A costly detour - employer’s attempt to bypass collective bargaining to negotiate directly with employees fails

Published on: 22/02/2017

#Employee relations

Under section 145B of TULRCA, it is an offence for an employer to offer employees an ‘inducement’ which, if accepted, would result in them giving up any or all of their collective bargaining rights.  The case of Dunkley and others v Kostal UK Ltd serves as a costly reminder to employers of what can happen if they do.    

After its proposed pay deal and related changes to terms and conditions were rejected in a consultative ballot in December 2015, Kostal wrote to all employees directly saying that a failure to agree to the terms would “lead to no Christmas Bonus and no pay increase this year”.  In the ACAS talks that followed, Kostal claimed that it had not intended to induce staff to opt out of collective bargaining and had made the offer so that the Christmas bonus would be paid before the end of the year. 

In January 2016, employees who had not accepted the proposals received a further letter from Kostal which said that the changes would not be implemented without their express agreement, but that “you should be aware that in the event that no agreement can be reached…..this may lead to the company serving notice on your contract of employment”.  The letter was silent as to whether dismissal would be followed by re-engagement on new terms.

Whilst a collective agreement was ultimately reached, 57 employees brought claims alleging a breach of section 145B (relying on both letters as offers).  The Tribunal rejected Kostal’s argument that the offer was just a temporary measure to solve the impasse and held that the offers were intended to achieve permanent changes to the employee’s terms and conditions.  It found also that it was “exceptionally improbable” that Kostal’s motive was not to bypass further negotiations with the unions and an employer should not be allowed to do so simply because it was unhappy with the ballot result.

The penalty for a breach of section 145B is £3,830 for each claimant union member receiving the offer.  If each claimant receives two awards for the two offers, the total compensation faced by Kostal would total £425,000 (approx.).  Although this is a first instance decision (and not binding on other courts), it demonstrates that employers need to be very careful about their timing when making any direct approach to employees during collective bargaining if they are to avoid falling foul of section 145B.    


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