A comment on Kostal UK Ltd v Dunkley & Ors  UKSC 47
By Alexi Norris, Paralegal at Cole Khan Solicitors LLP
On 27 October 2021, the UK Supreme Court (‘SC’) released its long-awaited decision on Kostal UK Ltd v Dunkley & Ors  UKSC 47 (‘Kostal v Dunkley‘).
Kostal v Dunkley is the first case which has brought the interpretation of s.145B of the Trade Union & Labour Relations (Consolidation) Act 1992 (“the 1992 Act”) to the Supreme Court. This section prohibits employers from making offers to union members which would have the “prohibited result”, in that a term is not, or is no longer, determined by collective bargaining.
“Its object, broadly stated, is to penalise offers made by employers to workers who are trade union members which, if accepted, would have the result that one or more terms of their employment will not (or will no longer) be determined by collective bargaining”Lord Leggatt,  UKSC 47 at 
Section 145B was inserted into the 1992 Act by the Employment Relations Act 2004 s 29. The principal purpose of s.145B’s enactment was to bring UK law into line with article 11 of the European Convention on Human Rights, as interpreted by the European Court of Human Rights per  in Wilson and Palmer v United Kingdom.
The key provisions of the 1992 Act provide, at s. 145B:
- A worker who is a member of an independent trade union … has the right not to have an offer made to him by his employer if: (a) acceptance of the offer, together with other workers’ acceptance of offers which the employer also makes to them, would have the prohibited 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.
The Appellant and 56 others are members of ‘Unite’, a trade union, all of whom are employed by the respondent, Kostal UK Ltd, as shop floor or manual workers.
Following a ballot from the employees, Kostal and Unite signed a (non-legally binding) Recognition and Procedural Agreement in February 2015. In October 2015, they began formal annual pay negotiations.
There were two preliminary meetings with Unite’s representatives. Following these meetings, Kostal made a pay offer. This offer was rejected via ballot by the union members. Kostal then made the same offer, also rejected, to their employees directly in December 2015.
In January 2016, Kostal made another offer, similar to the previous offer in December 2015, to the employees who had not accepted their earlier offer, and stated that if an agreement was not reached, then it “may lead to the company serving notice on your contract of employment“. By November 2016, over 97% of employees had accepted either of the direct offers.
In May 2016, the claimants brought proceedings to an Employment Tribunal claiming that the direct offers made to them by Kostal contravened s.145B 1992 Act. The tribunal found in favour of the claimants, and their statutory interpretation, and made an award of £3,800 to each claimant for each offer made.
The respondents appealed to the Employment Appeal Tribunal (the “EAT”) which, by a majority, dismissed the appeal. The EAT majority (including Simler P, the President of the EAT) rejected the argument that s.145B’s prohibition against ‘Inducements Relating to Collective Bargaining’ is aimed at Wilson/Palmer incentive to prevent or end collective bargaining of terms. It is also not intended to catch any offers outside of collective bargaining.
The Court of Appeal (the “CoA”) overturned the EAT, holding that this interpretation of s.145B was not in line with Parliament’s intentions. Bean LJ said that “it would amount to giving a recognised trade union… a veto over even the most minor changes in the terms and conditions of employment, with the employers incurring a severe penalty for overriding the veto”, per .
The CoA held that the right of workers under Article 11 ECHR is to be represented by a trade union and in that, for the union’s voice to be heard in employee and employer negotiations. But limited this right to only one of being heard, not a right to prevail.
The claimants were given permission to appeal to the UKSC.
“The Supreme Court unanimously allows the appeal and restores the awards made by the tribunal. It holds that Kostal’s direct offers to workers who were Unite members breached section 145B(2) of the 1992 Act. Lord Leggatt, with whom Lord Briggs and Lord Kitchin agree, gives the lead judgment. Lady Arden and Lord Burrows give a joint judgment that concurs in the result but advances a different interpretation of sections 145B and 145D of the 1992 Act.”UKSC Press Statement
Lord Leggatt rejected both the claimant’s and respondent’s arguments that s.145B is an offer with a particular content. Instead it is an offer which, if accepted by all the workers to whom the offer is made, would have a particular result.
The Court held that there is a connection between the presumed acceptance of the offers and the prohibited result specified in s.145B(2). This requirement cannot be satisfied unless there is a real possibility that, had the offer not been made and accepted, the workers’ relevant terms of employment would have been determined by a new collective agreement.
According to the UKSC Blog, therefore, there is nothing to stop an employer from making an offer directly to its employees in relation to a matter which falls within the scope of a collective bargaining agreement. But, this is only the case when the employer has first followed, and exhausted, the agreed collective bargaining procedure. The employer cannot make a direct offer to its workers, including union members, before the collective bargaining process has been exhausted – the process of which the employer has agreed to follow. This is what occurred in Kostal v Dunkley.
Lady Arden and Lord Burrows’ analysis accepted the claimant’s arguments and approved the EAT’s reasoning. They agreed that whenever an employer makes offers directly to the workers to agree terms outside of the collective bargaining process, it would thus amount to a prohibited result when an employer has a recognised union. If this is the case, the Tribunal’s focus should then turn to questioning if the employer’s main purpose was to achieve that prohibited result or if there was a genuine commercial purpose.
Lady Arden and Lord Burrows inferred that the employer’s underlying purpose should be assessed by the tribunal as a matter of fact. Old Square Chambers, who acted on behalf of the claimants, state that this was: ‘clear from s. 145D(4)(c) which suggests that offers made to particular workers based on performance or retention are not made with the purpose of achieving the prohibited result, even where (if accepted) they do achieve that result [113-114].’
Devereux Chambers, who acted on behalf of the respondents, have commented that Kostal v Dunkley has: “succeeded in persuading the majority of the Supreme Court that s.145B should not be interpreted so as to give trade unions an effective veto in collective bargaining”.
The UKSC’s decision highlights the sheer importance of maintaining clear and precise dispute resolution procedures between employers and trade unions, under which both sides can be abundantly clear as to when the collective bargaining process has ended.
Devereux Chambers have commented that employers and trade unions should check the clarity of their collective bargaining agreements. It may be advisable to agree a new procedure if the existing procedure is not clear on the beginning and end points of the collective bargaining process. It also may be advisable to establish clear timescales for when the employer and trade union can declare when the process has been exhausted.
Lastly, legal academics have highlighted that this judgment may lead to difficulties within the tribunals. Alan Bogg, professor of Labour Law at the University of Bristol, tweeted that the majority decision in Kostal v Dunkley ‘is a feat of technical reasoning’…. [He] fear[s] that the causation test in paragraph 65 will be very difficult to handle in ETs. By contrast, the alternative approach of Arden/Burrows provided a workable legal test and reflects the primacy of ‘purpose’ in s. 145D.
Bogg jovially asks an ‘exam-style’ question:
‘“The majority approach in Kostal represents a ‘private law’ interpretation of a labour statute, whereas the minority represents a ‘labour law’ interpretation.” Discuss’.
This is certainly an interesting perspective of the bench’s mentality, and an important question to ponder within this pivotal case.