A recent Employment Appeal Tribunal (EAT) judgement has established that employers cannot use unstructured or flexible union agreements as a loophole to bypass collective bargaining, warning businesses that direct pay offers conceived from frustration over negotiations carry potentially catastrophic financial penalties.
Background:
The legal dispute arose from a collective bargaining conflict involving approximately 1,250 members of the RMT. The workers’ previous employer, ‘V’, was engaged in exhaustive 2017 pay negotiations alongside three recognised trade unions under a flexible framework known as single-table bargaining. While two of the trade unions ultimately voted to accept a proposed 3.2% basic pay increase, the RMT membership overwhelmingly rejected the offer following an increasingly defensive and confrontational shift in rhetoric between the lead negotiators.
Eager to implement the backdated pay award in time for the peak Christmas season and deeply frustrated by what management perceived as union sabotage, V bypassed the ongoing collective framework. The company issued a direct written offer to the entire workforce, stating that the pay increase would land in their December bank accounts automatically unless individual RMT members proactively signed a formal opt-out notice. The RMT successfully brought claims before an Employment Tribunal, asserting that this direct communication violated Section 145B of the Trade Union and Labour Relations (Consolidation) Act (TULRCA) 1992. The Tribunal awarded a mandatory statutory penalty of £3,907 to each of the 1,250 affected union members, constituting a massive financial blow which the employer’s successor subsequently appealed.
Decision:
The EAT completely dismissed the employer’s appeal, providing critical clarity on how the seminal Supreme Court ruling in Kostal UK Ltd v Dunkley applies to less rigid, non-prescriptive union frameworks. The appellants argued that, because the joint negotiating committee had concluded its main meetings and two out of three unions had accepted the deal, the agreed collective bargaining process was functionally "exhausted," meaning there was no objective "prohibited result" under the law.
The Tribunal firmly rejected this defence, ruling that under the precedent established in Ineos Infrastructure Grangemouth v Jones, where a collective agreement is unstructured and flexible, determining whether negotiations have ended is a strict question of fact. The Tribunal had made an unassailable factual finding that the parties were actually close to an agreement and that no genuine impasse or deadlock existed. Crucially, the Judges noted that single-table bargaining requires total agreement and therefore negotiations with the RMT were ongoing. Hence, bypassing the union’s final say, simply because management had made a unilateral business decision that negotiations had "gone on long enough", directly triggered statutory liability. Further, the Tribunal rejected the employer's attempt to use the pretext of its underlying business motives, including holiday pay deadlines, to defeat the "prohibited purpose" element, confirming that a subjective desire to circumvent agreed union structures to impose individual contract terms satisfies the threshold of unlawful conduct.
Implications:
This ruling delivers a profound warning regarding the practical boundaries of employment negotiations. The most crucial takeaway is that even ostensibly benign, logical business reasons—such as rewarding staff quickly or matching a deal already accepted by other unions—will not serve as a legal shield if you intentionally bypass a recognised union. If a realistic chance of further negotiation remains, making a direct offer to employees could leave your organisation vulnerable to mandatory statutory penalties that can scale into the millions.
Additionally, this judgement explicitly confirms that employers cannot escape liability by unilaterally declaring a pay offer to be "full and final" or by pointing to aggressive union rhetoric as an excuse to walk away from the table. The courts will objectively scrutinise whether negotiations were truly deadlocked ‘as a matter of fact’. To mitigate these severe litigation risks, businesses must carefully audit their existing collective bargaining agreements to ensure that they feature highly specific, unambiguous dispute-resolution milestones that clearly define exactly when a process is legally exhausted. Finally, in multi-union frameworks, if a single union rejects an ongoing proposal, management must actively pursue distinct, single-union discussions rather than attempting to split the workforce through individual contractual inducements.
