On 18 May the Supreme Court began hearing an appeal about collective bargaining, which lawyers say has the potential to have a major impact on employment law and HR policies and practices.

In Kostal UK Ltd v. Dunkley and Others, the Supreme Court will decide if organisations can negotiate directly with staff where trade unions hold collective bargaining rights.

Lawyers at Irwin Mitchell say that 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. This case could give employers the freedom to agree changes with their staff directly if they are getting nowhere with the union.

In the original case (which was about the timing and amount of a Christmas bonus), the union Unite had argued that in contacting staff directly, Kostal had attempted to induce its staff out of collective bargaining, prohibited under the Trade Union and Labour Relations Act.

The Employment Tribunal and Employment Appeal Tribunal agreed, and ordered the employer to pay £400,000 in compensation to 55 members of staff.

Kostal appealed, arguing that it never intended to induce employees to opt out of collective bargaining, proved by the fact it continued to negotiate with the union and reached a subsequent agreement on pay.

In June 2019, the Court of Appeal held that Kostal had written to staff to circumvent collective bargaining, but that it was not unlawful because it was a temporary measure and staff hadn’t been asked to relinquish the right for their union to represent them. It said that trade unions with collective bargaining rights cannot prevent employers approaching staff directly to try to agree temporary changes to terms of employment where negotiations with the union have broken down.

However, the union appealed to the Supreme Court.

Whatever the Supreme Court decides, its decision will impact on any organisation where collective bargaining remains a key feature of negotiation when agreeing changes to terms and conditions of employment. It will be particularly significant in the public sector.

Glenn Hayes, Partner at Irwin Mitchell comments:

“Prior to the Court of Appeal ruling, it was almost impossible for organisations to make even minor temporary changes to terms and conditions of employment without union agreement, as any mistake could risk huge financial penalties.

“For many unionised employers, the appeal court ruling came as a relief, as it gave them scope to communicate directly with their staff – provided they attempted, in good faith, to agree terms with the union first.

“Although the decision was controversial, we believe that the Court of Appeal reached a fair compromise on the facts of this particular case. Prior to this, many employers have become very risk averse and agreed to union demands rather than face the possibility of having their decisions scrutinised by Employment Tribunals - not least because of the huge penalties involved if they get it wrong. Awards are fixed and tribunals can't reduce them like they can in other claims - even if they have sympathy with the employer.

“However, there are still questions that remain unanswered. If the Supreme Court upholds the Court of Appeal’s decision, we hope that it will put some more flesh on the bones of the scope of this exemption. For example, what happens if pay negotiations break down for a second or third time? Can the employer still write to its staff directly without risk if the changes are temporary rather than permanent? And how much effort must an employer make to agree terms with a recognised union before it can safely approach its staff?

“There’s still a lot riding on the ultimate outcome for employers, staff and unions, making this case one of the most significant for employment law in recent times.”

It is expected that the Supreme Court will make a deferred decision, which will be announced later this year.