When Is Collective Bargaining Exhausted And A Direct Offer Of New Employment Terms Allowed? The EAT Confirms An Objective Test

• Published date: 22 June 2022
• Subject Matter: Employment and HR, Contract of Employment, Employee Rights/ Labour Relations
• Law Firm: Lewis Silkin
• Author: David Hopper and William Brown

In the first reported application of the Supreme Court's landmark Kostal decision, the Employment Appeal Tribunal has ruled that an employer could not unilaterally declare that its negotiations with its recognised trade union had finished. As unionised employers may only make direct offers to employees after exhausting their collective bargaining procedure, the employer now faces punitive fines.

Under section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), employers are prohibited from making offers to employees who are members of its recognised trade union(s) which, if accepted, would mean their terms and conditions will not or will no longer be determined by collective bargaining. This outcome is known as the "prohibited result".

An employer will only be in breach of section 145B if the sole or main purpose of making the offer is to achieve the prohibited result. The penalty for unlawful inducements is currently '4,554 per offer per affected employee.

The Supreme Court (SC) recently considered the application of section 145B in the landmark case of Kostal UK Ltd v Dunkley and others. In Kostal, the SC ruled that, for offers to be capable of having the prohibited result, there must be at least a real possibility that, if they were not made and accepted, the relevant terms would have been determined by a new collective agreement. The upshot is that if an employer has exhausted the collective bargaining process, it is free to make direct offers to employees without incurring liability under section 145B. (See our article on the SC decision in Kostal for further information.)

What happened in this case?

In 2016-17, Ineos engaged in pay negotiations with its recognised trade union, Unite, in respect of employees at its Grangemouth oil refinery and petrochemicals plant. After five meetings over a four-month period, Ineos proposed a "best and final" offer of a 2.8% pay increase, which was rejected by Unite in favour of further talks. Following this, Ineos decided to award the pay increase unilaterally and at the same time gave notice of termination of its collective bargaining agreements with Unite at Grangemouth.

Unite, on behalf of its affected members, claimed that, in making the unilateral pay award, Ineos had sought to remove it as the recognised trade union at the Grangemouth site and that it resulted in employees' terms and conditions not being determined by collective bargaining, in breach of section 145B. The...