Landmark collective bargaining case heard by Supreme Court

Can you safely negotiate directly with staff where trade unions hold collective bargaining rights? If you think you can, and you do, and you’re wrong, the penalties can be huge. So, this is a big issue.

The scope of the law on this has now been considered by the Supreme Court, with the judgement to follow at some point later this year. There is a lot riding on this for employers, making it one of the most significant cases we will see in 2021. 

Personnel Today has been tracking the litigation over the years and their headline ‘Crucial collective bargaining case reaches Supreme Court’ sums it up. The case was heard on 18 and 19 May and they say, rightly, it could have a major impact on employment law and HR policies. This is the case of Kostal v Dunkley and will decide whether employers are able to negotiate directly with staff where trade unions hold collective bargaining rights in situations where talks with the union have broken down. We will come onto the case itself shortly, but first the background.

Central to these cases is section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992. Broadly speaking, that is designed to stop an employer from making an offer to a member of a recognised union which results in either all of their terms, or some of them, no longer being determined by collective agreement. So, it’s meant to stop the employer going over the head over the union and approaching employees directly. The legislation is very strict – it imposes a penalty on employers for every breach - a penalty which is in excess of £4,000 per breach at current rates. In this case the tribunal had found against Kostal and awarded in excess of £400, 000. So, these are very big numbers.

This is long running litigation which goes back to 2015. Collective bargaining between Kostal and the trade union, Unite, had broken down and so Kostal made two pay offers directly to a number of employees covered by Unite’s collective bargaining agreement. 57 of those employees went on to bring claims in the employment tribunal, backed by Unite, alleging that Kostal had offered unlawful inducements to forego collective bargaining under s145B. The tribunal ruled for the union, as did the EAT on appeal. However, as Personnel Today reported in June 2019, that ruling was overturned by Court of Appeal and it is that decision which the Supreme Court has been considering.

Not surprisingly this is being followed closely in employment circles and it was interesting to see the respected commentator, Darren Newman, tweet about it saying: ‘The arguments in the Supreme Court when the Kostal case starts today will be complex. But here is what I keep coming back to. There is no doubt that the employer could have derecognised the union with no legal consequences. It could have frozen pay. It could have imposed the deal.’ 

The tactic of derecognising a union in these situations is an interesting one and we will come onto that point. As for section 145B, Ed Goodwyn has been advising clients on this area for decades. I phoned Ed to get his thoughts on this case and I put it to him that, for employers, until the Court of Appeal stepped in, the law was stacked against employers: 

Ed Goodwyn: “The prohibition in Section 145B had previously been interpreted extremely widely that even when an employer was doing its best, and had tried through collective bargaining, and had basically reached the impasse, and even in circumstances where the employer didn't really want to negatively impact the collective bargaining but still needed to get to the employees on a particular issue, that was deemed to be offside. Now, the Court of Appeal gave guidelines effectively to say, look, in circumstances, it was very much on its facts this case, but on the facts, it was a beneficial approach that the employer was wanting to make to deal with confirmation of bonuses and working time arrangements. The employer had been to enormous lengths to try and seek agreement through the union but had failed, they completely fallen over, but the employer, understandably, still wanted to provide these issues to the employees. Now, they made it perfectly plain that this was just a temporary issue that they needed to put to the employees and they made it perfectly plain that they wanted to continue collectively bargaining with the union, it wasn't the end of any relationship with the union, far from it and in that sense, it was in good faith with the view not to in any way negatively impact the collective bargaining arrangements, per se. It is very much on that basis that the Court of Appeal, by way of a compromise, took the view that that was just about on the right side of the line insofar as section 145B was concerned. Unfortunately, even with the Court of Appeal’s decision, it is still a very large risk for employers. Now, we thought we knew that the appeal was going to the Supreme Court so most employers have taken a cautious approach and waited to see what the outcome is because the downside, if you get this wrong, is very significant. There are two downsides. Firstly, any agreement can be unpacked and secondly there is a effectively a fine for each time you breach section 145B and Kostal is quite an interesting case because in the lower courts there were found to be two separate breaches for each of the 55 employees and it very quickly came to a very significant sum by way of penalty of over £400,000. So, again, the size of the risk is substantial if you get it slightly wrong. So, we're all really hoping the Supreme Court will provide comfort to employers where they can codify with greater clarity exactly where the line is drawn as to what an employer needs to do to keep the good faith and the collective bargaining arrangements in play in those rare circumstances where the collective negotiations have completely broken down and they do still need to go to the employees.”

Joe Glavina: “Ed, there some commentators suggesting that in this case Kostal could have chosen the safer route and derecognised the union with no legal consequences. As a tactic, generally, in cases like this where negotiations with that union have broken down is that option a good one in your view?”

Ed Goodwyn: “Well, very often the employee doesn't want to derecognise the union. They often do have, broadly, an agreement and arrangement with them that has worked and also, in itself, to do recognise is very risky because whilst it may allow you to then directly deal with the employees, you could trigger industrial action. A trade union won't sit back and allow you to derecognise without a fight and, furthermore, even after the derecognition if the unions do have support they can immediately apply from compulsory recognition. So, derecognition whilst, of course, it is a weapon in the employers armour, it's high risk in itself and it is much easier to keep the collective bargaining arrangements in place, if they broadly work, and get round individual issues that have become an issue by way of an exemption to the normal rule under section 145B. So, in that sense the compromise that I mentioned that the Court of Appeal came to seems to make a lot of sense. The employer still has to respect the collective bargaining arrangement, it shouldn't be tempted to just ignore it, or derecognise, do its best to act in good faith, and only when it's done that which he can, would it be able to approach the employees direct which, to many commentators, seems to be a perfectly sensible balance.”

Incidentally, Ed has also been commenting on the Somerville case which you might have seen reported in the press and is the latest case dealing with worker status. His article for Outlaw is called ‘No minimum working time required to be counted as worker, EAT rules’. On Friday Ed will be talking to this programme about that case and its implications, so do watch this space.