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Kostal Decision – the final round

Do you have a unionised workforce? If so, the Kostal (Kostal UK Ltd v Dunkley and others [2021] UKSC 47 (27 October 2021)) decision is a must read.

If you are an employer which recognises a union - or unions - then the Kostal decision is unlikely to have escaped your notice. The case was brought because an employer ‘went around’ the recognised union and made a pay offer direct to employees despite there being an agreement with the union in place. The employer argued the reason for doing so was because collective bargaining with the union had stalled and the employer did this as a one-off exception and fully intended to engage with the union next time.

Why was there an issue?

The heavy tome that is the Trade Union and Labour Relations (Consolidation) Act 1992, or TULRCA as employment lawyers and HR professionals lovingly call it, states – at section 145B – that if there is a union which has collective bargaining rights over a group of employees, those employees who are members of said union cannot be approached directly by their employer with any offer if that results in the workers’ terms of employment no longer being determined by the collective agreement with the union, and the employer’s sole or main purpose in making the offer was to achieve that result i.e. to permanently bypass the union. If such action by the employer falls foul of this it amounts to an unlawful inducement. A tribunal would then make a declaration to that effect and order the payment of an award to each relevant employee of £4,341 currently.

Court decisions

The case outcome has gone from being bad for employers (Employment Tribunal and Employment Appeal Tribunal deciding Kostal had breached section 145B) to being good (Court of Appeal deciding there was no such breach) but now the Supreme Court has provided some helpful clarity in this area and it brings an end to the litigation that has lasted several years. However, the end result was not good for the employer in question, Kostal, who the Supreme Court decided was in breach of section 145B.

The court held that a test of causation has to be applied to ascertain whether the offer that was made to the employees who were union members of the recognised union – and that offer was accepted by the employees – would mean that such terms will not (or will no longer) be determined by collective agreement through the union when, had such offers not been made, there was a real possibility that the terms at issue would have been determined by collective agreement and the union. If that is the case, the offer direct to the employees is prohibited under section 145B. It decided that this was the position with the offer made by Kostal to its employees.

There will, however, be no breach of section 145B if the result (that the terms will no longer be determined by collective agreement) would have happened anyway, regardless of whether the employer made any offers which were then accepted.

The upshot is that an employer can make a direct offer to workers in respect of something which falls within the scope of a collective bargaining agreement, provided that it has followed and exhausted the agreed collective bargaining procedure.

Practical takeaway

Employers should ensure that there is a set procedure within any collective bargaining agreement which sets out how the employer will negotiate or consult with the union, the stages and escalations and what is considered to be the end of the collective bargaining process.

Disclaimer

This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. © Shoosmiths LLP 2022.

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