Kostal UK Ltd (Respondent) v Dunkley and others (Appellants)

Michaelmas Term

[2021] UKSC 47

On appeal from: [2019] EWCA Civ 1009

Kostal UK Ltd (Respondent) v Dunkley and others (Appellants)

before

Lord Briggs

Lady Arden
Lord Kitchin
Lord Leggatt
Lord Burrows

JUDGMENT GIVEN ON

27 October 2021

Heard on 18 May 2021
Appellants
Oliver Segal QC
Stuart Brittenden

(Instructed by Thompsons Solicitors (Leeds))

Respondent

Andrew Burns QC Georgina Hirsch

(Instructed by Gunnercooke LLP (Manchester))

LORD LEGGATT: (with whom Lord Briggs and Lord Kitchin agree)

Introduction

1. This case is the first occasion on which appeal courts have had to consider the

proper interpretation of section 145B of the Trade Union and Labour Relations
(Consolidation) Act 1992 (the “1992 Act”), one of a group of provisions added to the
1992 Act by amendment in 2004. 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.

2.          Pursuant to section 145B(5), a worker (or former worker) may present a

complaint to an employment tribunal on the ground that their employer has made an
offer in contravention of section 145B. The complaint must normally be presented
within three months from when the offer was made or, where the offer is part of a
series of similar offers to the complainant, the date when the last of them was made:
see section 145C(1) of the 1992 Act. If the tribunal finds that the complaint is well-
founded, the worker is entitled to be paid a lump sum award by the employer in
respect of the offer complained of: see section 145E(1)-(3). At the time of the offers

made in this case, the amount of the award was fixed at £3,800.

Relevant facts

3. The 57 claimants (and appellants) are members of Unite the Union (“Unite”)

and are employed as shop floor or manual workers by the respondent, Kostal UK Ltd
(which I will refer to as “the Company”). The Company manufactures
electromechanical and electronic products for the automotive industry.

The Recognition Agreement

4.          Following a ballot of workers in November 2014 which showed significant

support in favour of recognising Unite for the purpose of collective bargaining, the February 2015. The stated purpose of this agreement was to establish trade union recognition and representation within the Company and establish a framework for consultation and collective bargaining (clause 1.2). The agreement gave Unite “sole recognition and bargaining rights” (clause 2.1). By clause 3.1, the Company and Unite accepted that “the terms of this agreement are binding in honour upon them but do not constitute a legally binding agreement”.

5.          Clauses 7.1 and 7.2 of the Recognition Agreement stated that formal

negotiations would take place between the parties on an annual basis and that
negotiations would commence normally in October “with a normal effective date of
1st January”. Clause 7.4 stated that “any matters related to proposed change of terms
and conditions of employment will be negotiated between the Company and the
Union”. Appendix 1 outlined a procedure that “will be followed in order to deal with
collective issues which if not resolved, could lead to a dispute between the parties”
and stated that “[d]uring the procedural process, there will be no ... change imposed
by either party”. The procedure has four stages. The first three stages involve meetings
between trade union representatives and management. Stage 4 is described as

follows:

“Failing agreement at Stage 3 the matter, by joint agreement,
may be referred to ACAS for conciliation. … If the parties do
not agree to refer the matter to ACAS the procedure is
exhausted.”

6.          On a fair reading of the Recognition Agreement, the Company undertook -

albeit not as a legally enforceable obligation - not to make any change to any of its
workers’ terms and conditions of employment before it had first engaged in collective
bargaining about the matter with Unite and exhausted the process outlined in

Appendix 1.

The 2015 pay negotiations

7.          The first pay negotiations after the Recognition Agreement was signed

commenced in October 2015. Following two preliminary meetings with Unite sought a reduction in sick pay for new starters, a reduction in the Sunday overtime rate and consolidation of two separate 15 minute breaks into a single 30 minute break (which would comply with the Working Time Regulations 1998).

representatives, the Company tabled a pay offer on 24 November 2015. The offer
comprised: a 2% increase in basic pay; an additional 2% increase for those earning less
than £20,000 payable from 1 April 2016; and a Christmas bonus to be paid in

8. The offer was put to a ballot of union members on 3 December 2015. Of the 80% of union members who took part in the ballot, 78.4% voted to reject the offer.

9.          On 10 December 2015, the Company wrote to its employees to make the same

offer to them directly. The letter stated that, if they did not accept the offer by 18 negotiation meeting took place on 14 December 2015 at which no agreement was reached. By the end of December, the Company and Unite had reached Stage 4 of the procedure set out in Appendix 1 to the Recognition Agreement and had agreed to refer the matter to ACAS.

10.        By January 2016, according to the Company, 91% of eligible workers had

accepted the direct offer made on 10 December 2015. On 29 January 2016, the serving notice on your contract of employment”.

Company wrote to employees who had not accepted it, making a similar offer
(including an amount equivalent to the Christmas bonus backdated to 1 January 2016).

11. On 3 November 2016, by which point over 97% of employees had accepted

individual offers from the Company, a collective agreement between the Company and the Company in November 2015 (but without the 2015 Christmas bonus).

These proceedings

12.        On 11 May 2016 the claimants presented complaints to an employment tribunal

that the offers made to them directly by the Company contravened section 145B. The offer in the negotiations with Unite had been rejected in the ballot of union members, the Company had taken the conscious decision to by-pass further meaningful negotiations and contact with the union in favour of making direct offers to individual employees.
tribunal upheld the complaints and made the statutory award of £3,800 to each
claimant in respect of the first offer made on 10 December 2015 and an additional
award of £3,800 to each claimant who also received the second offer made on 29

13. The Company appealed to the Employment Appeal Tribunal (Simler J (President)

sitting with two lay members). The appeal tribunal, by a majority, dismissed the
appeal: see [2018] ICR 768. The Company then appealed to the Court of Appeal. For
reasons given by Bean LJ (with whom Singh and King LJJ agreed), the Court of Appeal
allowed the Company’s appeal and set aside the decisions of the employment tribunal
and Employment Appeal Tribunal: see [2019] EWCA Civ 1009; [2020] ICR 217. From
that decision, the claimants now appeal to this court.

The issue in the appeal

14.        The issue in this appeal is whether the pay offers made by the Company on 10

December 2015 and 29 January 2016 directly to workers who were members of Unite were offers which, if accepted by all the workers who received them, would have the “prohibited result”, as defined in section 145B(2) of the 1992 Act. It is not disputed
that, if that condition was satisfied, the Company’s sole or main purpose in making the
offers was to achieve that result, with the consequence that the making of the offers
contravened the right protected by section 145B(1).

15. Although the meaning of the relevant statutory provisions must be discerned

first and foremost from the language used, they need to be situated in their legal and
historical context in order to understand the mischief which they were designed to
address. I will therefore begin by outlining the legislative history. It is common ground
between the parties that the elements of this history which I will mention are
admissible as an aid to interpretation.

The legislative history

16. Section 145B and related provisions were inserted in the 1992 Act by section 29

of the Employment Relations Act 2004. It is not in dispute that a principal purpose of
their enactment was to bring UK law into line with article 11 of the European
Convention on Human Rights (“the Convention”) as interpreted by the European Court
of Human Rights in Wilson and Palmer v United Kingdom (2002) 35 EHRR 20; [2002]
IRLR 568.

Wilson and Palmer

17. The claimants in Wilson and Palmer were members of trade unions recognised

by their employers for collective bargaining purposes. In each case the claimants were
offered a pay increase if they agreed to sign personal contracts under which they
relinquished their rights to be represented by the union in negotiations over pay and
other terms of employment and agreed that these matters would be determined
individually rather than by collective bargaining. Those employees such as Wilson and
Palmer who refused to sign such contracts did not receive the same benefits. In
tribunal proceedings the claimants complained that their employers’ conduct infringed
their rights under what is now section 146(1)(a) of the 1992 Act not to have action
(short of dismissal) taken against them as individuals for the purpose of preventing or
deterring them from being members of a trade union. Their claims ultimately failed
when the House of Lords held (by a majority): (i) that the withholding from the
claimants of benefits conferred on other employees who agreed to sign personal
contracts constituted an omission rather than an “action”; and (ii) that anyway the
employers’ purpose was not to prevent or deter the claimants from being members of
a trade union as such, but only to prevent or deter them from using the union for the
particular purpose of collective bargaining. In these circumstances section 146(1)(a)
did not apply: Associated Newspapers Ltd v Wilson [1995] 2 AC 454.

18.        Having exhausted their domestic remedies, the claimants applied to the

European Court of Human Rights complaining that the law applicable in the United Kingdom failed to secure their rights under article 11 of the Convention to freedom of association, which include the right of every individual “to join trade unions for the protection of his interests”. The Court upheld the complaints. It did not accept that the absence under UK law of an obligation on employers to enter into collective bargaining gave rise, in itself, to a violation of article 11: see para 45 of the judgment. However, the Court stated (in para 46) that:

“it is of the essence of the right to join a trade union for the
protection of their interests that employees should be free to
instruct or permit the union to make representations to their
employer or to take action in support of their interests on
their behalf. If workers are prevented from so doing, their
freedom to belong to a trade union, for the protection of
their interests, becomes illusory. It is the role of the State to
ensure that trade union members are not prevented or
restrained from using their union to represent them in
attempts to regulate their relations with their employers.”

