UK: direct pay offer made when union negotiations were at an impasse was unlawful inducement

An employer cannot engineer an end point to collective bargaining, to enable it safely to make a direct pay offer to employees without it being an unlawful inducement to bypass collective bargaining, simply by describing the last offer rejected by the union as its "best and final" offer.  A tribunal may still conclude that continued collective bargaining could have reached agreement, particularly if the parties were close to agreement and therefore the bargaining process was not exhausted.  In these circumstances the direct offer would be the cause of the term not being collectively agreed and therefore an unlawful inducement, the penalty for which is currently £4,554 per offer per affected employee.

As established last year by the Supreme Court in Kostal v Dunkley, a unionised employer’s direct offer of new terms to workers will not be an unlawful inducement to opt out of collective bargaining only if the collective bargaining process has been exhausted.  The Scottish EAT recently applied this test in the case of Ineos Infrastucture Grangemouth Ltd v Jones, where 'acrimonious' negotiations had reached an impasse after the union rejected what the employer described as its "final and best" pay offer.  There was no structured agreement setting out clearly when the collective bargaining process would be exhausted and the tribunal had heard unchallenged evidence that the parties were close to an agreement and had contemplated further rounds of negotiation.  It was therefore open to the tribunal to conclude on the facts that an objective observer would regard it as more, rather than less, likely that agreement would have been achieved by further collective bargaining, and that negotiations were not at an end at the time of the offer.

The ruling emphasises the benefits of having a clearly delineated collective bargaining process, to avoid uncertainty and argument as to whether the process has been exhausted on the facts.