Collective bargaining – can direct offers be made to staff?

Posted on: November 16th, 2021

Collective bargaining is the official process by which trade unions negotiate with employers on behalf of their members. Collective bargaining is only possible where an employer recognises a trade union and between them, they decide on the scope of negotiations and agree these in a recognition agreement. 

Typically, a recognition agreement or collective agreement will set out:

  • what terms must be discussed/negotiated between the union and employer; and
  • the process that must be undertaken to discuss and seek agreement on the terms/changes to terms.

So, can an employer make direct approaches to staff where they are members of a recognised union?

The short answer is yes, direct offers can be made to staff, but only where the collective bargaining process (as set out in the written agreement between the union and employer) has been fully exhausted according to the Supreme Court in the case of Kostal v Dunkley and Others.  

This decision doesn’t mean that employers cannot make changes to terms and conditions unless agreed by the union.  However, it does mean that it is important that employers carefully consider and go through the procedure set out in their agreements with a union as ultimately employers won’t be able to bypass this process (even if it becomes evident that the union won’t agree, and direct offers become necessary). 

We don’t think this will be the end of these issues, as no doubt disputes will now arise as to whether the collective agreement procedure has been fully exhausted. 

Therefore, it would be sensible to review any collective bargaining agreements and to take legal advice before making any direct offers to workers, as getting it wrong could prove very costly. 

Relevant law – Section 145B of TULRCA

Section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) (section 145B) makes it unlawful for employers to make an offer to members of a recognised trade union (or a union which is seeking recognition) which is intended to result in one or more terms of employment being determined other than through collective bargaining.

Details of Kostal v Dunkley and Others

Facts

  • Kostal (the employer) and Unite (the union) were both party to a recognition agreement which stated that any changes to terms and conditions of employment would be negotiated between Kostal and Unite following a detailed four stage process.
  • In October 2015, pay negotiations commenced and Kostal offered employees (through the union consultation process) a pay rise and a Christmas bonus in return for making some other cost saving changes.
  • The offer was rejected by union members following a ballot.
  • Kostal then wrote to the employees directly to make the offer and explained that the employees would not get their Christmas bonuses or pay increases if the offer wasn’t accepted. Subsequently, ninety one percent of staff accepted the direct offer and new terms.
  • Negotiations with the Union continued but with no agreement.
  • Kostal write directly again to the remaining staff who hadn’t accepted the offer to make a further similar offer and to explain that if agreement could not be reached their employment may need to be terminated and they would be offered new contracts with the amended terms.
  • 57 members of the union brought claims against Kostal alleging that Kostal had tried to induce them to go outside of the collective bargaining process.
  • Almost one year after the pay negotiations started, an agreement between Kostal and Unite was reached for 2015 pay which was similar to the offer put forward in November 2015 minus the Christmas bonus.

Previous legal decisions on this case

The Employment Tribunal and Employment Appeal Tribunal both agreed that Kostal had acted unlawfully and contrary to section 145B.

The result of this was that they held that the two letters sent directly to staff had been two separate inducements to opt out of collective bargaining.

Each claimant was awarded £3,830 per breach (so for some employees they received £7,660). The total compensation Kostal had to pay came to £421,800.

The Court of Appeal however overturned this decision and found that the direct approaches were not unlawful inducements.  The Court of Appeal felt that the direct approaches were one-off direct pay offers and weren’t intended to bypass the collective agreement as a whole, as long as Kostal was committed to collectively bargaining in future matters.  An appeal was lodged with the Supreme Court.

The Supreme Court decision

The Supreme Court disagreed with the Court of Appeal and held that Kostal had acted unlawfully in making direct approaches to staff to change terms and conditions.

In reaching this decision, the Supreme Court said that it did not matter that:

  • the direct approaches to staff related to one pay negotiation; and
  • that Kostal remained committed to collectively bargaining in future matters (including pay reviews).  

Ultimately the effect of Kostal’s direct offers to staff was that it encouraged staff to deviate from the collective bargaining process with the Union (in effect making the recognition agreement worthless).

In deciding whether an employer has bypassed collectively bargaining (and breached section 145B), tribunals and courts have to focus on the result of the offer. Therefore, if there is a real possibility that the terms being discussed would have been determined by collective agreement (which they were in the Kostal case) had they not been agreed directly with workers, then the employer will be in breach of section 145B. 

However, the Supreme Court made clear that if an employer and union fully exhaust the process contained in their collective/recognition agreement and fail to reach agreement, direct offers could be made to workers. In Kostal’s case they hadn’t exhausted their agreed procedure when making the offers. 

Kostal are therefore having to pay compensation totalling £421,800.

Here to help

If you have any questions on collective bargaining or agreements, or would like to discuss any employment queries generally, please do get in touch. We would be happy to help.

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