Court of Appeal overturns Employment Appeal Tribunal in long-awaited Trade Union ‘unlawful inducements’ case

In a case which has had employers and Trade Unions on the edge of their seats, the Court of Appeal has overturned the decision of the Employment Tribunal and the Employment Appeal Tribunal in the case of Kostal UK Ltd v Dunkley & Others

Section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) prohibits an employer from making offers to members of a recognised trade union (or one seeking to be recognised), where the purpose of the offer is to cease collective bargaining.

Kostal UK Ltd. made an offer directly to employees when they failed to reach agreement with the recognised trade union. In a ground-breaking case, the Employment Appeal Tribunal upheld the decision of the Sheffield Employment Tribunal in holding the employer had breached the legislation and was liable to pay a fixed penalty (then £3,800, currently fixed at £4193.00) to each affected employee. The implication was that an offer to employees did not have to include the permanent surrender of collective bargaining terms. It was enough that one or more of the workers’ terms of employment would not, on that occasion, be determined by the collective agreement.  

Kostal appealed and the case was heard by the Court of Appeal on 22nd May 2019. Its arguments included that the financial risk to an employer of failing to persuade an Employment Tribunal as to its purpose, gave the union a de facto veto over any changes to terms and conditions proposed by the employer.  

In a unanimous decision, the Court of Appeal found in Kostal’s favour. Setting aside the decision of the Employment Tribunal and Employment Appeal Tribunal, it agreed that the Employment Tribunals’s construction of s,145b “gives a recognised trade union an effective veto over any direct offer to any employee concerning any term of the contract, major or minor, on any occasion;” and this went beyond the mischief intended to be cured by the ECtHRin Wilson and Palmer v United Kingdom [2002] IRLR 568.

Angela Brumpton of gunnercooke, who acts for Kostal UK Limited, commented:

“We have always maintained the effect of the original Employment Tribunal decision represented a paradigm shift in industrial relations in the UK. This decision will come as a relief to employers faced with a situation where collective bargaining has reached an impasse, and they wish to approach employees directly.”