Can Employers Change Terms And Conditions By Making Offers Directly To Workers And Avoiding Trade Union Negotiations?

Inducements to forgo collective bargaining: the risk of penal awards decreases after Court of Appeal decision.

Significant financial penalties can follow from an employer's direct offer of new terms to workers who are members of a recognised trade union (or one seeking to be recognised). The decision of the EAT in Kostal UK Ltd v Dunkley and others in December 2017 highlighted a risk for employers who decide to circumvent collective bargaining when an impasse in negotiations is reached.

Awards for unlawful offers under section 145B Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) are considerable and are increased each year: since April this year workers can be awarded £4,193 for each separate unlawful offer. Following the EAT's decision in Kostal, the employer was found liable for a total of £418,000, with £7,600 being awarded to each of 55 claimants.

In an important judgment, the Court of Appeal has now overturned the decision of the tribunal and EAT.

Unlawful inducements

Section 145B makes unlawful any direct offer by an employer to a member of a trade union which is recognised or seeking to be recognised where the effect of the offer (if accepted) and the employer's sole or main purpose in making the offer is that the worker's terms (or some of those terms) will not or will no longer be determined by collective agreement (the "prohibited result").

Case details: Kostal UK Ltd v Dunkley and others

Kostal UK Ltd had recently recognised Unite and entered into the first round of pay negotiations under their recognition agreement. The employer offered a pay rise and a Christmas bonus but proposed changes to breaks, overtime and to sick pay for new starters. Agreement with Unite could not be reached ahead of the Christmas break. Unite conducted a ballot by which its members rejected the offer. Kostal then wrote directly to all staff making the offer. After Christmas, the employer wrote to those employees who had not accepted the offer, proposing the same terms (with the exception of the Christmas bonus).

55 claimants brought a claim under section 145B that Kostal had made two unlawful offers which (if accepted) would have the effect that those particular terms would no longer be determined by collective agreement and that Kostal's purpose in doing so was to circumvent collective bargaining. An employment tribunal upheld the claimants' claims.

On appeal, the EAT upheld the decision of the tribunal. It held that the effect of...