The Supreme Court has held in Kostal UK v Dunkley and ors that an employer's direct pay offer to workers, bypassing stalled collective bargaining with the recognised trade union, constituted an unlawful inducement by virtue of section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992.

The employer entered into a recognition agreement with Unite to establish a framework for collective bargaining. The agreement provided that formal pay negotiations would take place annually, and that any proposed changes to terms and conditions of employment would be negotiated with the union. When a package of pay increase, a Christmas bonus and some detrimental changes to terms and conditions was rejected in a consultative ballot the employer took the matter into its own hands. It wrote to all employees directly offering the same package, and posted a notice stating that if employees did not agree to the new terms, they would forfeit their Christmas bonus. The employer then wrote again to the employees who had not accepted the pay proposal offering them a 4% pay increase and stating that dismissal might be a possible outcome if agreement could not be reached. A group of employees then brought claims in the employment tribunal alleging that their rights under section 145B TULR(C)A had been infringed on two separate occasions by the letters they received.

The Court of Appeal had previously held that a one-off direct offer to employees concerning pay which bypassed stalled collective bargaining did not constitute an unlawful inducement under section 145B, but the Supreme Court disagreed. It held that the Court of Appeal's view that section 145B could only be contravened where union members are asked to surrender their collective bargaining rights on a permanent basis was incorrect, and that there was no difference between offering an inducement to trade union members to agree not to be represented by their union in collective bargaining indefinitely or for a long or very short period of time.

The Supreme Court held that an offer can be made if the collective bargaining process has been exhausted. In this instance the collective bargaining process was ongoing when the offer was made and so section 145B had been breached.

It follows that there's nothing to prevent an employer from making an offer directly to workers provided that it has followed, and exhausted, the agreed collective bargaining procedure. Where a union has not yet been recognised the employer can make direct offers to workers without risk of contravening section 145B because there is no possibility of agreeing terms through collective bargaining at the time the offers are made.

Take note: Following the Supreme Court's decision employers will not be able to bypass a stalled collective bargaining process by making direct offers to workers unless it is clear that the collective bargaining process has been exhausted. It will not be possible to avoid liability by deliberately thwarting the process as the employer will have to display a genuine belief that the process has been exhausted.  It's worth noting that if an employer breaches section 145B then each of the affected employees can claim a mandatory award from the Employment Tribunal, currently set at £4,341.

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