What does the collective bargaining ruling mean for businesses?

Any employer that recognises a union should pay careful attention to a recent Supreme Court decision, warns Finlay McKay

What does the collective bargaining ruling mean for businesses?

Employers that engage in collective bargaining arrangements with trade unions are unable to make direct offers to union members until they exhaust collective bargaining procedures. The Supreme Court decision of Kostal UK Ltd v Dunkley reverses the previous judgment of the Court of Appeal in the same case. 

The law

Section 145B of the Trade Union and Labour Relations Act (TULRCA) 1992 was inserted in 2004 following a legal challenge in the European Court of Human Rights (ECHR). The resulting statutory provision is aimed at preventing an employer going over the heads of the union with a direct offer to workers.

Facts

The Dunkley case involved two direct offer letters, one prior to Christmas 2015 and the other in January 2016 which were written by the employer to employees while pay negotiations were ongoing.

Mr Dunkley and 56 other claimants, who were all members of Unite, brought tribunal proceedings claiming that both the December and January offer letters amounted to an unlawful inducement contrary to s 145B of TULRCA. The tribunal agreed with the claimants and awarded the mandatory fixed amount of £3,800 for each offer, totalling £7,600 for each claimant. 

The Employment Appeal Tribunal (EAT) agreed with the tribunal that the letters breached s 145B. The employers appealed to the Court of Appeal, which upheld their appeal on the basis that this was a direct offer which could be construed as temporary or applying on one occasion where the negotiation had reached difficulties. They did not consider that this was a permanent attempt to circumvent collective bargaining.

The Supreme Court decision

The Supreme Court rejected the Court of Appeal’s reasoning that this had been a temporary situation. Following an examination of the legislative origins of s 145B the majority said that the offer had achieved a prohibited result and was in breach. However, the minority disagreed with this reasoning, although they reached the same conclusion.

Implications for employers

Employers cannot try to circumvent stalled negotiations by going over the heads of the union and contacting employees directly. If there is a recognition agreement in place, this should be respected. The procedures should be followed and exhausted before making any direct offer. What the employer cannot do with impunity is make an offer directly to its workers, including those who are union members, before the collective bargaining process has been exhausted.

Employers may want to ensure that new procedures for collective bargaining do not allow for long drawn-out processes. It should also be very clear when the process comes to an end, including any dispute resolution procedure. One of the issues raised in the case was the risk that if employers must wait for procedures to be exhausted, how will they know with certainty when they have reached that point?

The Supreme Court explained that employers have two means of protection against that risk: 

The first is to ensure that the agreement for collective bargaining made with the union clearly defines and delimits the procedure to be followed.

If the employer genuinely believes that the collective bargaining process has been exhausted, it cannot be said that the purpose of making direct offers was to procure the result that would not have been determined by collective agreement. 

We suspect that the issue of when procedures are in fact exhausted will be an area of further debate. 

Finlay McKay is an employment partner at CMS