Collective bargaining: risks of seeking to bypass a recognised trade union in a stalemate situation

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Employee relations has its moments and recently changes to the Codes of Practice on Industrial Action Ballots and Picketing have aroused considerable interest.  Now a decision of the Sheffield employment tribunal has added another interesting twist. The case involves collective bargaining and potentially impacts on long standing strategies adopted by some employers to seek to break deadlocks in pay negotiations.

In Dunkley and others v Kostal Ltd, an employment tribunal held that an employer‘s attempts to bypass collective bargaining arrangements with a recognised trade union, and make a direct approach to employees, was unlawful.  The decision has been greeted ‘with interest’ by trade unions and by employers alike, the latter particular interested in whether the decision will be appealed

Legal background

A little-known provision of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), Section 145B, states that an employer may not make offers direct to members of a recognised trade union, where the purpose of such offer is to cease collective bargaining. Section 145B refers to this as a ‘prohibited result’.

Breach of Section 145B attracts a mandatory award for each affected employee, currently £3,830.00 per claimant.

To date, there has been very little case law on the operation of Section 145B, so the decision in Dunkley and others v Kostal Ltd, although a first instance employment tribunal decision and therefore not binding on other tribunals, is somewhat surprising.

Case facts

The trade union, UNITE, entered into a recognition agreement with Kostal Ltd in February 2015. The agreement specifically provided for annual pay negotiations and that any proposed changes to employees’ terms and conditions would be collectively negotiated with UNITE.

In pay negotiations in November 2015, the company made an offer of a 2% increase in basic pay plus a 2% Christmas bonus, subject to agreement of changes to sick pay arrangements for new starters, reductions in overtime rates and consolidation of certain rest breaks. 

UNITE members rejected the offer in a ballot. Following confirmation of the rejection, Kostal wrote to all employees directly, summarising the offer it had put, and confirming that the offer was still open to employees to accept, so long as they did so by signing and returning a copy of Kostal’s letter by 18 December. They made it clear that a failure to sign and return the letter would result in no Christmas bonus being paid.  In January 2016, the Company sent a further letter to those employees who had not signed and returned its initial letter, confirming that if no agreement could be reached it might result in notice of termination being given. 

Some of the employees so contacted by Kostal, who were members of UNITE, brought claims for breach of S145B TULRCA.

Employment tribunal decision

The employment tribunal found that there had been a breach of Section 145B TULRCA.  The tribunal concluded that both of the letters sent by Kostal directly to its employees, in December 2015 and again in January 2016, constituted direct offers to the recipient employees. It also found that Kostal had taken a conscious decision to by-pass further meaningful negotiations with UNITE when making these offers, i.e. that the Company’s sole or main purposes in making the offers was the achievement of a ‘prohibited result’ for the purpose of Section 145B TULRCA.

In coming to its decision, the tribunal discounted Kostal’s stated commitment to continuing collective bargaining in relation to any further future proposed changes to terms and conditions. It also explicitly rejected the Company’s arguments that its main purpose in making the offers in question was to reach a temporary solution to the particular impasse it had reached with UNITE, and ensure that employees didn’t lose out on their Christmas bonus.   

Comment

This judgment, albeit first instance and open to appeal, does emphasise the care employers need to take in relation to collective bargaining issues. In particular it highlights the risks of immediately rushing to approach employees directly if you reach a stalemate with a recognised union on a matter which might fall within the remit of a collective bargaining arrangement. (It is also worth noting that Section 145B TULRCA is also applicable where a union is still in the process of seeking recognition).

The costs of such mistakes can be high. In the case of Kostal, an award was not made at the time the reserved judgment was handed down as an award hearing was scheduled for a later date, subject to the parties not reaching prior agreement on compensation. However, if   ultimately each claimant (there were 57 in total) were to be awarded the mandatory award in respect of both unlawful offers, it would cost Kostal around £425,000!  

EEF Support

Employers who are unsure of what they can and cannot do under the terms of a collective bargaining agreement, or who require support and assistance in dealing with a collective bargaining issue should contact our Employee Relations experts, either via their normal EEF advisor or call 0808 168 5874 or email HRenquires@eef.org.uk .

You can also register here for our free webinar, Employee Relations: avoiding and managing industrial disputes and learn from Chris Harries, EEF’s National Head of Employee Relations, about tried and tested ways to stay in control of employee relations arrangements, maintain good working relationships with unions and avoid potential industrial disputes.

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National Head of Employee Relations

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