19. The Court went on to find (at para 47) that, by leaving it open to employers to

offer those employees who acquiesced in the termination of collective bargaining
substantial pay rises (which were not provided to those who refused to sign contracts
accepting the end of union representation), UK law “permitted employers to treat less
favourably employees who were not prepared to renounce a freedom that was an
essential feature of union membership. Such conduct constituted a disincentive or
restraint on the use by employees of union membership to protect their interests.”
Thus:

“… domestic law did not prohibit the employer from offering
an inducement to employees who relinquished the right to
union representation, even if the aim and outcome of the
exercise was to bring an end to collective bargaining and thus
substantially to reduce the authority of the union …

Under United Kingdom law at the relevant time it was, therefore, possible for an employer effectively to undermine or frustrate a trade union’s ability to strive for the protection of its members’ interests.”

20. The Court concluded (at para 48) that “by permitting employers to use financial

incentives to induce employees to surrender important union rights, the respondent
State failed in its positive obligation to secure the enjoyment of the rights under article
11 of the Convention”.

The 2003 review and response to consultation

21.        In February 2003, the Government published a Review of the Employment

Relations Act 1999. The centrepiece of that Act was the establishment of a statutory regime for the recognition of trade unions for collective bargaining. This regime seeks to promote voluntary recognition wherever possible; but if an agreement for recognition is not reached voluntarily, or if such an agreement is reached but the parties fail to agree on a method for conducting collective bargaining, a trade union may apply to the Central Arbitration Committee for assistance. In the last resort, where a lengthy and complex procedure is complied with and the union satisfies the necessary conditions, the Committee has powers to compel the employer to recognise a trade union and to impose a specified method of collective bargaining.

22.        Chapter 3 of the Review referred to the judgment of the European Court of

Human Rights in Wilson and Palmer and expressed the view that, in the light of that judgment, certain changes in UK law were needed to ensure compliance with the Convention. One such change was to “establish a clear positive right for members of independent unions to use their union’s services” (para 3.11). Another was to regulate the “freedom to agree individualised contracts”. The Review noted that “[e]mployers often enter contractual arrangements with individual workers which contain different terms from the provisions of a collective agreement” and recorded the Government’s view that it is “essential that employers and individuals should retain their freedom to agree individualised contracts” (paras 3.12 - 3.13). However, it was said (at para 3.13) that “there must be clear limits on the exercise of this freedom”. In particular:

“the law should not allow employers to do what they did in
the Wilson and Palmer cases, that is, offer inducements to
workers on condition that they relinquish their rights to
union representation and make it a condition of entering
individualised contracts that workers must relinquish those

rights.”

The Government proposed that:

“the law should be amended to specify that the entering of
individualised contracts would not constitute unlawful union
discrimination against those union members not offered
them, as long as there was no inducement to relinquish
union representation and no pre-condition in the contracts to
relinquish it.”

23. The Review was the subject of public consultation. The Government Response

to the Public Consultation, published in December 2003, noted that the proposal
concerning individualised contracts was generally welcomed by employer groups but
that unions were concerned about the proposal (para 3.8). In response to the
consultation the Government reaffirmed its view that the judgment of the European
Court in Wilson and Palmer “requires some important changes to trade union law …”
(para 3.9). Relevantly for present purposes, it was proposed (at para 3.12) that:

“… offers should be made unlawful whose main purpose is to
induce a group of workers, who belong to a recognised
union, to accept that their terms of employment should be
determined outside collectively agreed procedures. The
result is that it would be unlawful for an employer to offer an
inducement to the union members in such a group to have
their terms of employment determined outside the
framework set by any existing collective bargaining
arrangements. This limits the scope of employers to offer
individualised contracts. To avoid inflexibility however, the
law should allow employers to make offers where the sole or
main purpose of the inducement is unconnected with the
aim of undermining or narrowing the collective bargaining
arrangements. In particular, the law should give room for
employers and individuals to enter individualised contracts
designed to reward or retain key workers.” (Emphasis in
original)

The Bill

“Inducements relating to collective bargaining

(1) A worker who is a member of an independent trade

union which is recognised, or seeking to be recognised, by his
employer 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, and

(b) the employer’s sole or main purpose in making the offers is to achieve that result.

(2)	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.

(3)	It is immaterial for the purposes of subsection (1)

whether the offers are made to the workers simultaneously.

…”

(The words underlined were added when the Bill was
amended in response to the recommendation of the Joint
Committee on Human Rights referred to above.)

27.        Also relevant is section 145D, which provides:

“…

(2) On a complaint under section 145B it shall be for the

employer to show what was his sole or main purpose in
making the offers.

…

(4)	In determining whether an employer’s sole or main

purpose in making offers was the purpose mentioned in
section 145B(1), the matters taken into account must include
any evidence -

(a) that when the offers were made the employer had recently changed or sought to change, or did not wish to use, arrangements agreed with the union for collective bargaining,

(b) that when the offers were made the employer

did not wish to enter into arrangements proposed by
the union for collective bargaining, or

(c)	that the offers were made only to particular

workers, and were made with the sole or main
purpose of rewarding those particular workers for
their high level of performance or of retaining them
because of their special value to the employer.”

28.        In these provisions the word “recognised”, in relation to a trade union, means

being recognised by an employer for the purpose of collective bargaining: see section 178(3) of the 1992 Act. The phrase “collective bargaining” means negotiations relating to or connected with one or more of the matters specified in section 178(2). Those
matters include (among others) terms and conditions of employment. The phrase
“collective agreement” means any agreement or arrangement made by or on behalf of
one or more trade unions and one or more employers relating to one or more of the

specified matters: see section 178(1).

Interpretation of section 145B

29. Against that background, I turn to the interpretation of section 145B of the 1992 Act. Three preliminary points may be made.

30. First, as with any question of statutory interpretation, the task of the court is to determine the meaning and legal effect of the words used by Parliament. The modern case law - including, in the field of employment law, the recent decision of this court in Uber BV v Aslam [2021] UKSC 5; [2021] ICR 657, para 70 - has emphasised the central

importance of identifying the purpose of the legislation and interpreting the relevant language in the light of that purpose. Sometimes the context and background, or the statute viewed as a whole, provides clear pointers to the objectives which the relevant
provisions were seeking to achieve. In other cases, however, the purpose needs to be
identified at a level of particularity which requires it to be elicited mainly from the
wording of the relevant provisions themselves. The present case is one in which,
although the legal context and aim of seeking to secure article 11 rights is important,
the somewhat complicated and elaborate wording of section 145B (and section 145D)
calls, in my view, for a careful linguistic analysis on the assumption that the words used
have been chosen with precision.

31.        Second, the critical provision in this case is section 145B(1)(a), read together

with subsection (2) which defines the “prohibited result”. It is that result which (as its appellation indicates) represents the mischief which the legislation aims to prevent or deter. The employer has a defence if it shows that its sole or main purpose in making the offers was not to achieve that result. For short, I will refer to the purpose of
achieving the prohibited result as the “prohibited purpose”. It is, however, important to note that what constitutes the prohibited purpose is defined by reference to what constitutes the prohibited result. For that reason too, although the relevant provisions
must be construed as a whole, the primary question must be to identify the nature and
scope of the prohibited result.

32. The third preliminary point is that, although (as noted above) the words “will

not” were added to section 145B(2) during the Parliamentary process as part of an
amendment to extend the scope of section 145B to cases where a trade union is
“seeking to be recognised”, I do not accept the Company’s submission that those
words are limited in their application to such cases. Certainly, the words “will no
longer” can only apply in cases where the union is already recognised for the purpose
of collective bargaining. But there is nothing in the language used which confines “will
not” to cases where the union is seeking to be recognised or which ties each
alternative in subsection (2) exclusively to one of the alternatives referred to in
subsection (1). The alternatives do not even appear in the same order in the two
subsections: in subsection (1) a trade union “seeking to be recognised” is mentioned
after a trade union “which is recognised”, but in subsection (2) the words “will not”
appear before the words “or will no longer”.

33. Further, the words “will no longer” carry the implication that the workers’ terms

of employment were previously determined by collective agreement negotiated by or
on behalf of the union. That may not be true, however, not only where the union is
seeking to be recognised but also where a trade union has only recently been
recognised by the employer. In that situation the existing terms of employment might
have been determined by collective agreement negotiated by or on behalf of another
trade union, or they might not have been determined by collective agreement at all (if
there was previously no recognised union). It would be irrational to interpret section
145B as inapplicable in such circumstances - all the more so when it is expressly
applicable where a trade union is seeking to be recognised. The only reasonable
interpretation, in my view, is that, where a trade union is recognised, the right not to
have an offer made by the employer applies where the result of acceptance would be
that one or more terms of employment either (i) will not or (ii) will no longer be
determined by collective agreement negotiated by or on behalf of the union.

