When employers have to negotiate certain terms and conditions with a union, talks can often hit a brick wall.

This can be incredibly frustrating on both sides. As well as keeping employers in limbo, it can also be infuriating for employees, as the way collective bargaining works means that trade unions often end up negotiating terms on behalf of employees who are not union members.

Collective bargaining

When wages and other terms and conditions need to be negotiated for large groups of workers at the same time, trade unions can step in to negotiate with employers on behalf of unionised employees. This process is known as collective bargaining.

For employers, it is often easier to resolve issues through collective bargaining than to have to deal with numerous separate complaints from individual workers. However, this is a lengthy process, and may also result in a loss of productivity as both parties sit down to reach an agreement.

Unlawful inducement

While it may be tempting to cut out the middle man, employers must be careful when seeking to bypass the negotiation process. Making any form an offer directly to a unionised employee could be construed as an attempt to get them to relinquish their collective bargaining rights.

This is known as unlawful inducement, an offence which carries a minimum penalty of around £4,000 per employee.

So, are employers’ hands tied?

Well, sort of, but not entirely. A recent case seems to suggest that in certain circumstances, when talks break down, the employer can go over the head of the union and make a pay offer directly to employees.

Kostal UK Ltd v Dunkley and ors

In this case, automotive parts manufacturer Kostal UK entered into collective bargaining with Unite, the recognised trade union. Following negotiations, the company offered a package of pay increases plus a Christmas bonus; however, these perks were also accompanied by some detrimental changes in employees’ terms and conditions, such as reduced entitlements to Sunday overtime and sick pay for new starters.

The terms were presented to unionised employees, who rejected them by an overwhelming majority.

Despite this decision, the company wrote to all employees directly to offer them the same package. In this communication, employees were told that if they did not agree to the terms, they would forfeit the Christmas bonus that had been offered. Going one step further, the company then followed up with a second letter, informing employees that their contracts may be terminated if an agreement could not be reached.

This prompted employees to bring Employment Tribunal claims against the company, alleging that each letter amounted to unlawful inducement contrary to Section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992. This prohibits employers from making offers to members of a recognised trade union if the aim is to prohibit the union from negotiating employees’ terms via collective bargaining.

The verdict

Based on a straightforward reading of Section 145B, the Tribunal initially upheld the claims and awarded a total of £420,000 in compensation. 

This was made up of two separate inducements at a fixed penalty of £3,800 each, plus £7,600 awarded to each of the 55 claimants.

However, the company subsequently appealed to the Court of Appeal, arguing that the law had been interpreted too literally by the Employment Appeal Tribunal.

Somewhat unexpectedly, the Court of Appeal agreed. It held that the company’s offer was a one-off attempt at reaching a direct agreement for the sole purpose of resolving the impasse in negotiations. Importantly, it also noted that the company did intend to engage with Unite for the purpose of collective bargaining in the future.

Ultimately, if the company had made a direct offer to employees that, if accepted, would mean they would no longer be part of the bargaining unit (and therefore would not have their terms negotiated on their behalf by the union in the future), this would have constituted unlawful inducement.

However, as the offer made did not seek to have this affect, the company was found not to have broken any laws.

James Tamm

Director of Legal Services

Expert Comment

Employers who have carried out collective bargaining with trade unions will no doubt be familiar with this sort of situation where hit a brick wall. It’s therefore comforting to know that, in certain circumstances, employers have the opportunity to go over the head of the union and straight to the workforce. That said, this is limited to circumstances where the offer is a one off rather than an effort to permanently displace the union or discourage workers from being members.

Employers should also remember that unions have other weapons in their armoury – the right to ballot members on strike action, for example – so it still pays to carefully weigh up the potential industrial relations issues before acting.

Given this, and the fact that union issues are notoriously complex, employers should always seek advice from an Employment Law expert in these circumstances.

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