Industrial relations: Can we side-step collective bargaining and make an offer directly to employees?

Is an employer prohibited from making offers to trade union members

Is an employer prohibited from making offers to trade union members, where their acceptance would mean that some of the terms of their employment would, temporarily, cease to be determined collectively? 

In Kostal UK Ltd v Dunkley and others the Employment Appeal Tribunal held that this was prohibited.  It was sufficient that just some terms of the contract would not be determined collectively.  Further, it was irrelevant that this may be a one-off direct agreement, rather than a complete refusal for terms to be negotiated collectively. 

The facts

The employer had offered a 2% increase in basic pay and a lump Christmas bonus, in return for a reduction in sick pay for new starters and a reduction in Sunday overtime (among other things).  The union felt it could not recommend the offer, and gave its members a ‘free vote’.  80% voted to reject the proposal. 

The employer then sent a letter to every employee offering the same terms, but giving employees a deadline by which to accept, after which they would not receive the Christmas bonus.  In January, after the deadline, the employer wrote again to employees who had not accepted, offering a 4% increase in basic pay if they agreed the changes, and threatening dismissal if they did not.  Subsequently, 57 employees brought claims against the employer alleging that the inducements were unlawful.

The law

The Trade Union and Labour Relations (Consolidation) Act (TULRCA) prohibits an employer offering ‘inducements’ to employees which, if accepted, would result in them giving up any or all of their collective bargaining rights. 

The employer will only be in breach of this provision if their ‘sole or main purpose’ in making the offer is to achieve a ‘prohibited result’, i.e. that the terms of employment, or any of those terms, will not (or will no longer) be determined by collective agreement.

Where such an offer is found to have been made the Tribunal must make an award of £3,830 for each affected employee.  There is no basis upon which this award can be reduced.

The Employment Tribunal decision

The Employment Tribunal held that the inducements were unlawful, and awarded compensation of £3,830 in respect of each separate inducement, i.e. a total of £7,660 per claimant. 

The employer had argued that under TULRCA there must be some permanence to the offer, requiring it to have the effect that the terms of employment would not be determined by collective agreement in the future.  This was rejected by the Tribunal who held that, while there was some requirement of permanence, the offer itself was sufficiently permanent as once the employees accepted the changes they would be permanently bound by them.  To require otherwise would give an employer the ability to drop in and out of collective negotiations to suit its purpose. 

The Tribunal also rejected the employer’s argument that the main purpose of the offers was to ensure that the employees did not lose their Christmas bonus.  Not only did this explanation fail to account for the January offer, but, given that the Christmas bonus was introduced into negotiations by the Respondent as a negotiation tool, it was somewhat disingenuous to say that the purpose of the offers were to save the employees from a threat the employer itself had made.

The EAT Decision

The employer appealed on the grounds that it had never intended to cease collective bargaining.  Indeed, collective bargaining did not cease and eventually a collective agreement was reached on the amended terms.  Therefore, it argued that its purpose in making the offers was not to achieve the ‘prohibited result’.

The Employment Appeal Tribunal, by majority, dismissed the appeal.  It held that the ‘prohibited result’ included situations where any of the terms of employment, even if just one of many, would not have been determined by collective bargaining.  There was no requirement for that term to never again be determined by collective bargaining, so the fact that this result was arguably temporary – in that it was a one-off direct agreement – was irrelevant. 

Further, the EAT also held that the Tribunal was right to have made two financial awards to each claimant, as there had been two separate unlawful offers.  The offers were on distinct terms making them distinct offers, so an award should be made in respect of each of them. 

What does this mean for me?

In light of this decision it is crucial to ensure you are particularly careful if you make offers directly to employees where there is a recognition agreement in place which includes collective bargaining.  It is not acceptable for an employer to abandon collective negotiations simply because they do not like the result of a ballot.  This case has made it clear that you cannot approach employees individually to strike a deal, and then seek to show commitment to collective bargaining by securing a collective agreement, having already destroyed the union’s mandate on the point in question. 

However, where collective bargaining has broken down to the extent that you have a proper purpose for making the offers directly to workers, the EAT have made it clear that there is nothing to prevent inducements being offered in such circumstances.

Given that an award of £3,830 will be made in respect of each distinct offer, it is clear that breaching this prohibition can have significant financial ramifications.  Accordingly, you will have to think carefully about your purpose for making an offer, before you seek to abandon collective negotiations by making an offer directly to employees.

Paul MacFarlane (paul.macfarlane@weightmans.com) is a Partner in the London Employment, Pensions and Immigration team and is an expert in all aspects of the law of industrial relations. If you have any questions about this difficult and sensitive area of law, please do not hesitate to get in touch with Paul or speak to your usual Weightmans advisor.

 

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