Kostal UK Ltd v Dunkley

The Supreme Court interpreted section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992, inserted by the Employment Relations Act 2004, in light of the mischief identified by the European Court of Human Rights in Wilson and Palmer. The court held that the statutory prohibition targets employer offers which, if accepted by the recipients (and by other workers to whom the employer makes similar offers), would have the practical effect that one or more terms of employment will not (or will no longer) be determined by collective agreement negotiated by or on behalf of the union, when there was a real possibility that those terms would otherwise have been so determined. Where there is an agreed collective bargaining procedure, an employer may not by-pass that procedure by making direct offers while the procedure remains unexhausted. Whether the offers contravene section 145B also depends on the employer's sole or main purpose in making them, and the employer bears the burden of showing a genuine alternative or business purpose under section 145D.

This appeal concerned complaints under section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 that an employer's direct pay offers to union members had the prohibited effect of undermining collective bargaining. The claimants, members of Unite, relied on a Recognition and Procedural Agreement with the employer which set out an annual bargaining timetable and a four-stage dispute procedure. After the union rejected a proposed package in a membership ballot, the employer wrote to individual employees on two occasions offering materially similar pay and terms directly and linking one offer to a Christmas bonus. Employees who accepted the direct offers obtained those terms before a collective agreement had been reached.

The tribunal found the offers contravened section 145B because the employer had consciously decided to by-pass meaningful negotiations; it awarded the fixed statutory sums. The Employment Appeal Tribunal (majority) upheld that approach. The Court of Appeal reversed, taking a narrower view that the statutory "prohibited result" required an offer that operated to remove collective bargaining rights (in substance a contracting-out) more permanently or clearly than occurred here.

The Supreme Court framed the issues as (i) whether the offers, if accepted, would have the statutory "prohibited result" and (ii) whether the employer's sole or main purpose in making the offers was to achieve that result. The court emphasised purposive interpretation guided by the Wilson and Palmer judgment and statutory history. It rejected an interpretation that any direct offer of terms not yet collectively agreed automatically contravened section 145B. Equally, it rejected an overly narrow test limited to explicit permanent contracting-out. The court held that the prohibited result exists where acceptance of the offers would, in practice, cause agreed collective bargaining arrangements to be by-passed (in whole or in part) when there was a real possibility that the matters would otherwise have been determined by collective agreement. Where a recognised union exists and an agreed procedure has not been exhausted, making direct offers can therefore contravene section 145B. The employer can escape liability only if it proves its sole or main purpose was a genuine business purpose under section 145D.

Procedure and relief: the claimants sought employment tribunal complaints under section 145B and the fixed statutory award; the Supreme Court allowed the appeal from the Court of Appeal and restored the tribunal's finding that the offers contravened section 145B on the facts found below.

Appeal allowed. The court held that section 145B prohibits offers which, if accepted (together with acceptance by other workers to whom similar offers are made), would have the practical effect that one or more terms of employment will not or will no longer be determined by collective agreement negotiated by or on behalf of the union when there was a real possibility those terms would otherwise have been so determined. The employer had made direct offers before the agreed collective bargaining procedure was exhausted and the tribunal was entitled to find the offers contravened section 145B; the employer failed to show a genuine business purpose under section 145D.

Employment Tribunal: complaint under section 145B upheld and statutory awards made; Employment Appeal Tribunal: claimants' appeal dismissed by majority, [2018] ICR 768 (EAT); Court of Appeal: employer's appeal allowed and decisions of ET and EAT set aside, [2019] EWCA Civ 1009; appeal to the Supreme Court allowed, restoring the tribunal's decision.