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Court of Appeal loosens limits to contractual change in absence of trade union collective agreement

  • United Kingdom
  • Employment law

13-06-2019

In Kostal UK Ltd v Dunkley, the employer has succeeded in overturning the EAT's decision on trade union legislation which had restricted an employer’s ability to change employment terms in a unionised workplace without collective agreement.

The employer argued that the EAT’s decision effectively gave a veto to a union where the collective bargaining process had been followed. The Court of Appeal has decided that this is not what Parliament intended.

Background - facts

K, the employer, had newly recognised Unite for collective bargaining. During the first annual pay negotiation, K’s 2% pay increase and 2% Christmas bonus was conditional upon some changes to overtime, sick pay and breaks. The offer was rejected by the union and by members in a consultative ballot. K then wrote directly to employees offering the pay increase, bonus and changes to other terms, with a warning that if the offer was not accepted by 18 December they would not receive the Christmas bonus and that it could not be paid at a later date. In January, a further letter offering a 4% pay increase was sent to those employees who had so far rejected the offer and warned that if they did not accept, K could serve notice in relation to their contract of employment. Some ten months later, collective agreement was finally reached on the pay proposals.

A tribunal upheld claims brought by 55 employees arguing that the December and January letters sent by K constituted a breach of section 145B of the Trade Union and Labour Relations Consolidation Act (TULRCA). Approximately £420,000 compensation was awarded, based on the then statutory award of £3,800 for each of the two letters, per claimant.

Background – the legislation

In broad terms, 145B prohibits an employer from making an offer to a member of a recognised union which results in either all or any of his/her terms no longer being determined by collective agreement, where that outcome is the employer’s sole or main purpose. K argued that the first offer to employees was made so that employees had the opportunity to receive the Christmas bonus and both offers were a temporary solution to an impasse with the union, with collective bargaining continuing thereafter. On appeal to the EAT, K argued that 145B is not intended to apply to situations, such as this, where collective bargaining continues. The EAT dismissed K’s appeal, leading to today’s Court of Appeal ruling.

Court of Appeal judgment

The Court of Appeal reviewed the history of section 145B to establish the reason for its introduction. In particular, that it was in response to the offering of inducements (“sweeteners”) to employees to opt out of collective bargaining altogether and that UK law at the time was defective in protecting trade unions rights under Article 11 of the European Convention on Human Rights.

As this case did not involve the surrender of collective bargaining rights by the workers, the Court agreed with K and decided that s145B did not apply in the circumstances. Otherwise, the Court noted “It would amount to giving a recognised trade union with a collective agreement similar to the one in the present case a veto over even the most minor changes in the terms and conditions of employment, with the employers incurring a severe penalty for overriding the veto.” Such a result would, in the view of the Court, go far beyond curing the defect in UK law.

Comment

The Court outlined two situations where s145B will apply:

  • where a trade union is seeking to be recognised and the employer makes an offer whose sole or main purpose is to achieve the result that the workers’ terms will not be subject to a collective agreement; and,
  • where an employer makes an offer to end collective bargaining for some or all terms on a permanent basis.

It rejected a third situation, as in K’s case, where the employer makes an offer which results in one or more terms on one occasion not being determined by collective agreement. This is because union members are not being asked to relinquish their right to be represented by their union in the collective bargaining process and have their terms and conditions negotiated by the union in the future. All that has happened is that the employer has gone directly to the workforce and asked them whether they wish to agree a particular terms on this occasion. In such circumstances, a union still has options open to them, including opposing the change by calling an industrial action ballot.

This is a dramatic about turn and one that will be welcomed by employers. However, the Court noted that K was not motivated by hostility to trade unions, that the offers were made to the whole workforce and that each individual would continue to be represented by Unite under the collective agreement. As such, it distinguished K from those employers in the past that had offered sweeteners, leading to s145B’s enactment. Employers with an “anti-union motivation”, per the Court, should be aware that s145B may still apply. The union is applying for permission to appeal to the Supreme Court.