The Court of Appeal has decided that our trade union legislation does not prohibit an employer appealing directly to its workforce on a single occasion about a change to a particular contractual term, provided that it is willing to continue to negotiate with the union in relation to that term in the future. That does not mean, however, that bypassing a collective agreement in this way will necessarily be a good idea in terms of industrial relations.
The dispute which reached the Court of Appeal arose from a pay offer made by Kostal UK Limited, an advanced electronics company. This was rejected by Unite, who had recently been recognised for collective bargaining purposes. Kostal then wrote directly to its employees on two occasions, urging them to accept the terms which had been rejected by Unite.
On the first occasion the inducement offered was the payment of a Christmas bonus, and on the second workers were told that rejecting the offer carried the risk of their existing contracts being brought to an end. In response to complaints from the Union that these offers were in breach of trade union legislation, Kostal stated that “it was never the company’s intention to induce people to opt out of collective bargaining”.
Both the employment tribunal and the EAT thought that these offers infringed the provisions in the Trade Union and Labour Relations (Consolidation) Act 1992 which prohibit offering “inducements” which have a “prohibited result” in relation to collective bargaining if the employer’s sole or main purpose is to achieve that result. Since these provisions were introduced (back in 2004) it has been clear that offering employees inducements to abandon collective bargaining – either entirely or in relation to a particular term - is prohibited. But it has not been clear – at least until now - what happens in a situation where an employee appeals to the workforce directly on a particular issue on a single occasion.
The Court of Appeal has now said that bypassing the collective bargaining procedure on a one-off occasion is not prohibited. It said that otherwise a recognised union would in effect have a veto over any direct offer to any employee on any term of their contract (major or minor) on any occasion. That could not have been what was intended when the legislation was introduced.
It added that such an interpretation of the legislation “did not render the union powerless” in this type of situation. It could – as it did on this occasion – ballot its members on industrial action.
Had the employers not overturned the employment tribunal’s judgment they would have been obliged to make a payment of £7,600 to all 55 claimants – ie £3,800 to each claimant for each unlawful offer. While the Court of Appeal’s clarification will be welcome to employers, the decision also illustrates the complexity of these provisions and the significant financial and industrial relations risks of any infringement.