sought for specific cases. For more information see our terms and conditions.