Kostal UK LTD v Dunkley and others [2021] UKSC 47

Kostal UK LTD v Dunkley and others [2021] UKSC 47


3rd November 2021

The Supreme Court has provided a much-needed interpretation of section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992. That provision restricts employers from making direct offers to trade union members to vary employment terms that would otherwise have been negotiated through collective bargaining. To be prohibited under s145B, the purpose of the offer must be to take those terms outside the ambit of collective bargaining. This potentially created scope for trade unions to hold a veto during collective bargaining negotiations.  

Background

A recognition agreement was in place between Kostal UK Ltd and Unite the Union, which outlined an agreed procedure for collective bargaining. In particular, it was agreed that any proposed changes to terms and conditions would be negotiated between the employer and the union. After collective negotiations began in October 2015 over workers’ pay, a final offer was rejected by the Union and its members shortly thereafter. The employer agreed to refer the negotiations to ACAS for continued conciliation, but in a rush to meet Christmas deadlines the employer made individual offers to the union members to get the deal done. An action in the employment tribunal was brought in response to the apparent contravention of s145B.

The Supreme Court decision

This claim eventually made its way to the Supreme Court, which had to grapple with the proposition that, in effect, interpreting s145B in a particular way might catch all direct offers made by employers, thereby essentially giving trade unions a veto power in such negotiations. It should be noted that the penalty for breaching s145B could be as much as £4,341 per affected union member. This is potentially a huge financial consequence for employers, especially those with large, unionised workforces. It could also leave employers with very little leverage during negotiations with unions.

The Supreme Court agreed with the employer on that point, finding that a veto had not been Parliament’s intention (although it found against the employer on the facts). Instead, Parliament simply wanted to guarantee that employers could not undermine collective negotiations by circumventing them to negotiate with individuals. To protect this intention the Supreme Court decided that employers could only initiate direct offers once an employer had engaged and exhausted the agreed collective bargaining procedure. Its rationale was that in those circumstances an employer had not sought to negotiate outside the collective bargaining agreement because, once exhausted, collective negotiations had essentially failed.

This then meant that the question to ask was not whether a direct offer had been made, but rather was the employer of the sincere belief that collective bargaining had been exhausted before they turned to make direct offers? Had the employer completely followed through the entirety of the collective negotiation process? It was on this point that the facts of the case were found against the employer as they had agreed to refer the dispute to ACAS.

What does this mean for employers?

Now employers can be confident that so long as they have exhausted the process their direct offers come with no risk. Though this is good news for employers overall, there are implications that employers should heed.

Employers should be aware that exhausting the process will be a high standard in the courts, going beyond just a breakdown in negotiations. This will include the conclusion of all dispute resolution methods (if any) agreed with unions. It was the ACAS referral that saw the decision go against the employer in this instance, and so employers should ensure they have clear codified dispute resolution mechanisms that they can track and work through methodically. They should include time limits so that unions cannot drag the process on.

This will also serve as evidence of the employer having no intention to operate outside the scope of the collective bargaining agreement when the time comes to make direct offers. Many long-standing collective bargaining agreements do not have clear written procedures and often operate through convention and standard practices. Where this is the case employers should look to codifying this process to best protect themselves.

It is vital too that those negotiating on the behalf of an employer receive appropriate training so that they do not inadvertently breach s145B.