Kostal UK Ltd v Dunkley¹. Kostal UK Ltd , the employer, entered into a recognition framework for collective bargaining with Unite in February 2015. One of the agreement’s provisions stated that formal pay negotiations were to be conducted annually and any proposed changes to the employees’ terms and conditions of employment would be negotiated between Kostal and Unite.
Unite proceeded to write to Kostal to initiate formal pay negotiations for 2016. After various meetings, Kostal issued a set of proposals which all employees would receive. These proposals related to pay increases and bonus pay. Kostal also proposed changes to the employees’ terms and conditions as an “exchange”. Unite had concerns over some of the proposed changes to employees terms and conditions of employment so these were not recommended to members. The proposed changes were ultimately rejected by members in the consultative ballot.
After the rejection, Kostal posted a notice explaining that it would contact employees individually offering the same terms and conditions, and explaining that failure to agree to the new terms and conditions would result in employees not receiving a Christmas bonus. This was followed up with a letter to all employees and a further notice. Kostal wrote to employees who did not accept the proposal in January 2016 explaining that no changes could be made to the terms of their employment without their express agreement; however where no agreement could be reached it might lead to Kostal serving notice under those employees’ contracts.
Eventually a collective agreement on pay and amended terms and conditions was agreed in November 2016. However, some employees brought a claim before the Employment Tribunal for infringement of their rights under section 145B of Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA). The Employment Tribunal and the Employment Appeal Tribunal, on the facts, found in favour of the employees.
However, Kostal appealed to the Court of Appeal on the issue of liability.
The Court of Appeal allowed the appeal and decided in favour of Kostal. The Court of Appeal determined that section 145B of TULRCA should be interpreted as dealing with two types of cases. “The first type of case is where an independent trade union is seeking to be recognised and the employer makes an offer whose sole or main purpose is to achieve the result that the workers’ terms of employment will not be determined by a collective agreement.” “The second type of case is where an independent trade union is already recognised, the workers’ terms of employment are determined by collective agreement negotiated by or on behalf of the union, and the employer makes an offer whose sole or main purpose is to achieve the result that the workers’ terms of employment (as a whole), or one or more of those terms, will no longer be determined by collective agreement”.
The Court of Appeal believed that the facts in this case caused the situation to fall into a third category which was outside the scope of section 145B of TULRCA. The Court of Appeal determined that cases such as this “where an independent trade union is recognised, the workers’ terms of employment are determined by a collective agreement negotiated by or on behalf of the union, and the employer makes an offer whose sole or main purpose is to achieve the result that one or more of the workers’ terms of employment will not, on this one occasion, be determined by the collective agreement” should not fall within the scope of section 145B of TULRCA. The Court of Appeal felt if Dunkley was right this would ultimately give trade unions a veto over “direct offers of any employee concerning any terms of the contract…on any occasion and could not be what Parliament intended when it introduced the legislation”.
As a result of this case employers can bypass collective bargaining requirements and directly agree amendments with employees provided that such negotiations are a one-off and not intended to remove these terms permanently from the collective bargaining process. It also seems to be clear that genuine attempts to negotiate are necessary before going direct to employees.
¹ EWCA Civ 1009