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The Employment Appeal Tribunal (EAT) has ruled that employers must consult unions when changing employees’ terms and conditions when they are signed up to collective bargaining.

The EAT upheld a decision made by the Sheffield Employment Tribunal to compensate employees of Kostal UK – an electronics manufacturer – for the breaching of collective bargaining rules. The employees were members of the trade union Unite.  It was found that the company had made unlawful inducements to the employees to sign a new contract without consulting with the union and ruled that it must pay its employees compensation of £3,800 for each unlawful inducement made.

Eat judge Mrs Justice Simler stated that section 145b of the Trade Union and Labour Relations Act 1992 seeks to prevent employers “going over the heads of the union with direct offers in order to achieve the result that one or more terms will not be determined by collective agreement with the union if the offers are accepted”.

The claims resulted from a failed agreement between Kostal and Unite, following a proposal for a 2% increase in basic pay, plus an additional 2% for those earning less than £20,000 – together with a Christmas bonus payable during the 2015 festive season.  In addition, Kostal sought a sick pay and Sunday overtime reduction for new employees and consolidation of the two 15-minute breaks currently in operation, into one 30-minute break.

In December 2015, Kostal wrote to employees asking that they sign a new contract containing the new terms and conditions or risk losing their Christmas bonus.  Those who did not accept the offer were again urged to do so in January 2016.  The union was not aware of this contact and subsequently – on behalf of the employees – sued Kostal for compensation, which they won.

Kostal appealed and argued that it had not intended to encourage employees out of collective bargaining but to inform them that there was a time limit on the offer of the Christmas bonus.  Agreement was eventually reached on pay and amended terms and conditions, but by then the offer of the Christmas bonus was no longer applicable.

In her judgement, Mrs Justice Simler said that the law prohibited offers made to workers who are members of a recognised trade union – or one seeking recognition by their employer – if acceptance of the offer would have a prohibited result and the sole or main purpose in making the offers is to achieve that result. The prohibited result is that the workers’ terms of employment, or any of those terms, “will not, or will no longer, be determined by collective agreement negotiated by or on behalf of the union”.  She also quoted a government review of the law that confirmed the law should explicitly prohibit inducements or bribes being made to trade union members to forego union rights.

Ranjit Dhindsa, Partner and head of the employment, pensions and immigration team at Fieldfisher stated:

“That means employers or unions cannot go behind the veil of collective terms by going directly to employees when it suits them. A lot of employers get frustrated with collective bargaining, as seen here when Kostal couldn’t come to a pay agreement with its union.”

She added:

“….a lot of employers may have tried this tactic and got away with it, but they can’t now assume that they will”.  

Howard Beckett, assistant general secretary for legal services at Unite, said:

“The decision confirmed employers cannot dip in and out of collective bargaining when it suits their purposes and this is key to protecting workers and trade unions from underhand employer tactics.”