Offers agreed to be contrary to section 145B(1)(a)

34. Before considering the competing arguments about the meaning of section

145B(1)(a) and (2), I think it useful to start by identifying the category of offers which
both parties agree fall within these provisions. This category consists of offers which, if
accepted, would require workers who are members of a trade union to agree to forego
or relinquish collective bargaining rights. The difference between the parties’ positions
is that, on the Company’s case, this is the only type of offer to which section 145B
applies.

35.        Examples of this type of offer are the offers made by the employers to the

claimants in the Wilson and Palmer cases of a pay rise in return for agreeing to give up (altogether and for the indefinite future) their rights to be represented by their union in collective bargaining. Offers of this kind, if accepted, would clearly have the
prohibited result. So too would offers made to members of a union seeking to be
recognised if acceptance would require the workers to agree not to be represented by
the union in collective bargaining in the event that the union receives recognition.

36.        What if an employer offers a pay rise to workers who are union members

conditional on those workers agreeing not to have any changes to their pay and only where union members are asked to surrender collective bargaining rights “on a permanent basis”, such an interpretation of the section cannot in my view be justified. There would be some basis for it in the language used if, in relation to a recognised trade union, subsection (2) applied only where one or more terms of employment “will no longer” be determined by collective agreement. But, as discussed above, the definition of the prohibited result cannot reasonably be interpreted as limited in that way. It also includes cases where the result of accepting an offer would be that a term “will not” be determined by collective agreement. No minimum length of time is specified or can reasonably be read into subsection (2) for which that result would have to persist in order to constitute the “prohibited result”.

conditions determined by collective bargaining in this particular pay round? Leading
counsel for the Company, Andrew Burns QC, agreed that the acceptance of such an
offer would have the prohibited result. He was plainly right to do so. There is no
difference in principle between offering an inducement to trade union members to
agree not to be represented by their union in collective bargaining indefinitely or for a
long period or for a very short period of time. In so far as the judgment of the Court of

The claimants’ case

37.        The claimants’ case is that the “prohibited result” is achieved if one or more of

at least on the material occasion
the workers’ terms of employment will, , not be interpretation of section 145B(1)(a) and (2) is much more far-reaching. The majority of the Employment Appeal Tribunal, who agreed with it, expressed this interpretation clearly at para 52 of their judgment:
determined by collective agreement but by individual agreements between the
employer and the workers. This submission is ambiguous. The reference to “the
material occasion” could be understood as meaning merely that an offer which, if
accepted, would require a union member to agree not to have any term or terms of
their employment determined by collective agreement will fall within section
145B(1)(a) and (2) even if that agreement would be limited to the current pay round
(or some other temporary period). As discussed above, this point is conceded by the

“We consider that on a straightforward reading of the words of [subsection (2)], if as a matter of fact, acceptance of direct offers to workers means that at least one term of

employment will or would as a consequence of acceptance be determined by direct agreement whenever that occurs, and not collectively (even if other terms continue to be
determined collectively), that is sufficient. That term, if accepted, would no longer or would not be determined collectively, at least until a further change is negotiated, agreed or imposed. The fact that the result is temporary (in
the sense of being a one-off direct agreement following
acceptance of the offers) rather than permanent does not
affect this question, as both sides agree.” (Emphasis added)

38. On this interpretation, the fact that an offer is made by the employer directly to

workers who are trade union members to make changes which have not been
collectively agreed to one or more terms of their employment is by itself enough to
achieve the prohibited result. The reasoning is that acceptance of such an offer would
automatically have the result that the term in question will have been determined by
individual agreement at least for the time being, and therefore “will not (or will no
longer) be determined by collective agreement negotiated by or on behalf of the
union” - at least until such time as the term is subsequently varied or replaced by a
term negotiated through collective bargaining. This is said to be sufficient for the offer
to fall within the scope of section 145B(1)(a) read with subsection (2).

Reasons for rejecting the claimants’ interpretation

39. In my view, the Court of Appeal was right to reject this interpretation of the provisions for at least four reasons.

40. First of all, if the intention had been to prohibit (subject only to the employer

showing that the result was not its sole or main purpose) any direct offer made to a
worker who is a trade union member to vary a term of the worker’s employment in a
way that has not been agreed through collective bargaining, then this could - and I
have no doubt would - have been said much more simply and straightforwardly in the
statutory wording. There would have been no need to use and no point in using what,
if the claimants’ interpretation is correct, is circuitous and convoluted drafting which
requires hypothesising what result acceptance of the offer, together with other
workers’ acceptance of offers made to them, would have.

41. Second, I agree with the Company’s submission that, as a matter of language,

the claimants’ interpretation also does not fit with the use of the future tense in
section 145B(2). In order to determine whether an offer is lawful, section 145B(1)(a)
directs consideration to the result which acceptance of the offer (and any other similar
offers) would have. To determine whether that result is the prohibited result defined
in subsection (2), it is therefore necessary to look forwards from the notional date of
acceptance of the offers to what will or will not happen thereafter. The period during
which one or more terms will not be determined by collective agreement may be time-
limited or open-ended, but it starts to run when the offers are assumed to have been
accepted. It follows logically that the prohibited result is not a result capable of being
achieved by the very acceptance of the offers irrespective of what happens afterwards.

42. It is not an answer to this point to say, as the Employment Appeal Tribunal said

at para 50 of their judgment, that it “is self-evidently the case that an offer once made
can only be accepted subsequently so that any acceptance viewed at the point of an
offer being made is in the future”. It is indeed self-evident that, when an offer is made,
any acceptance of the offer must lie in the future. But it is not self-evident whether
acceptance of the offer is itself the prohibited result or whether the prohibited result is
conceived as something which, if achieved, would post-date - and result from -
acceptance of the offer (together with other workers’ acceptance of offers made to
them). The wording of subsection (2) indicates that the latter is that case.

43. Third, as discussed, section 145B applies both where the trade union of which

the worker is a member is already recognised and where the union is “seeking to be
recognised”, and no distinction is drawn between those two situations. It would,
however, make no sense to prohibit or deter employers from making offers regarding
pay or other terms of employment directly to workers where the union has not yet
been recognised and is therefore not in a position to represent its members in any
collective bargaining.

44. The response given by leading counsel for the claimants, Oliver Segal QC, when

say in such a situation that it was not its sole or main purpose in making the offers to
achieve the prohibited result. I do not think this answer adequate for two reasons.
First, this argument operates at too late a stage in the analysis. As discussed earlier,
the mischief which section 145B is aiming in general to prevent or deter is the
“prohibited result”. Yet I can see no credible reason - and none has been suggested -
for seeking to prevent or deter employers from making pay offers directly to their
workers when there is no recognised union with whom a collective agreement can be
negotiated. Accordingly, there is no reasonable basis for attributing to Parliament the
intention that acceptance of such an offer would have the prohibited result. The
legality of such an offer therefore cannot rationally depend on the employer having to
show what its purpose was in making it. Second, on the claimants’ interpretation of
the “prohibited result”, relying on the employer’s purpose to avoid a contravention of
section 145B where the union has not yet been recognised in any event does not work.

this point was raised by Lord Briggs during oral argument, was that the employer could depends upon what constitutes the prohibited result. If agreeing terms directly with a worker who is a union member which are not the subject of a collective agreement is ipso facto the prohibited result, I cannot see how the employer could say (at least in general) that it was not its main purpose in making the offers to achieve that result.

45.        A fourth reason for rejecting the claimants’ interpretation is that, if it were

correct, section 145B would have a radical effect going far beyond the aims apparent identified by the European Court in Wilson and Palmer. It would be a change of acute political sensitivity which only Parliament could properly make and which would naturally be preceded by public consultation and debate. There is no hint of such a proposal in the pre-Parliamentary and Parliamentary materials leading up to the enactment in 2004 of section 145B of the 1992 Act.

from the legislative history, and indeed inconsistent with those aims. The consequence
would be that, whenever a union refuses to agree to a proposed pay deal or other
change to one or more terms of employment so that no collective agreement is
reached, the employer could not make a direct offer to its workers without being at
serious risk of incurring what may be (if there is a large number of workers) a heavy
financial penalty. That is because the offer, if accepted, would automatically achieve
the prohibited result. I do not think that the Court of Appeal exaggerated in saying that
this would potentially give 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 (see para 53 of the judgment). Whatever view is taken of the merits of such a
regime, it would undoubtedly mark a major shift in industrial relations in this country.

The Company’s case

48.        I turn then to the Company’s case that the only type of conduct outlawed by

section 145B is the offering of inducements to workers who are trade union members heard in negotiations with the employer. They do not include a right to have terms of employment determined through such negotiations.

to forego or relinquish collective bargaining rights. In the Company’s submission
(accepted by the Court of Appeal at para 42 of the judgment), the collective bargaining
rights which section 145B is intended to secure are the article 11 rights recognised in

49. On behalf of the Company, Mr Burns QC further submitted that the collective

bargaining rights protected by section 145B are only capable of being infringed by
offering inducements to contract out of collective bargaining. Provided the employer
does not seek to remove any terms from the scope of collective bargaining in this way,
the employer is free to strive for its own interests, which may legitimately include
acting in ways which are calculated to undermine the union’s bargaining position in
negotiations.

