In Kostal UK v. Dunkley, the Supreme Court’s ruling has confirmed that employers can make direct offers to staff provided that their collective bargaining processes are fully exhausted first. 

Established as one of the most important cases for trade unions rights in a decade, Kostal UK v. Dunkley has clarified that organisations can negotiate directly with staff where trade unions hold collective bargaining rights if the due processes are exhausted first.

This ruling also means the terms and conditions of employee contracts can be altered if the collective bargaining process ends and trade unions cannot reject this.

This marks a considerable change as employers wanting to negotiate directly with staff when negotiations with the union have broken down have nearly always erred on the side of caution to avoid facing huge financial penalties, lawyers at Irwin Mitchell have said.

This case arose in February 2015 when Kostal (the employer) and Unite (the union) signed a union recognition agreement.

Following a round of wage negotiations, the majority of employees (80 per cent) voted against the offer in a ballot.

However, after this, Kostal wrote directly to union members and urged them to accept their offer alongside a change in the terms and conditions of their contract. The employer stated staff would lose a pay increase and a Christmas bonus of £270 if they failed to accept.

This offer was then repeated in January 2016 but now indicated that failure to agree may lead to the company serving notice under their contracts of employment.

The union argued that, through this approach, Kostal was attempting to induce its staff out of collective bargaining which is prohibited by the Trade Union and Labour Relations Act.

Proceeding through two employment tribunals, Kostal was ruled to have conducted “unlawful inducements”.

Following a Court of Appeal case which ruled against this, the Supreme Court did ultimately rule in favour of the union which argued that Kostal had indeed breached the 1992 Trade Union Act.

Jonathan Tuck, partner in the Employment practice at Baker McKenzie in London, reiterated the implications of this ruling:

The Court ruled that Kostal’s pay offer directly to employees was an unlawful inducement because the collective bargaining process had not been exhausted.

However, although Kostal lost on the facts, the majority of the Supreme Court rejected the Claimant’s broader arguments on collective bargaining which would have significantly changed the industrial relations landscape in the UK.

The decision confirms that employers can legitimately make direct offers to employees so long as they first exhaust their collective bargaining processes, and provides useful clarity on when they can engage directly with the workforce on changing terms and conditions.

It underlines the importance of following the agreed process, but confirms that ultimately, trade unions cannot veto changes to terms and conditions when negotiations have failed.