Kostal UK Ltd v Dunkley and others

An employer contravenes section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 by making direct offers which, if accepted, would cause employment terms not to be determined by collective agreement when there was a real possibility that they otherwise would have been. That possibility will ordinarily exist where an agreed collective bargaining procedure remains unexhausted.

The provision protects the union’s opportunity to represent its members through the agreed bargaining process. It does not give the union a veto once that process has been followed and exhausted. Liability also requires the employer’s sole or main purpose to be achieving the prohibited result. A genuinely held belief that bargaining has ended may therefore protect the employer.

The appellants were Unite members employed by Kostal UK Ltd. Kostal had recognised Unite and agreed an annual collective bargaining and dispute-resolution procedure. During the first pay round under that agreement, the workforce rejected Kostal’s proposal in a union ballot. Before the agreed procedure had been exhausted, Kostal made substantially the same offer directly to employees, linking acceptance to a Christmas payment and later warning of possible termination.

The Employment Tribunal upheld complaints under section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992. The Employment Appeal Tribunal dismissed Kostal’s appeal by a majority: [2018] ICR 768. The Court of Appeal allowed a further appeal: [2019] EWCA Civ 1009; [2020] ICR 217. The issue before the Supreme Court was whether acceptance of the direct offers would have produced the statutory prohibited result.

1. Disposition. The appeal was allowed unanimously, although the court divided 3–2 on the interpretation of the legislation. Lord Leggatt, with whom Lord Briggs and Lord Kitchin agreed, supplied the majority reasoning. The Employment Tribunal was entitled to find that both direct offers contravened section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992.

2. The prohibited result. Section 145B focuses on the practical result of accepting all relevant offers, not merely their contractual wording. Acceptance has the prohibited result where it causes one or more employment terms not to be determined by collective agreement and, without the offers, there was a real possibility that those terms would have been so determined. An agreed bargaining procedure which remains unexhausted will ordinarily establish that possibility. The words “will not” are not confined to unions seeking recognition, and the provision can protect collective bargaining for a temporary period or a single bargaining round.

3. Limits of the prohibition. Section 145B neither prohibits every direct offer concerning a matter within collective bargaining nor gives a recognised union a veto. Once an employer has followed and exhausted the agreed procedure, it may ordinarily make direct offers because there is no longer a real possibility that the terms would otherwise be determined by collective agreement. A further safeguard lies in section 145B(1)(b): liability arises only where achieving the prohibited result was the employer’s sole or main purpose.

4. Application. Kostal made both offers while the agreed process, including its final conciliation stage, remained active. Assuming universal acceptance, the direct agreements would as a practical matter have deprived continuing collective negotiations of their capacity to produce a better deal. Withholding the Christmas payment from non-accepting workers, and the later warning of possible termination, restrained the employees’ use of union representation. The tribunal had also found that Kostal consciously decided to bypass further meaningful negotiations.

5. Separate reasoning. Lady Arden and Lord Burrows agreed that the appeal should be allowed but rejected the majority’s causal “real possibility” analysis. They considered that the offers amounted, in substance, to contracting out of collective bargaining for that pay round. On their approach, the employer would escape liability if its main purpose was an independent, genuine business purpose. They did not accept that exhaustion of the bargaining procedure would necessarily exclude liability.

1. United Kingdom Supreme Court: Allowed the workers’ appeal from [2019] EWCA Civ 1009 and restored the conclusion that the direct offers contravened section 145B.
2. Court of Appeal: Allowed the employer’s appeal and set aside the decisions below: [2019] EWCA Civ 1009 ; [2020] ICR 217 .
3. Employment Appeal Tribunal: By a majority, dismissed the employer’s appeal: [2018] ICR 768 .
4. Employment Tribunal: Upheld the workers’ complaints and made the prescribed award for each unlawful offer.