The Employment Appeal Tribunal (EAT) has held in Kostal UK Ltd v Dunkley and ors that employers cannot go over the heads of unions recognised for collective bargaining purposes and make offers directly to the workforce, if the purpose and effect is so that the workers’ terms will not be determined by collective agreement negotiated by the union.

Thompsons was instructed by Unite the Union’s Strategic Case Unit to act on behalf of its members.

Basic facts

After a ballot in December 2015 on a pay offer which was rejected by the members, the company wrote to all their employees (not just union members) on December 10 making the offer directly to them and explaining that if it was not accepted by 18 December they would not receive the Christmas bonus element.

On 14 January 2016, the union wrote to the company saying that, by writing directly to employees following collective consultation, it was in breach of section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA). On 29 January 2016, however, the company wrote to those employees who had not accepted the offer, warning them that they could be dismissed. If they agreed to the pay offer, however, they would receive a 4 per cent pay increase backdated to 1 January 2016.

This prompted 57 workers to start tribunal proceedings, claiming that the letters of 10 December 2015 and 29 January 2016 constituted unlawful inducements and were therefore contrary to section 145B TULRCA.

Relevant law

Section 145B states that employers are prohibited from making an offer to workers of recognised trade unions if the “sole or main purpose” of that offer is to achieve the “prohibited result”. That is, that the workers' terms of employment “will not (or will no longer) be determined by collective agreement negotiated by or on behalf of the union”.

Tribunal decision

Holding that it was not permissible for employers to abandon collective negotiation when they do not like the outcome of a ballot, the tribunal concluded that both the December 2015 and January 2016 offers constituted inducement offers which would, when accepted, have the “prohibited result”. As there had been two inducement offers, the tribunal made two awards of £3,800 to each claimant in respect of each letter.

The company appealed, arguing that the purpose of the letters was not to bring about the “prohibited result” but simply to ensure that employees understood the implications of their decision to reject the changes. It also appealed against the tribunal’s decision to make two awards per claimant.

EAT decision

Rejecting the appeal by a majority, the EAT held that the point of section 145B was to prevent employers from “going over the heads of the union with direct offers to workers”, thereby avoiding a collective agreement with the union.

The legislation would be satisfied, therefore, if the acceptance of a direct offer by an employee meant that at least one term of employment would be determined by direct agreement and not collectively even if other terms continue to be determined collectively. That did not mean employers could not make offers directly to workers. They just had to be able to demonstrate (and the burden was on them to do so) that their primary purposes was not to induce workers to abandon collective bargaining.

In this case, Kostal UK said it made offers directly so that employees would not lose their Christmas bonus. As the second letter was sent out when they had already lost the bonus, the company could not establish a proper aim or purpose for making direct offers to the workforce.

The EAT agreed unanimously that the tribunal was correct in its award of compensation.