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Bypassing collective bargaining: when is a direct pay offer to employees ‘unlawful inducement’?

An employer who made a one-off direct offer of new terms and conditions to its employees did not, on the facts, unlawfully induce them to cease collective bargaining.

What is unlawful inducement?

The Trade Union and Labour Relations Consolidation Act 1992 protects collective bargaining by penalising employers who induce workers who are members of a recognised trade union to vary the terms of their employment outwith the collective bargaining process.

Making offers directly to employees where there are collective bargaining arrangements in place risks unlawful inducement claims. A claim can be made if:

  • there was an offer made to a member of an independent and recognised union;
  • that offer was made to at least two other workers;
  • the acceptance of the offer would have meant that the workers’ terms of employment, or any of those terms, ‘will not (or will no longer) be determined by collective agreement negotiated by or on behalf of the union’; and
  • ending / preventing collective bargaining was the employer’s sole or main purpose in making the offers.

The penalties for unlawful inducement are high. Each employee can claim a mandatory award from the tribunal, currently £4,193 per offer.

Very few claims of this type have been brought since they were introduced in 2004.

Kostal UK Ltd v Dunkley

In 2015 Kostal entered into a recognition agreement with Unite. During the first formal pay negotiations, Kostal made an offer of a 2% increase in basic pay and a Christmas bonus in exchange for reduced sick pay for new joiners, a reduction in Sunday overtime and the consolidation of rest breaks. Unite balloted its members who rejected the offer.

Kostal then wrote directly to the employees explaining that if they did not agree to the offer by 18 December they would not receive their Christmas bonus. In January further letters were issued to those who had not accepted, offering a 4% pay increase and threatening dismissal if agreement could not be reached.

A group of employees brought tribunal proceedings claiming that the December and January letters both amounted to unlawful inducement. The tribunal and Employment Appeal Tribunal both agreed with the claimants and awarded the mandatory fixed amount for each offer. Kostal appealed to the Court of Appeal.

It was the first time that the Court of Appeal had been asked to consider the statutory provisions on unlawful inducement and it allowed the appeal.

Clear factors in the decision were that Kostal was not motivated by hostility to Unite; the offers were made to the whole workforce; and the employees were not being asked to give up their right to be represented by the trade union in collective bargaining: Kostal had made the offers get agreement to a term on this one occasion after they had been unable to reach agreement with the trade union following negotiations.

The Court distinguished between an offer whose purpose is that the workers’ terms as a whole (or one of those terms) will no longer be determined by collective bargaining (unlawful inducement); and an offer whose purpose is that the workers’ terms as a whole (or one of those terms) will not on this one occasion be determined by collective bargaining (no unlawful inducement).

The statutory provisions should not be construed in a way that could give a union an effective veto over any changes to terms and conditions. As the Court explained, if a union does not agree with the approach the employer is taking it has the option of balloting its members for industrial action.

In practice

This decision weakens the previously understood protection of union members and may be appealed to the Supreme Court, However for now it is authority that it is possible to try to break an impasse in collective negotiations by making direct offers to employees, provided that the intention is only to resolve the current dispute and not to end collective bargaining altogether. However, given the risks, we’d recommend taking advice before making direct offers to employees in these circumstances.

Please get in touch with your usual Brodies contact if you’d like to discuss any of the issues raised in this blog.

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