Jumping the gun - direct offer to employees was unlawful inducement

Hogan Lovells

Hogan Lovells

The UK Supreme Court found in Kostal UK Ltd v Dunkley that it was an unlawful inducement for an employer to offer a pay deal to employees “over the head” of its recognised trade union. However, the position would have been different if the employer had exhausted the collective bargaining process it had agreed with the union before making the offer.

What happened

Under section 145(B) of the Trade Union and Labour Relations Act 1992 it is unlawful for an employer to make an offer to a member of a recognised union that will result in the worker’s terms of employment not being or no longer being determined by collective agreement. To be unlawful, the employer’s sole or main purpose in making the offer must be to induce workers to accept terms and conditions of employment that are determined outside collectively agreed procedures. In Kostal UK Ltd v Dunkley the Supreme Court had to decide when, if at all, an employer can make a direct offer to staff who are represented by a recognised union without infringing that protection.

Kostal UK Ltd recognised Unite. The collective bargaining agreement set out a four stage process for negotiating terms and conditions of employment and agreed that changes to terms would not be imposed while negotiations were continuing. During pay discussions in 2015, Kostal tabled an offer that was rejected by union members in a ballot. At that point Kostal pre-empted the collective process by writing directly to employees asking them to agree the proposed terms on an individual basis. The offer said that employees who did not agree would not receive a Christmas bonus. Union members brought claims that this offer, along with a subsequent one, amounted to an unlawful inducement.

The Supreme Court agreed. The purpose of the unlawful inducement provisions is to secure employee rights under the European Convention on Human Rights to be represented by unions. The union went too far by suggesting that any offer made by an employer directly to workers asking them to agree to changes that had not been collectively agreed would be a breach of the provisions. However, Kostal was also wrong to suggest that the protection applied only where an employee was effectively being asked to opt-out of collective bargaining, either permanently or temporarily.

Protections against unlawful inducements are designed to prevent a situation in which an employer makes an offer that bypasses agreed arrangements for collective bargaining. Such an offer denies unions their seat at the table and does not allow the union’s voice to be heard. Employers are not free to drop in and out of the collective bargaining process at will, even though such agreements are not usually legally enforceable. In this case the employer had not exhausted the collective bargaining process that it had agreed with the union before it made its offer to workers. It had accordingly acted in breach of section 145B.

Next steps

The Supreme Court’s majority decision is pragmatic and recognises that it would be a major shift in industrial relations policy to prevent an employer making an offer to employees over the head of a union in any circumstances at all. That would give unions an effective veto over any direct offers to employees, on any matter, regardless of the circumstances. Instead, the Supreme Court emphasises that an offer will amount to an unlawful inducement if it is made at a time when there is at least a possibility that the terms in question would have been determined by a collective agreement. There was still such a possibility in this case because the employer had not exhausted the collective bargaining procedure before making its offer. Had it done so before it acted, the position may well have been different.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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