Stalled negotiations on changes to a collective bargain may lead clients to ask – how do we get around this? 

The answer, according to the Supreme Court in Kostal UK Ltd v Dunkley and others, is to wait until you have 'exhausted' the negotiations. 

This is a historic decision – one in which the UK Supreme Court was required to examine the fundamental nature and purpose of collective bargaining. On one view, the answer they have given is straightforward. But on a practical level, it may not be so easy to apply.

The legislation

Under S.145B of the Trade Union and Labour Relations (Consolidation) Act 1992 a direct offer to workers that bypasses the collective bargaining arrangements will be an unlawful inducement if it produces the 'prohibited result'. The ‘prohibited result’ is that some or all of the workers' terms of employment will not be determined by collective agreement – S.145B(2). There is a penalty for taking the step which is currently £4,341 per person.

The Supreme Court decision

At the early stages of the case, the employment tribunal and EAT had been wrestling with whether a 'one off' agreement or offers that only dealt with one term would be caught by the provision. If there was no wider evidence of a wish to break away from collective bargaining per se, would that be a sufficient defence for the employer?

The Supreme Court's judgement was unanimous , with a 3-2 split as to why. Lord Leggatt departed from the arguments that had been put before the court and found that the employer’s direct pay offer to workers, bypassing stalled negotiations with the union, constituted an unlawful inducement. He concluded that the focus must be on the result of the offer, rather than its contents. An employment tribunal must ask itself whether, had the offer to the individuals not been accepted, the new terms would ultimately have been determined by the collective bargain. In other words, was that process exhausted by the time the offer was made?

Lady Arden and Lord Burrows took the view that it was for the employer to show that the offer was made for genuine business reasons and not with the underlying aim of departing from the collective bargaining arrangements. Lord Leggatt on the other hand concluded that "showing the purpose in making the offers cannot anyway provide a secure or stable defence to the employer. It could always be said that achieving a change in terms of employment which had not been collectively agreed was the employer’s main purpose in making the offers”.

In practice

While lawyers may grapple with the reasoning in the coming days and weeks, the result of the decision is that:

  1. An employer can make direct offers to workers, provided that the collective bargaining process agreed with the union has been followed and 'exhausted'.
  2. There will now be debate (and perhaps some game play) between employers and unions about how to determine when the negotiations have been exhausted. How easy will it be to reach the view that the failure to agree is no more than stalemate? Some collective bargaining machinery has lengthy dispute resolution terms – which can protract the bargaining process. Others may be completely silent giving either party the chance to try to shut the door, or leave it open – depending on their objective.
  3. And where in all of this does industrial action sit? The balloting process often begins when talks are 'at an end' – or appear to be. And yet the strike action may bring the employer back to the table.

The judgement still leaves plenty of issues for industrial action specialists to chew over.


Joan Cradden