Employment Appeal Tribunal confirms that an employer’s attempt to bypass collective bargaining was unlawful

First instance decision

This case involved an appeal by the employer, Kostal UK Limited, against an Employment Tribunal’s decision in March 2017.  See our insight article on that first instance decision here.

In order to overcome a perceived impasse in negotiations with its recognised trade union, Unite, the employer decided make a direct offer to its employees of an improved pay deal in return for changes to working hours patterns.  It made two offers, one in December 2015 and one in January 2016.

Unite argued that the result of Kostal’s actions was to seek to bypass a newly agreed collective bargaining arrangement and that this was a breach of s145B. This provision’s purpose is to prevent employers from undermining the principle of collective bargaining and gives effect to a European Court of Human Rights ruling that employees should not be disincentivised from enjoying collective bargaining rights.

If an offer is made to employees that leads to terms and conditions no longer being determined by collective bargaining - referred to as the “prohibited result” - this will be a breach of s145B. The penalty for this is currently £3,907 per affected employee (but £3,800 at the time of Kostal’s offers).

The Employment Tribunal agreed that s145B had been breached and found that the two offers were separate and distinct, meaning that each employee should receive two awards of £3,800.  Kostal appealed in relation to both liability (arguing that its intention was not to cease collective bargaining) and remedy (saying that only one award of £3,800 should have been made per employee).

Employment Appeal Tribunal

In its judgment issued in December 2017, the EAT upheld the Employment Tribunal’s decision and rejected Kostal’s appeals on both liability and remedy.  This was the EAT’s first decision on s145B.

The EAT held that the prohibited result occurs where offers, if accepted, result in new terms being agreed directly rather than through collective bargaining.  For a claim under s145B to succeed, there is no need for a particular term or terms to be permanently removed from the scope of collective bargaining. The fact that collective bargaining had subsequently continued at Kostal did not prevent the direct offers made in December 2015 and January 2016 from having the prohibited result.  Those offers, if accepted, would have resulted in the relevant terms set out in the offer letters being agreed directly with employees rather than through collective bargaining.  Whilst that change in terms may not have been permanent, they would have at least remained in place until a further change was implemented.

The EAT also agreed with the Employment Tribunal’s conclusion that the offers made by Kostal had been separate and distinct. The relevant employees were therefore entitled to two separate awards of £3,800 for two separate breaches of s145B.

A trade union stranglehold?

Employers may be concerned that the effect of s145B is to create a trade union veto which prevents them from making changes in any circumstances without union agreement.  However, the EAT expressly confirmed that unions do not enjoy a “practical veto” and indicated that “if collective bargaining breaks down, to the extent that the employer has a proper purpose for making offers directly to workers, there is nothing to prevent such offers being made”. This is because s145B “does not prevent employers from making offers that would merely have the prohibited result; the employer must also have as his sole or main purpose an unlawful purpose”.

Each case is going to turn on its facts. Whether collective bargaining has actually broken down and an employer’s motives will be extremely important in each case.  Kostal was significantly hampered by factual findings that it had been “somewhat disingenuous” about its purpose as it had acted in a way “intended to weaken Unite’s negotiating position” without exhausting agreed dispute resolution procedures.  This led Kostal to pay a heavy price, but may provide some comfort to employers without such motives who wish to make direct offers to employees in the event of a genuine impasse.

Kostal UK Limited v Mr D Dunkley & others UKEAT/108/17 – judgment available here