50. On this interpretation it can still be said that section 145B covers cases which go

Wilson and Palmer

beyond the facts in and applies in other comparable circumstances. would involve agreeing to relinquish collective bargaining rights for a temporary period only. It also applies to offers which, if accepted, would involve agreeing to give up collective bargaining rights in relation to one particular matter - unlike the offers in Wilson and Palmer which proposed a complete surrender of the right to union representation in relation to all matters. In so far as the Explanatory Notes are admissible as an aid to interpretation, therefore, the Company’s interpretation is consistent with the statements quoted at para 24 above.

51.        The Company’s interpretation also leaves scope for a defence of the kind

contemplated by section 145B(1)(b) and section 145D based on the employer’s sole or
main purpose. Thus, even if, for example, acceptance of an offer made by the
employer would involve the permanent surrender of all collective bargaining rights,
there will still be no contravention of section 145B in the situation contemplated by
section 145D(4)(c): that is, where “the offers were made only to particular workers,
and were made with the sole or main purpose of rewarding those particular workers
for their high level of performance or of retaining them because of their special value
to the employer.”

52.        Applying the Company’s interpretation of section 145B to the facts of the

present case, Mr Burns submits that the offers made directly to workers who were eventually resulted in a collective agreement for the 2015 pay round reached in November 2016 (see para 11 above). Had that collective agreement been more favourable than the terms of the direct offer which a worker had already accepted, the worker would have received the more favourable terms negotiated with the union. Accordingly, Mr Burns submits, it could not be said when the direct offers were made that their acceptance would have the result that any of the workers’ terms of employment would not be determined by collective agreement.

members of Unite did not require them, if the offers were accepted, to forego or
relinquish any collective bargaining rights (either indefinitely or at all). By accepting the
offers, workers simply secured a pay rise in return for changes to sick pay, overtime
and breaks. Their rights to be represented by Unite in negotiations over pay and
conditions and to receive the benefit of any collective agreement were unaffected.

53. I agree with the Company’s analysis of the article 11 rights which section 145B is

intended to secure. I do not, however, accept the further submission that those rights,
and section 145B, are only capable of being infringed by an offer which, if accepted,
would require the worker to contract out of collective bargaining (for any length of
time and in relation to one or more terms of employment). For the reasons which
follow, I think it sufficient to contravene section 145B(1)(a) and (2) that an offer is
made which, if accepted, would in fact cause arrangements for collective bargaining
which have been agreed with the union to be by-passed (in whole or in part).

The article 11 right to union representation

54.        As outlined at paras 18-20 above, the European Court of Human Rights in

Wilson and Palmer held that the article 11 rights of individuals to join trade unions for the protection of their interests include the right to be represented by a trade union in negotiations with the employer over pay and other terms of employment and for the
union’s voice to be heard in such negotiations. As Mr Burns QC for the Company put it
in oral argument, the right protected by article 11 is a right that the union, when
recognised, should be afforded “a seat at the table” for the purpose of collective
bargaining and permitted to enter into discussions and negotiations with the employer
and to be heard by the employer. There is, however, no right to have any changes to
terms of employment agreed through collective bargaining and no restriction on the
employer offering workers such changes where no collective agreement has been
reached.

55. I agree that this is what was decided in Wilson and Palmer. The claimants place

much emphasis on the passage in the Court’s judgment (quoted at para 19 above)
which stated that in UK law at the relevant time it was possible for an employer
“effectively to undermine or frustrate a trade union’s ability to strive for the protection
of its members’ interests”. However, this statement needs to be read in conjunction
with the conclusion which immediately precedes and follows it. Read in context, it
cannot reasonably be understood to mean that the state has a positive duty to make it
unlawful for an employer to do anything which would undermine a trade union’s
bargaining ability; rather, it is explaining that permitting employers to offer financial
incentives aimed at inducing employees to relinquish the right to union representation
infringes their right protected by article 11 to join a trade union “for the protection of
[their] interests”.

“In substance, [article 11] affords members of a trade union
the right for their union to be heard with a view to protecting
their interests and requires national law to enable trade
unions, in conditions not at variance with article 11, to strive
for the protection of their members’ interests. However, it
does not guarantee them any particular treatment by the
state …”

57.        An important question raised by the present case is how far the right to be

represented by the union and for the union to be heard in discussions or negotiations with the employer extends. It seems to me that it must on any view extend beyond a right not to receive inducements to contract out of union representation. Suppose that
in the present case, before having any discussion with representatives of Unite, the
Company’s managers had simply made direct offers to its workers of the kind that
were in fact made and had told the union that they wished to see how many workers
accepted those offers before deciding whether to engage in collective bargaining. If
the right to be represented by the union in negotiations and for the union’s voice to be
heard is to have any substance at all and is not to be entirely empty or illusory,
permitting such conduct must be contrary to article 11. That must be so, in my view,
even if the offers made to workers who are union members are simply offers of a pay

rise along with other changes to their terms of employment and do not require or
request the recipients to agree to give up any collective bargaining rights (either
indefinitely or at all).

58. It follows that whether the offer, if accepted, would require contracting out of

collective bargaining (for at least some period) cannot be the sole test of compliance
with article 11. At least where there is a recognised union, refusing or failing to engage
in any discussions or negotiations with the union before making direct offers to
workers who are union members is itself inconsistent with their right to be
represented by the union in collective bargaining. Such conduct denies the union its
seat at the table and does not allow the union’s voice to be heard.

“[the employer] has by-passed the representative
organisation and entered into direct individual negotiation
with its employees, in a manner contrary to the principle that
collective negotiation between employers and organisations

of workers should be encouraged and promoted.”

Focusing on results

63.        There is an important feature of the wording of section 145B which both

parties’ interpretations of the section leave out of account. In this respect, although diametrically opposed, they seem to me to share a common flaw. In both cases they treat the question whether an offer falls within section 145B(1)(a) and (2) as
depending entirely on the content of the offer. On the claimants’ preferred
interpretation, all that matters is whether the offer is to agree a change which has not
been collectively agreed with the union to a term or terms of the individual worker’s
contract of employment. On the Company’s interpretation, all that matters is whether
the offer requires the worker to contract out of any collective bargaining rights.

64.        Both interpretations fail to reflect the structure of section 145B. What is

prohibited by the section is not the making of an offer which, if accepted, would offers but with the potential practical consequences of the employer’s conduct, considered in the round. The interpretations of section 145B for which the claimants and the Company contend both seem to me incapable of explaining why, in judging whether acceptance of an offer would have the prohibited result, it is necessary to assume, as required by subsection (1)(a), “other workers’ acceptance of offers which the employer also makes to them”.

constitute an agreement with a particular content. Rather, what is prohibited is the
making of an offer which, if accepted, would have a particular result. Furthermore, and
importantly, that result is not defined as one which follows simply from acceptance of
the offer by the worker who is the subject of section 145B: it takes account
additionally of any offers which the employer also makes to other workers and
requires consideration of what would happen if all the offers made were accepted.

65.        I think it is possible to read section 145B in a way which gives meaning and

effect to this significant feature of its language and does so in a way which is
compatible with article 11. Once it is recognised that the question whether the
acceptance of offers would have the prohibited “result” is a question of causation, it is
evident that the state of affairs described in subsection (2) cannot be regarded as the
“result” of acceptance of the offers if it would inevitably have occurred anyway,
irrespective of whether the offers were made and accepted. In that case there would
be no causal connection between the presumed acceptance of the offers and the state
of affairs described in subsection (2). More specifically, in order for offers made by the
employer to workers to be capable of having the prohibited result, there must be at
least a real possibility that, if the offers were not made and accepted, the workers’
relevant terms of employment would have been determined by a new collective
agreement reached for the period in question. If there is no such possibility, then it
cannot be said that making the individual offers has produced the result that the terms
of employment have not been determined by collective agreement for that period. In
other words, it is implicit in the definition of the prohibited result 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 when they otherwise
might well have been determined in that way.

66.        On this interpretation, there is no difficulty in applying section 145B in cases

where the union is not yet recognised but is seeking to be recognised. In that situation the employer is free to make individual offers to workers in relation to a particular pay round without any risk of contravening section 145B because, at the time when the
offers are made, there is no possibility of agreeing terms through collective bargaining.

67.        Likewise, where there is a recognised union, there is nothing to prevent an

employer from making an offer directly to its workers in relation to a matter which falls
within the scope of a collective bargaining agreement provided that the employer has
first followed, and exhausted, the agreed collective bargaining procedure. If that has
been done, it cannot be said that, when the offers were made, there was a real
possibility that the matter would have been determined by collective agreement if the
offers had not been made and accepted. What the employer cannot do with impunity
is what the Company did here: that is, make an offer directly to its workers, including
those who are union members, before the collective bargaining process has been
exhausted.

