Unite has won a case at the Supreme Court on whether an employer can offer inducements to staff that ‘bypass’ a decision reached through a ballot, in what has been described as a “paradigm shift” in industrial relations.
In Kostal UK v Dunkley and others, the Supreme Court found in favour of a group of Unite members whose employer, Kostal, a car components manufacturer in Rotherham, had sought to undermine union negotiations by offering unlawful inducements to subvert a union ballot that had rejected a pay offer.
However, the Supreme Court has maintained that employers can make direct offers to employees if the collective bargaining process has been exhausted, making it clearer when direct engagement is permitted for employers changing terms and conditions.
Unite general secretary Sharon Graham said: “With the support of their union the workers stood firm. Now they have won an historic case that creates a legal precedent for every union member across the UK.
“It means that employers cannot subvert or bypass union collective bargaining processes by offering their workforces inducements of one type of another to abandon union mandates. That is momentous.”
In October 2015, Kostal and Unite began formal pay negotiations. After two meetings with Unite representatives, Kostal made a pay offer, which was rejected after the union balloted its members.
Collective bargaining
In the December, Kostal made the same pay offer directly to its employees, bypassing Unite, urging them to accept the offer individually or lose a Christmas bonus worth £270.
Then, in January 2016 Kostal made a similar offer to employees that had not accepted the first offer. It said that, if no agreement was reached, “this may lead to the company serving notice on your contract of employment”.
By November 2016 more than 97% of employees had accepted one of the two direct offers, and Kostal and Unite reached a collective agreement on similar terms to the direct offers. However, before that point, Mr Dunkley and other claimants complained to an employment tribunal that the direct offers made to them by Kostal contravened section 145b of the Trade Union and Labour Relations (Consolidation) Act 1992.
Unite won two employment tribunals which ruled that both Kostal offers amounted to “unlawful inducements” and its members were awarded more than £420,000 in compensation.
Kostal appealed to the Employment Appeal Tribunal which dismissed the case. Kostal then went to the Court of Appeal, which unanimously found in Kostal’s favour. Setting aside the previous decisions, it agreed that the tribunal’s interpretation of Section 145b of the Act gave unions a “an effective veto over any direct offer to any employee concerning any term of the contract, major or minor, on any occasion”.
This judgment is a game changer. It means that employers cannot ignore legally established collective bargaining rights just because they suddenly choose to ignore them or subvert them” – Sharon Graham, Unite
Lawyers acting for Kostal have previously described the original tribunal decision as “a paradigm shift in industrial relations”.
Of today’s Supreme Court judgment, Graham said: “This judgment is a game changer. It means that employers cannot ignore legally established collective bargaining rights just because they suddenly choose to ignore them or subvert them.”
The Supreme Court unanimously allowed the appeal and restored the awards made by the employment tribunals, meaning the workers involved will each receive a compensation payment of around £8,000.
The judgment confirmed that Kostal’s direct offers to Unite members breached section 145b of the Act. Lord Leggatt, with whom Lord Briggs and Lord Kitchin agreed, provided the lead judgment. However, Lady Arden and Lord Burrows gave a joint judgment that resulted in the same outcome but advanced a different interpretation of sections 145b and d.
Angela Brumpton, partner at law firm gunnercooke, which represented Kostal, said: “Naturally we are deeply disappointed for our client, Kostal UK Ltd. However employers in general will no doubt be content with the Supreme Court decision, which removes a considerable degree of risk where collective bargaining has been exhausted.”
Unite national officer Simon Coop, who was involved in the original dispute, said: “Justice has been done at last. It is actually a vindication of Unite’s reps system, which ensured all the union members stuck together through thick and thin.”
Jonathan Tuck, partner at law firm Baker McKenzie, said “The Court ruled that Kostal’s pay offer directly to employees was an unlawful inducement because the collective bargaining process had not been exhausted.”
“However, although Kostal lost on the facts, the majority of the Supreme Court rejected the claimant’s broader arguments on collective bargaining which would have significantly changed the industrial relations landscape in the UK.”
“The decision confirms that employers can legitimately make direct offers to employees so long as they first exhaust their collective bargaining processes, and provides useful clarity on when they can engage directly with the workforce on changing terms and conditions. It underlines the importance of following the agreed process, but confirms that ultimately, trade unions cannot veto changes to terms and conditions when negotiations have failed.”
Richard Arthur, head of trade union law at Thompsons Solicitors, which represented Unite, said: “This is the most important trade union rights case in over a decade – and the first case in the UK’s highest court on trade union bargaining rights. It protects the fundamental right of workers to meaningful collective bargaining and has widespread implications for every unionised workplace.”
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