A direct pay offer by a company to its employees, bypassing the recognised trade union with which it was in negotiations, and stating that, if no agreement was reached, "this may lead to the company serving notice on your contract of employment", breached the prohibition in s 145B of the Trade Union and Labour Relations (Consolidation) Act 1992, the UK Supreme Court held today.

Lord Briggs, Lady Arden, Lord Kitchin, Lord Leggatt, Lord Burrows, unanimously though for differing reasons, allowed an appeal by 56 members of the trade union Unite who were employed by Kostal UK Ltd. Kostal and Unite had signed a (non-legally binding) recognition and procedural agreement had begun formal annual pay negotiations, but in December 2015, after union members were balloted and rejected the offer, Kostal made the same offer to its employees directly, bypassing Unite stating that failure to accept would mean the employee not receiving a Christmas bonus. The following month it made another similar offer to those employees who had not yet accepted the first offer, with the suggestion that non-agreement might lead to notice being served. 

The Employment Tribunal and Employment Appeal Tribunal upheld the claimants' complaint of a breach of s 145B(2), but the Court of Appeal allowed Kostal's appeal and set aside the decisions of the tribunal and the EAT. 

Lord Leggatt, with whom Lord Briggs and Lord Kitchin agreed, said that both parties agreed that offers which, if accepted, would require workers who were trade union members to agree to forego or relinquish collective bargaining rights, either indefinitely or for any period, fell within section 145B. Kostal argued that this was the only type of offer which did so; the claimants argued for the wider interpretation accepted by the majority of the EAT whereby it is enough that, if the offer was accepted, at least one term of employment would be directly and not collectively agreed, at least for the time being. 

Lord Leggatt rejected both these interpretations. Both parties wrongly focused solely on the content of the employer’s offer. What s 145B prohibited was not an offer with a particular content but an offer which, if accepted by all the workers to whom the offer is made, would have a particular result. What was required was a causal connection between the presumed acceptance of the offers and the prohibited result specified in s 145B(2). On this interpretation there was nothing to prevent an employer from making an offer directly to its workers in relation to a matter which fell within the scope of a collective bargaining agreement provided that the employer had first followed, and exhausted, the agreed collective bargaining procedure. What an employer could not do with impunity was what Kostal did here: make a direct offer to its workers, including union members, before the collective bargaining process which the employer had agreed (albeit in honour only) to follow had been exhausted.

Lady Arden's and Lord Burrows' preferred interpretation was closely aligned with that of the tribunals. It did not necessarily follow that an employer could escape liability just because the collective bargaining process had been exhausted (as where, for example, the employer was determined to thwart the bargaining process). Where an offer was made directly, and not through collective bargaining, to workers who were trade union members which, if accepted, would change one or more terms of their employment, to avoid liability it was for the employer to establish that its sole or main purpose in making the offer was a genuine business purpose.

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