68.        It was argued on behalf of the Company that it may be difficult to say with

certainty whether the collective bargaining process has been exhausted in any of the agreed procedure at para 5 above. If in the present case, following the meeting specified at Stage 3, the Company had written to the union representatives stating that the Company did not agree to refer the matter to ACAS, it is clear from the terms of Appendix 1 that the procedure would at that point have been exhausted. A second level of protection is provided by the requirement of section 145B(1)(b) that the section will not be contravened unless the employer’s sole or main purpose in making the offers is to achieve the prohibited result. If the employer genuinely believes that the collective bargaining process has been exhausted, it cannot be said that the purpose of making direct offers was to procure the result that terms will not be determined by collective agreement when that otherwise might well have been the case.

particular case and that this interpretation therefore exposes employers to risks which
they cannot afford to take and hence would unreasonably restrict their freedom of
negotiation. I do not accept this. In my view, employers have two means of protection
against that risk. The first is to ensure that the agreement for collective bargaining
made with the union clearly defines and delimits the procedure to be followed. The

69.        This interpretation of section 145B is further supported by section 145D(4)(a) of

the 1992 Act. That provision identifies, as a matter which must be taken into account in determining whether an employer’s sole or main purpose in making offers was the prohibited purpose, any evidence:

“that when the offers were made the employer … did not
wish to use, arrangements agreed with the union for
collective bargaining.”

As Professors Alan Bogg and Keith Ewing have pointed out in a commentary on this case, this supports the inference that, where the acceptance of individual offers would by-pass arrangements agreed with the union for collective bargaining, such acceptance would have the prohibited result: see Bogg and Ewing, “Collective Bargaining and Individual Contracts in Kostal UK Ltd v Dunkley: A Wilson and Palmer for the 21st century?” (2020) 49 ILJ 430, 451.

The present case

70.        In the present case the Company agreed when it entered into the Recognition

Agreement to conduct annual pay negotiations with Unite and to follow the procedure outlined in Appendix 1 before making or proposing any change to terms and conditions of employment outside that process. The offers made directly to employees
dishonoured that agreement because they were made before the process had been exhausted. Furthermore, the Company’s behaviour, potentially at least, treated less favourably employees who were not prepared to relinquish their right to have the
agreed procedure for collective bargaining followed. In the case of each direct offer
made during the collective bargaining process, the clear message was that, if the
employee did not accept it, he would not receive the Christmas bonus (or an
equivalent payment) calculated at 2% of basic salary. In the case of the second offer,
there was also a threat to terminate the worker’s contract of employment unless the
offer was accepted. It is hard to imagine how, on the assumption required by section
145B(1)(a) that all the direct offers were accepted, the negotiations with Unite could
as a matter of practical reality have resulted in a better deal than the one which all the
workers would thereby already have accepted individually. On the other hand, there
was a real likelihood that any worker who did not accept the direct offers would be left
financially worse off. That is indeed what happened, as workers who declined both
offers did not receive the Christmas bonus (or any equivalent payment) for 2015. In
these circumstances the Company’s conduct can fairly be characterised as a
disincentive or restraint on the use by the claimants of union representation to protect
their interests. The relevant use was the exercise of their right to be represented in

collective bargaining conducted in accordance with the Recognition Agreement.

Conclusion

71. I conclude that, on the proper interpretation of section 145B of the 1992 Act, an

offer would have the prohibited result if its acceptance, together with other workers’
acceptance of offers which the employer also makes to them, would have the result
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
when, had such offers not been made, there was a real possibility that the terms in
question would have been determined by collective agreement. That must ordinarily
be assumed to be the case where there is an agreed procedure for collective
bargaining in place which has not been complied with.

72.        In the present case, on the facts found by the employment tribunal the

collective bargaining process outlined in the Recognition Agreement was still
continuing when the first and second offers were made by the Company directly to the
claimants. In those circumstances the tribunal was entitled to find that the offers were

made in contravention of section 145B. I would therefore allow the appeal.

LADY ARDEN AND LORD BURROWS:

1.          Introduction

73.        This case turns on a correct interpretation of certain statutory provisions

relating to collective bargaining between a trade union and an employer. The central union. The House of Lords had held that the employers’ conduct had not infringed domestic law. But the Strasbourg court decided that the domestic law contravened the employees’ rights under article 11 of the European Convention on Human Rights (“ECHR”).

statutory provisions in question are sections 145B and 145D of the Trade Union and
Labour Relations (Consolidation) Act 1992 (“the 1992 Act”), which were inserted by the
Employment Relations Act 2004. Those provisions were part of the Labour
Government’s response to the UK’s defeat before the European Court of Human Rights
(“ECtHR”) in Wilson and Palmer v United Kingdom (2002) 35 EHRR 20; [2002] IRLR 568
(“Wilson and Palmer v UK”). In those cases, employers had offered incentives (by
increased pay) to employees to relinquish their contractual rights to have their terms
of employment determined by collective bargaining carried out by recognised unions.

74. This is the first case to be decided by an appellate court on sections 145B and

145D of the 1992 Act. The Employment Tribunal (“ET”) and the majority of the
Employment Appeal Tribunal (“EAT”) found in favour of the claimants who are all
members of the trade union Unite (“Unite”). The Court of Appeal allowed the appeal
of the employer, Kostal UK Ltd (“Kostal”). That split of view is reflected in helpful case
notes, referred to further below, written by John Bowers QC (supporting the Court of
Appeal’s decision) and by Professors Alan Bogg and Keith Ewing (criticising the Court of
Appeal’s decision): see Bogg and Ewing, “Collective Bargaining and Individual Contracts
in Kostal UK Ltd v Dunkley: A Wilson and Palmer for the 21st century?” (2020) 49 ILJ
430; Bowers, “Can a union veto changes to terms by failing to negotiate or agree?”
(2020) 136 LQR 186; Bowers, “Response to Bogg and Ewing, ‘Collective Bargaining and
Individual Contracts in Kostal UK Ltd v Dunkley: A Wilson and Palmer for the 21st
century’” (2021) 50 ILJ 118; and Bogg and Ewing, “Kostal UK Ltd v Dunkley: A Reply to
John Bowers QC” (2021) 50 ILJ 125.

2.          The facts

75. Although the facts have also been set out by Lord Leggatt in his judgment, we

coherent whole. The respondent employer, Kostal, produces electromechanical and
electronic products. The appellant members of Unite are employed as shop floor or
manual workers. In November 2014, there was a ballot with significant support in
favour of recognising Unite for the purposes of collective bargaining with Kostal.

think it helpful to set out our own summary so that our judgment can be read as a signed between Kostal and Unite which gave Unite “sole recognition and bargaining rights” (clause 2.1). Clause 3 made clear that the agreement was binding in honour only, rather than legally binding, and that the common objective was to use the processes of negotiation and meaningful consultation to achieve beneficial results for both sides.

76.        Under clause 7, the following was provided:

“7.1	Formal negotiations will take place between the

parties on an annual basis. …

7.2 Negotiations will commence normally in October and with a normal effective date of 1 January. …

7.4 Any matters related to proposed change of terms and

conditions of employment will be negotiated between the
company and the union.”

77.        Appendix 1 contained a “disputes and resolution of collective grievances

procedure” designed “to deal with collective issues which if not resolved, could lead to
a dispute between the parties”. It set out four procedural stages, the last of which
provided that, in the event of a failure to agree at stage 3, “the matter, by joint
agreement, may be referred to ACAS for conciliation”. It was provided that, during the
procedural process, “there will be no sanctions of any kind applied nor change
imposed by either party”.

78.        Having achieved recognition earlier in the year, in October 2015 Unite

requested a meeting so that formal pay negotiations could commence. There were
preliminary meetings on 29 October and 12 November, with a first proposed pay offer
for 2016 tabled by Mr Johnson for Kostal at a meeting on 24 November. The offer was
of a 2% increase in basic pay, a lump sum of 2% of basic pay to be paid in December as
a Christmas bonus, and an additional 2% for those earning less than £20,000 payable
with effect from 1 April 2016. In return, Kostal requested a reduction in sick pay for
new starters, a reduction in the Sunday overtime rate, and consolidation of two
individual 15-minute breaks into a single 30-minute break.

79. The offer was considered and discussed in the meeting of 24 November. Mr

Coop, on behalf of Unite, asked what would happen to the Christmas bonus if the deal
was rejected. He was told by Mr Johnson that the Christmas bonus had to be paid in
December from 2015 profits and:

“if this was not paid in December, it could not and would not be paid in 2016, therefore it would be lost to employees and they would be left with either the 2% on basic or 4% on basic depending on whether their basic salary was greater or less

than £20K …”

Mr Coop then stated that he could not recommend the offer, and would give his members a “free vote”, neither recommending acceptance nor rejection, in a forthcoming ballot.

80. The ballot of Unite’s members at Kostal took place on 3 December 2015 and

had an 80% turnout; 78.4% voted to reject the proposal and just over 20% voted to
accept. On 9 December 2015, Mr Johnson emailed Mr Coop, describing the ballot
result as “disappointing if not unexpected”. Mr Johnson’s email continued as follows:

“I am writing to inform you that I now intend to write to each
and every individual employee at Kostal UK in order to offer
the company pay increase and term and condition changes. I
am doing this because otherwise we will run out of time to
pay a ‘Christmas bonus’ prior to Christmas in December’s
pay. Please be aware that any employee who rejects the pay
offer will not receive the Christmas bonus and it cannot be
paid at a later date even if we subsequently achieve an
agreement between us.”

