Employers in collective bargaining agreements cannot make direct offers with staff, EAT rules

Business went ‘behind the veil’ of agreements to get employees to sign new contracts

Employers must consult unions when changing employees’ terms and conditions when they are signed up to collective bargaining, the Employment Appeal Tribunal (EAT) ruled last week.

The EAT upheld a decision by the Sheffield Employment Tribunal to compensate employees of electronics manufacturer Kostal UK, who were members of trade union Unite, for breaching collective bargaining rules. The company made unlawful inducements to its employees to sign a new contract without consulting the union. 

Kostal appealed the Sheffield tribunal’s February 2017 decision, in which it ruled that the company must pay its employees compensation after it attempted to persuade 55 employees to agree to a new pay deal without their union’s knowledge.

The EAT handed down its decision on 13 December, upholding the tribunal’s original decision for Kostal to compensate employees a total of £418,000. This was made up of the mandatory fixed award of £3,800 for each unlawful inducement offer made by the company.

In its December decision, following a hearing on 14-15 November, the EAT cited section 145b of the Trade Union and Labour Relations Act 1992 – that trade union members have the right not to have an offer made to them by their employer if accepting the offer would have a prohibited result, and if the employer’s main purpose was to achieve that result.

EAT judge Mrs Justice Simler said section 145B seeks to prevent employers “going over the heads of the union with direct offers in order to achieve the result that one or more terms will not be determined by collective agreement with the union if offers are accepted”.

The claims arose after Kostal and Unite failed to reach an agreement following Kostal’s proposal for a 2 per cent increase in basic pay plus an additional 2 per cent for those earning less than £20,000, along with a substantial Christmas bonus, payable during the 2015 festive season. In return, it sought a sick pay and Sunday overtime reduction for new employees, and consolidation of the two contracted 15-minute breaks into one 30-minute break.

Kostal then wrote to employees in December 2015 urging them to sign a new contract with the new pay offer and terms and conditions of employment, or risk losing their £270 Christmas bonus. This was done without the union’s awareness, and was repeated to those who did not accept the offer in January 2016.

The union, on behalf of the employees, sued Kostal for compensation and won. While Kostal said it made the two pay offers on the same terms – which would make it a single offer – the EAT disagreed and dismissed the company’s appeal. 

Following an appeal hearing on 14 and 15 November, the company argued it had never intended to make employees opt out of collective bargaining, but wanted to inform them they would lose their Christmas bonus if they did not agree to the changes in time.

A collective agreement was eventually reached on pay and amended terms and conditions on 3 November 2016, by which time, however, the issue of the Christmas bonus was no longer applicable.

Simler said in her judgment that the law prohibited offers made to workers who are members of a recognised trade union, or one seeking recognition by their employer, if acceptance of the offer would have “the prohibited result” and the employer’s sole or main purpose in making the offers is to achieve that result. “The prohibited result” is 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”.

She also cited a government review of the law that confirmed the law should explicitly prohibit inducements or bribes being made to trade union members to forego union rights.

Ranjit Dhindsa, partner and head of the employment, pensions and immigration team at Fieldfisher, said employers with recognition agreements with unions including collective bargaining essentially agree to collaboratively deal with issues such as pay.

“That means employers or unions cannot go behind the veil of collective terms by going directly to employees when it suits them,” she told People Management. “A lot of employers get frustrated with collective bargaining, as seen here when Kostal couldn’t come to a pay agreement with its union.”

Dhindsa said that “a lot of employers may have tried their tactic and got away with it, but they can’t now assume that they will”, and emphasised how “eye watering” the compensation award was for just 55 employees.

Howard Beckett, assistant general secretary for legal services at Unite, said: “The decision confirmed employers cannot dip in and out of collective bargaining when it suits their purposes and this is key to protecting workers and trade unions from underhand employer tactics.”

Kostalhad not responded to People Management’s request by press time.