UK: Collective bargaining - no obligation on 'de facto' employer; risks of direct negotiation with employees

In Independent Workers Union of Great Britain v University of London the Central Arbitration Committee has decided that a union representing employees of an outsourcing company was not entitled to collectively bargain directly with the university to whom their services were supplied. This was so even if the university "substantially determined" the workers' terms: recognition can only be sought from an employer in respect of its 'workers' and to be 'workers' individuals must have a contract with the employer. There was no contract here between the university and the individuals (and indeed their employer already recognised a different union for collective bargaining on their behalf). The CAC did not rule on the union's argument that this is incompatible with Article 11 of the European Convention on Human Rights, as it has no power to make a declaration to that effect.

It is unlawful for an employer to bypass collective bargaining by making an offer of new terms directly to individual trade union members where the main purpose of the offer is to set a term of employment other than by collective bargaining. The EAT in Kostal UK Ltd v Dunkley has confirmed that this applies even where the term is only temporarily governed by individual agreement and collective negotiations continue subsequently and reach agreement on that term. The key test is whether the purpose of the offer was for a term to be determined (whether only as a one-off instance or ongoing into the future) other than by collective bargaining, or whether the employer's main motivation was some other pressing business aim. The employer in this case made two separate offers directly to employees after its offer had been rejected in a union ballot, one making a Christmas bonus conditional on signing up to the new terms, the other threatening dismissal if the offer was not accepted. The tribunal did not consider that the employer's stated purpose, to avoid the employees losing out on their Christmas bonus, was a genuine business aim, given its view that the employer had itself chosen to make the bonus time-limited. The two offers were viewed as two different unlawful inducements giving rise to a mandatory award (currently set at just under £4,000) per employee for each communication. The EAT left open the question whether an identical repeated offer might be viewed as a single offer giving rise to only one award per employee.

Whether an employer can establish a separate business reason for its offer will be a question of fact and degree in each case. The EAT noted that direct negotiations may be lawful where employers "have engaged in lengthy and meaningful collective consultation and reached an impasse before considering making direct offers"; or "can demonstrate a strong history of operating collective bargaining arrangements with the union and/or have no wish to avoid entering into such arrangements when the offers are made"; or can show genuine business reasons (unconnected with collective bargaining) for approaching workers directly outside the collective bargaining process. "Where an employer acts reasonably and rationally and has evidence of a genuine alternative purpose, tribunals are likely to be slower to infer an unlawful purpose than in cases where the employer acts unreasonably or irrationally or has no credible alternative purpose." However, employers should only proceed down this route with considerable caution.