81. That same day, Mr Johnson issued a “General Notice” headed “Pay Negotiations

2015”, which was displayed on notice boards in the workplace, summarising Kostal’s
pay offer and its proposed changes to terms and conditions. The notice set out the
offer and continued:

“Unfortunately, the above offer was rejected by a ballot of
trade union members. Therefore, the company has made the
decision to write to every individual employee of Kostal UK in
order to offer the above to each person directly. We are
doing this due to the short time frame in order to pay a
Christmas bonus, which can and will only be paid in
December’s pay. Therefore … failure to sign and return [by no
later than 18 December 2015] will lead to no Christmas
bonus and no pay increase this year.”

82. Letters in the same terms as the notice were sent out to employees by Kostal on

10 December 2015. These were the first offers relied on by the claimants as
constituting a breach of their statutory rights under the 1992 Act. The letters began by
referring to the rejection of the pay offer in the trade union ballot and continued:
“However, the company does wish to reward our employees for their efforts in 2015
and therefore wish to offer the pay increase to each individual employee.”

83. There was a pay negotiation meeting on 14 December 2015. At the beginning of the meeting Mr Coop was noted as having said:

“You sent a letter out to all employees - you are bypassing

the collective bargaining agreement.”

The note records Mr Johnson’s confirmation that:

“he had distributed a letter … to all our employees because
the pay offer had been rejected by trade union members …”

Mr Coop made a proposal that, if Kostal took out the provision about changing breaks, he would guarantee to get the pay offer through. The employer did not accept this proposal.

84. Later in December 2015 Kostal issued a further general notice to employees stating that the pay offer had been made to all individual employees directly because:

“we wanted to give the majority of employees the acceptance including trade union representatives and members.”

opportunity to be paid the Christmas bonus in their

The notice urged employees to agree to the changes by 18 December and reminded them that they would not receive their bonus if they failed to do so.

85.        As for the dispute resolution process under the recognition agreement, the ET

found that by the end of December 2015 the parties were at stage 4 of the process, namely reference to ACAS for conciliation. In anticipation of that, both sides set out their cases in writing. Kostal’s document, written by Mr Johnson, described the
decision to write to individual employees as being for two reasons. First, the employer
had no idea how many employees were trade union members and was not therefore
aware whether Unite was speaking on behalf of the majority. Secondly, the employer
wanted its employees to have the opportunity to receive the Christmas bonus.

Towards the end of this document Mr Johnson wrote:

“my final point is to quote the Unite letter - ‘Mr Johnson
needs to listen to the voice of the workers’ - I believe that I
have, and that 91% of them have spoken, perhaps the trade
union should follow their own advice and listen to the
majority and not the minority.”

86.        By letter dated 14 January 2016 Mr Coop put Mr Johnson on notice that he

believed that letters had been sent directly to employees because, following collective consultation, Unite had rejected the employer’s proposal and that, in Unite’s view, this appeared to breach section 145B of the 1992 Act.

87.        Mr Johnson responded by letter dated 29 January 2016 rejecting that

contention. He said:

“The relevant circumstances are, in summary, that
negotiations forming part of collective bargaining, reached
stage 3 in December last year with no agreement. We have
made it clear that our parent company in Germany insists
that payment of any Christmas bonus happens in December,
and cannot be carried over into the New Year. This has been
the case for many years. Therefore, we decided to write to
the employees directly, clarifying that if they did not sign to
accept their new terms, they would not be able to take the
benefit of a Christmas bonus …

In my letter dated 15 January 2015, I made it clear that it was never the company’s intention to induce people to opt out of collective bargaining. The only reason for making the offer to members was so that the Christmas bonus would be payable before the end of the year. If it was not accepted, the bonus would not be payable at a later date. There was absolutely

nothing in the offer to staff that stated, or even implied, that
acceptance of the offer would involve an agreement that
they would no longer be subject to collective bargaining.”

88. Also on 29 January 2016 Kostal wrote letters to those employees who had not

accepted the pay proposal. The letter noted that “unfortunately you rejected our
offer”. Reference was made to the three proposed changes to terms and conditions
and an explanation was given as to why those were considered to be necessary. The
recipients were invited to a meeting on 2 February 2016 with a human resources
officer or alternatively invited to return the then current letter accepting the offer no
later than 4 February 2016. The letter went on to state:

“Please be aware that the proposed changes will not be implemented without your express agreement and the consultation process will be full and open. However you

should be aware that in the event that no agreement can be reached between the parties, this may lead to the company serving notice on your contract of employment.”

Nothing was said about that action being followed immediately by re-engagement on the new terms. The letter went on:

“In consideration for your agreement to the proposed
changes, the company is willing to pay a 4% increase in your
basic salary backdated to 1 January 2016.”

89. Following a ballot for industrial action, Unite called for an overtime ban. This

took place. Many months later, on 3 November 2016, by which stage over 97% of
employees had accepted individual offers, a collective agreement was reached as to
pay and amended terms and conditions. The ET recorded:

“save for the by then irrelevant issue of the Christmas bonus,
the collective agreement endorsed the pay proposals which
[Kostal] had put forward in November 2015 together with the
three changes to terms and conditions.”

90. The claimants alleged that their rights under section 145B of the 1992 Act had

been infringed on two occasions, by the letters of 10 December 2015 and 29 January
2016. The ET found that the offers were similar but not identical in that the Christmas
bonus did not feature in the second offer.

3.          The legislative provisions

91. Sections 29 to 32 of the Employment Relations Act 2004 inserted a group of

new sections, numbered 145A-145F, into the 1992 Act. Section 145A is headed
“Inducements relating to union membership or activities” and is not directly relevant
to the issues we have to decide. But sections 145B to 145D are of central importance,
especially sections 145B and 145D.

“145B Inducements relating to collective bargaining

(1) A worker who is a member of an independent trade

union which is recognised, or seeking to be recognised, by his
employer 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, and

(b) the employer’s sole or main purpose in making the offers is to achieve that result.

(2)	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.

(3)	It is immaterial for the purposes of subsection (1)

whether the offers are made to the workers simultaneously.

…

(5) A worker or former worker may present a complaint to an employment tribunal on the ground that his employer has made him an offer in contravention of this section.

145C	Time limit for proceedings
(1)	An employment tribunal shall not consider a

complaint under section … 145B unless it is presented -

(a)	before the end of the period of three months

beginning with the date when the offer was made or,
where the offer is part of a series of similar offers to
the complainant, the date when the last of them was

made, or

(b)	where the tribunal is satisfied that it was not

reasonably practicable for the complaint to be
presented before the end of that period, within such

further period as it considers reasonable.

145D Consideration of complaint

(1)

…

(2) On a complaint under section 145B it shall be for the

employer to show what was his sole or main purpose in
making the offers.

(3) On a complaint under section … 145B, in determining

any question whether the employer made the offer (or
offers) or the purpose for which he did so, no account shall
be taken of any pressure which was exercised on him by
calling, organising, procuring or financing a strike or other
industrial action, or by threatening to do so; and that
question shall be determined as if no such pressure had been
exercised.

(4)	In determining whether an employer’s sole or main

purpose in making offers was the purpose mentioned in
section 145B(1), the matters taken into account must include
any evidence -

(a) that when the offers were made the employer had recently changed or sought to change, or did not wish to use, arrangements agreed with the union for collective bargaining,

(b) that when the offers were made the employer

did not wish to enter into arrangements proposed by
the union for collective bargaining, or

(c)	that the offers were made only to particular

workers, and were made with the sole or main
purpose of rewarding those particular workers for
their high level of performance or of retaining them
because of their special value to the employer.”

92. Although this appeal is not concerned with the remedy imposed for breach of

“Everyone has the right to freedom of peaceful assembly and
to freedom of association with others, including the right to
form and to join trade unions for the protection of his

interests.”

In Wilson and Palmer v UK, the ECtHR agreed that UK law was in violation of article 11.
The crux of the ECtHR’s reasoning proceeded in five stages (paras 41 to 48):

(i) Article 11 could impose on a state a positive obligation to ensure the effective enjoyment of the rights protected by that article.

(ii) The words “for the protection of his interests” in article 11 meant that a trade union must be free to strive for the protection of its members’ interests. However, this freedom of a trade union to make its voice heard did not extend to imposing on an employer an obligation to recognise a trade union. Trade

unions had other ways to make their voices heard including, for instance, the
right to strike.

(iii)       However, it was of the essence of the right to join a trade union for the

protection of their interests that employees should be free to permit the union to make representations to their employer. If they were prevented from doing so, their freedom to belong to a trade union for the protection of their interests
became illusory.

(iv)        As it was open to the employers to treat employees who signed

individual contracts better than those who refused to sign such contracts, UK
law permitted employers to treat less favourably employees who were not
prepared to renounce a freedom that was an essential feature of union
membership. Such conduct was a disincentive or restraint on the use by
employees of union membership to protect their interests.

