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Supreme Court rules that direct pay offers to workers were unlawful

In Kostal UK Ltd v Dunkley and others, the Supreme Court held that the employer had offered unlawful inducements when it made two pay offers directly to Unite members while the collective bargaining process was continuing.

Facts

Kostal recognised the trade union, Unite, for collective bargaining purposes. Under the recognition agreement, the parties agreed to enter into annual formal pay negotiations and to negotiate any proposed changes to the terms and conditions of employment.


Kostal proposed a 2% increase in basic pay, an additional 2% increase for employees earning less than £20,000 and a lump sum of 2% of basic pay as a Christmas bonus. It also wanted to decrease the sick pay of new starters, reduce Sunday overtime, and consolidate two 15-minute rest breaks into a single 30-minute break.


The union members rejected the offer in a consultative ballot.


In December 2015, Kostal wrote directly to each employee seeking their signed acceptance to its pay offer. Kostal said that a 'failure to sign and return … will lead to no Christmas bonus and no pay increase this year'.


Kostal sent a second letter to each employee in January 2016 warning that if no agreement can be reached 'this may lead to the company serving notice on your contract of employment'.

Employment tribunal claim

Several Unite members brought claims in the employment tribunal. They argued that Kostal had breached their rights when it sent them two pay offers in its letters of December 2015 and January 2016.


Section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A) prohibits an employer from making an offer to members of a trade union if acceptance of the offer would have a 'prohibited result' and the employer's sole or main purpose in making the offer is to achieve that result.

Supreme Court

The Supreme Court found for the union members. It said that an employer could make pay offers directly to workers where it had followed and exhausted the agreed collective bargaining procedure. However, it could not make offers to workers, as Kostal had, before the collective bargaining process has been exhausted.

What does this mean for employers?

This judgment confirms that trade union legislation prohibits employers from bypassing the union and making direct offers to employees while the collective bargaining process is continuing.


While a direct approach can be made after the collective bargaining process has been followed and exhausted, employers should remain very cautious about doing this. This is because, depending on the facts, there may be a risk that the union disputes the status of the collective bargaining process and/or a tribunal makes a finding that the process is ongoing.

The financial ramifications can be huge if an employer gets it wrong. Kostal must pay £7,600 to each claimant, making a total award of around £420,000.

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