(v) It was therefore possible under UK law for an employer effectively to

undermine or frustrate a trade union’s ability to strive for the protection of its
members’ interests.

It followed that UK law was in violation of article 11.

8.          Our reasons for allowing the appeal

108. With great respect, we prefer the conclusion, and most of the reasoning, of the ET and the majority of the EAT to that of the Court of Appeal. Our essential reasons for doing so, and for allowing the appeal, can be set out in the following ten points.

first crucial to clarify the approach we must take. The modern approach to statutory the EAT in this case took into account the explanatory notes and the Government’s response to the Public Consultation reviewing the Employment Relations Act 1999, published on 2 December 2003; and, in the light of those materials, it is not in dispute that one of the purposes of sections 145A-145F of the 1992 Act was to ensure that domestic law complied with the ruling of the ECtHR in Wilson and Palmer v UK which was itself concerned to ensure compliance with article 11 of the ECHR.

interpretation requires the courts to ascertain the meaning of the words in a statute in
the light of their context and purpose (see, for example, Uber BV v Aslam [2021] UKSC
5; [2021] ICR 657, para 70; Rittson-Thomas v Oxfordshire County Council [2021] UKSC
13; [2021] 2 WLR 993, para 33). In carrying out their interpretative role, the courts can
look not only at the statute but also, for example, at the explanatory notes to the
statute, at relevant consultation papers, and, within the parameters set by Pepper v

110. But it is also relevant that the explanatory notes to the Employment Relations

Act 2004 made clear that the new statutory provisions were concerned to deal not
only with the facts of Wilson and Palmer but also with circumstances considered by the
Government to be comparable. This is set out in the explanatory notes at para 193:

“The Government believes that the principle underlying the decision of the [European Court of Human Rights in Wilson and Palmer] extends beyond the facts in Wilson and Palmer and is applicable to a number of other comparable

circumstances. The purpose of sections 29-32 [of the the Government to be comparable.”

Employment Relations Act 2004, inserting sections 145A to
145F into the Trade Union and Labour Relations
(Consolidation) Act 1992 and making some other
amendments to the 1992 Act] is therefore to secure that
these provisions deal not only with the facts in Wilson and

This left open what counts as comparable circumstances. But one obvious example,
going beyond the facts of Wilson and Palmer and falling within section 145B, is that the
provisions extend, as made clear by the wording of section 145B(2), to where any
(even just one) of the workers’ terms of employment will not, or will no longer, be
determined by collective agreement.

111.     Andrew Burns QC, counsel for Kostal, pressed upon us that we should also take

into account earlier versions of the Bill. He pointed out that the words “will not” in applicable to the standard situation of a recognised union (“will no longer”) to be relegated to brackets.
section 145B(2) were only inserted in later versions of the Bill, once it had been
decided to include not only recognised unions but also unions seeking recognition. This
was to support his submission that, in the case of a recognised union, the relevant
words were “will no longer” which supported the interpretation that one was
concerned with workers relinquishing their rights in the future to have their terms of
employment determined by collective bargaining (ie that the workers were
“contracting out” of collective bargaining). We are not convinced that it is permissible
to consider previous versions of the Bill that became law. But even if we were to take
those earlier versions into account, we do not think that it takes matters much further.

113. It is very important to stress - and it may be this that makes the interpretation

that “the employer’s sole or main purpose in making the offers is to achieve that result
[ie the prohibited result]”, cannot be read literally. A literal interpretation - so that
offers of individual agreements with workers (who are members of a recognised trade
union or a trade union seeking recognition) on any terms of employment would
automatically mean that the employer’s main purpose is to achieve the prohibited
result - would leave no scope for the idea that the employer does not infringe section
145B if the employer has a genuine business purpose. Yet section 145D(4) makes clear
that, through the concept of “the employer’s sole or main purpose”, offers to
particular workers are sometimes acceptable and do not infringe section 145B. This is
consistent with the Government’s explanation of the policy that we have set out in
para 99 above. The words in section 145B(1)(b) must therefore be interpreted (see

see that the crucial wording embodies the two linked concepts of the “prohibited result” and the employer’s “main purpose in making the offers”. Section 145D(4) provides some mandatory but limited guidance as to whether the employer’s main

purpose was to achieve the prohibited result. One can see that sections 145D(4)(a) and
(b) refer to situations which would tend to show that that was the employer’s main
purpose: they are situations where the evidence is that the employer does not wish to
use the collective bargaining arrangements agreed or proposed by the union. In
contrast, section 145D(4)(c) refers to situations which would tend to show that the
employer’s main purpose was not to achieve the prohibited result but was, rather,
what Simler J helpfully referred to (see para 97(v) above) as a “genuine business
purpose”: ie there is evidence that the employer is making the offers to particular
workers to reward those workers for their high level of performance or to retain them
because of their special value. It is mandatory for a court to take those matters into
account if there is any evidence in relation to those matters: the relevant words of
section 145D(4) are that “the matters taken into account must include any evidence
[of the matters set out in (a), (b) and (c)]”.

of sections 145B and 145D particularly difficult - that the words in section 145B(1)(b), of the offer would have the prohibited result, the employer has a genuine business purpose. In other words, the employer does not have the main purpose of achieving the prohibited result where the employer has a genuine business purpose. Where this is in dispute, it will be for employment tribunals to make findings of fact as to the employer’s main purpose.

“a distinction between terms of a collective agreement which of work, would obviously fall into the first category.”

are of their nature apt to become enforceable terms of an
individual’s contract of employment and terms which are of
their nature inapt to become enforceable by individuals.

Let us assume, therefore, that, immediately before an individual offer as to pay is accepted by a relevant worker, the worker’s contractual right was to the pay set by collective agreement. It would follow that, immediately after acceptance, that worker’s pay would no longer be determined by collective agreement but would be that set out in the employer’s offer. The “prohibited result” would thereby be brought about, albeit for a limited period, until the terms fixed by any subsequent collective agreement replaced those terms.

consequences of accepting “contracting out” on a one-off basis

117.     The approach taken by the Court of Appeal produces an extremely narrow

Wilson and Palmer case would extend to both as would the protection offered by article 11 of the ECHR.
interpretation of section 145B. Mr Burns’ primary submission was that the prohibited expressly giving up their right to have their terms of employment determined by collective bargaining for the 2015 round, Mr Burns accepted that that would have been covered by section 145B. We consider that he was obviously correct to have made that concession. There would be no valid reason to distinguish a long-term (or permanent) contracting out of collective bargaining from a one-off contracting out of collective bargaining. The mischief of the
result is one where the offer is for the workers to “contract out” of collective
bargaining. That can apply equally to a union seeking recognition as to a union that is
already recognised. But even Mr Burns conceded that there can be a contracting out of
collective bargaining, with a recognised union, on a temporary one-off basis. So had

118. Once one accepts that express contracting out of collective bargaining on a

temporary one-off basis must be covered, three important consequences follow. First,
the main reasoning of the Court of Appeal cannot be sustained. That reasoning
explicitly rejected a third type of case where, “on this one occasion”, the workers’
terms will not be determined by collective agreement. Secondly, the words “will not”
in section 145B(2) are being applied to a recognised trade union ie “the prohibited
result is that the workers’ terms of employment, or any of those terms, will not [on this
occasion] be determined by collective agreement negotiated by or on behalf of the
union.” (bracketed emphasised words inserted). This contradicts the view, otherwise
submitted by Mr Burns, that the words “will not” apply only to unions seeking
recognition and “will no longer” applies only to recognised unions. Thirdly, and most
importantly, one inevitably must consider whether the facts of this case constitute, in
substance if not in form, the contracting out of collective bargaining on this occasion. It
cannot be correct - and would amount to an unacceptable triumph of form over
substance - if only offers expressly referring to contracting out of collective bargaining
on this occasion were covered.

120. We have explained in para 113 above that the words in section 145B(1)(b) must

would have the prohibited result, that is not the employer’s sole or main purpose in
making the offers because the employer has a genuine business purpose. Once one
reaches the conclusion that, on these facts, the prohibited result would be achieved by
the acceptance of the offers (ie these facts did constitute contracting out on this
occasion), the findings of fact of the ET (set out at para 95 above), as upheld by the

on this occasion so that the acceptance of the offers would achieve the prohibited dressing” as it had already “destroyed the union’s mandate”. This was because the relevant terms of employment had already been offered (and accepted) individually irrespective of the collective bargaining.
result. Although Kostal did not make any express reference to collective bargaining in
its offers, acceptance of the offers being made would mean that, on this occasion, as
found by the ET, the relevant workers’ terms of employment would not be determined
by collective agreement. The important passages from the ET’s judgment set out at
para 94 above, make clear that, even though collective bargaining continued until it
was concluded on 3 November 2016 (see para 89 above), the individuals who had
accepted one or other of the individual offers had already had their terms determined
on the basis of the individual agreement rather than that considerably later collective
agreement. That document was purporting to record a collective agreement in
circumstances where the terms and conditions had for some time been governed by
variations agreed individually. This is consistent with the interpretation of the
“prohibited result” that we have put forward in para 116 above. Furthermore, as the

(5) Kostal’s main purpose was to achieve the prohibited result (ie the employer did not have a genuine business purpose)

be interpreted as excusing the employer where, even though acceptance of the offer prohibited result (ie that Kostal did not have a genuine business purpose). The EAT was correct that the ET was perfectly entitled to make those findings of fact and the Court of Appeal did not suggest the contrary.

121.     Indeed, in our view, this is a strong case for holding that there has been a

breach of section 145B. As has been set out at para 95 above, although Kostal
purported to be seeking to ensure that a Christmas bonus would be paid to employees,
the ET found that Kostal took a conscious decision to by-pass further meaningful
negotiations and contact with the union in favour of a direct and conditional offer to
individual employees. This was not a case where an impasse had been reached. On the
contrary, Kostal abandoned the agreed procedures before stage 4 (the reference to
ACAS) had been attempted. Bogg and Ewing (2021) 50 ILJ 125, 126, make this point
forcefully in criticising Bowers for having said that Kostal had engaged in an
“exhaustive succession of discussions with the union”:

“As the factual findings of the Employment Tribunal in Kostal make clear, the collective negotiations were not exhausted in this case. … The employer issued the individual offers before

a further meeting with the union during the collective
negotiation process which took place on 14 December. The
individual offers were also issued before the exhaustion of
the parties’ own agreed dispute resolution procedure, the
final stage of which provided for ACAS conciliation.

In short, it is inconsistent with the tribunal’s findings of fact to describe the collective negotiations as ‘exhaustive’. They were not ‘exhaustive’ because they failed to exhaust the

procedural steps provided for in the parties’ own recognition
agreement. That the employer bypassed its own agreed
procedures and issued individual offers during the collective
bargaining process was critical to the reasoning of the ET and
EAT that this constituted the statutory prohibited purpose.”

(6) The interpretation taken by the Court of Appeal would render it very difficult in practice to establish a breach of section 145B

122. The approach we are here putting forward is further strengthened by a concern

that, if one were to take the narrow approach favoured by the Court of Appeal or even
if, beyond that, one insisted that there must be express reference to contracting out
including on one occasion, one would be rendering it very difficult in practice to

establish a breach of section 145B. Indeed, one might go so far as to say that it would
render section 145B a virtual dead letter. This was the point made by the EAT that we
have set out at para 97(iii) above. The facts of this case beautifully illustrate the point.
If we were to dismiss this appeal, employers would be advised that, provided they do
not expressly mention in individual offers that the workers must give up or surrender
rights to have terms fixed by collective bargaining, and provided they continue to show
commitment to collective bargaining by little more than what the ET described as
“window dressing” (see para 94 above), they can avoid being in breach of section
145B. Although strongly supportive of the Court of Appeal’s approach, Bowers (2020)
136 LQR 186, 191, recognised the reality that that approach would render it very
difficult to establish a breach of section 145B:

“In reality, unless there is a pattern of behaviour from which
inferences might be drawn of anti-union hostility, it is likely
to become very difficult to establish a breach of section 145B
in future cases. This is because any well-advised employer is
likely to emphasise the particular reasons for an offer being
made at that time, and that it is not about withdrawing from

collective bargaining in future.”

123. A further difficulty with any narrow interpretation that would require a worker

to wait and see how collective bargaining might in future progress is that the wrong in
question is committed by the making of the offer. Under section 145C(1)(a), the
worker to whom the offer is made then has a limitation period of three months to
bring a claim (or, if the offer is part of a series of similar offers to the complainant, the
three months runs from when the last of them was made). By section 145C(1)(b), this
is subject to the time limit running from such later date as considered reasonable by
the tribunal “where the tribunal is satisfied that it was not reasonably practicable for
the complaint to be presented before the end of that period”. Apart from the
possibility of a tribunal applying that exception in section 145C(1)(b), the short
limitation period would plainly render it problematic for a worker to wait and see how
any collective bargaining might progress. This was a point clearly and correctly made
by Simler J at para 54:

“[I]t must be possible for a worker to determine what the complaint before necessarily knowing the outcome of the next bargaining round (which could be a year away) and therefore without knowing what effect acceptance would have. As Mr Burns put it, the worker would have to decide whether the unexpressed intention (and effect) of the offer if accepted would be for one or more terms of employment to be determined outside collective bargaining in the next collective bargaining round, irrespective of the immediate effect of acceptance on terms of employment. That to our minds is unworkable.”

effect of acceptance would be within the time limit
prescribed. The approach we adopt allows that and creates a
coherent scheme. On the other hand, absent an express
statement as to the effect of acceptance of the offers on
collective bargaining, if the effect of acceptance is only to be
judged at some future unidentified date such as the next
collective bargaining round, the time limits are unworkable
(and not merely difficult, as Mr Burns concedes). On Mr

reasoning. First, it is misleading to portray the union as having a veto over the needs to know more facts in order to determine whether this would constitute an infringement of section 145B or not. For example, if there were urgent business demands requiring work to be done on the August Bank holiday, there would probably be no breach of section 145B. The employer would have a genuine business purpose for the offers and its main purpose would not be to bypass the collective bargaining procedures. Bogg and Ewing (2020) 49 ILJ 430, 456, make a similar point:

negotiation of any terms with individuals. As we have made clear, where the
employer’s main motive for individual negotiation is a genuine business purpose,
section 145B does not prevent offers to individuals. A genuine business purpose
includes rewarding particular employees with incentive pay and seeking to retain
particular employees (both of which, as we have seen, are expressly set out as being
permitted in section 145D); and the need to meet urgent business demands. Secondly,

“In our view, it is not at all clear that [Bean LJ’s] example where the employer had exhausted the negotiation procedures provided for in the recognition agreement, hence this was a genuine impasse at the end of the agreed process, section 145D might suggest that this was not a prohibited purpose.”

constitutes a breach of section 145B on the EAT’s broader
interpretation. We do not know enough about the facts Bean

125.     It is also our view that the Court of Appeal misinterpreted Simler J when it

suggested, at para 43, that she had said, in the last sentence in para 61 (set out at para
97(iv) above), that “an employer who has acted ‘reasonably and rationally’ will not be
liable”. Simler J was not saying that. All she was saying, correctly, was that, in assessing
an employer’s main purpose, an employer is more likely to be found to have a genuine

business purpose, the more reasonable and rational its conduct has been.

126. It is important to stress that, on the facts of this case, we need go no further

accepted, would constitute contracting out of collective bargaining on this occasion, so
that that offer falls within the prohibition in section 145B as satisfying the “prohibited
result” requirement; and (ii) where the employer’s main purpose was to achieve that
result rather than having a genuine business purpose (and the factual findings of the

than deciding that an employer is in breach of section 145B: (i) where an offer, if what the position would be on other hypothetical facts. But in applying the statutory provisions we think it is useful always to have in mind the following two questions:

(a) is the employer, in form or in substance, making an offer for the workers

to contract out of collective bargaining whether in the future or on this
occasion?

(b) is the employer seeking to bypass the agreed (or, if the union is seeking

recognition, the contemplated) collective bargaining procedures or does the
employer have a genuine business purpose in making the individual offers?

On the facts of this case, Kostal was making an offer for the workers to contract out of collective bargaining on this occasion; and Kostal was seeking to bypass the agreed collective bargaining procedures and did not have a genuine business purpose in making the individual offers.

127. One point raised at the hearing was how precisely these statutory provisions

operate where the relevant trade union is seeking recognition but has not yet been
recognised. It is unnecessary for us to decide this but we see no difficulty in applying
the provisions in the way that we have explained above. We have explained above, at
para 116, that one needs an existing or envisaged collective agreement in order to
establish the “prohibited result”. Plainly an offer requiring the trade union member
(even though the trade union is merely seeking recognition), formally to contract out
of a future collective agreement would be covered. But assuming that, even in this
context, the prohibited result may extend beyond that formal contracting out, the
employer is, as ever, excused where it has a genuine business purpose. And, although
we are hesitant to speculate without facts, one can readily anticipate that, where a
trade union is only at the stage of seeking recognition, it is likely to be easier for the
employer to establish that it has a genuine business purpose than where a union has
already been recognised.

UK, including, most importantly, Demir v Turkey (2009) 48 EHRR 54 and to the helpful summary of the Strasbourg case law by Underhill LJ in Pharmacists’ Defence Association Union v Boots Management Services Ltd [2017] EWCA Civ 66; [2017] IRLR 355, paras 29-47. Although we have seen that one of the purposes of sections 145B and 145D was to ensure that domestic law was brought into line with the ECtHR decision on article 11 in Wilson and Palmer v UK, we have not found it necessary to explore in any further detail the law on article 11. We therefore prefer to say nothing further on that issue.

applying ordinary statutory interpretation, that the Court of Appeal’s interpretation of
sections 145B and 145D contravened article 11 of the ECHR so that the provisions
should be read down so as to be ECHR-compliant under section 3 of the Human Rights

9.          The judgment of Lord Leggatt