In London North Eastern Railway Ltd (LNER) and another v Jiwanji and others [2026] EAT 102, the employment appeal tribunal (EAT) upheld a tribunal decision that LNER's predecessor, Virgin Trains East Coast (VTEC), breached section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 (the Act) by making offers direct to employees after the RMT union had rejected a collectively negotiated pay deal.

Legal principles

Section 145B of the Act provides that a worker who is a member of an independent trade union recognised by their employer has the right not to have an offer made to them by their employer where:

1. acceptance of the offer would produce 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 (“the prohibited result”); and
2. the employer's sole or main purpose in making the offer is to achieve the prohibited result.

In Kostal UK Ltd v Dunkley and others [2021] UKSC 47, the Supreme Court held that an employer breaches section 145B where:

1. it makes direct offers to union members;
2. acceptance of those offers would mean terms are determined outside the agreed collective bargaining process when there was a real possibility those terms would otherwise have been agreed through collective bargaining; and
3. the employer's sole or main purpose is to achieve that result.

Importantly, the Supreme Court stated that employers are generally free to make direct offers only once they have followed and exhausted the agreed collective bargaining procedure. If bargaining has not been exhausted, there will ordinarily be a real possibility that terms could still be agreed collectively.

Against this background, a claim was brought by 1,250 employees of LNER who were supported by the RMT trade union.

The background

VTEC recognised several trade unions, including the RMT, for collective bargaining purposes. During the 2017 pay negotiations, VTEC negotiated with three unions through a Joint Committee process. In October 2017, negotiators initially appeared close to agreement on a pay deal. The RMT's negotiator initially indicated that he would recommend acceptance, but following opposition from members the RMT ultimately recommended rejection and members voted against the proposal. Two other unions (TSSA and Unite) accepted the offer. Following the RMT's rejection, VTEC wrote directly to employees on 13 November 2017 informing them that the pay award would be implemented and inviting RMT members to "opt out" if they did not wish to receive it. The communication stated that employees should not expect a better deal through further negotiations.

The employment tribunal upheld the claims. It found that the letter of 13 November 2017 contained an offer, and, had the offer not been made, there was a real possibility that matters would have been determined by collective agreement. Before making the offer, VTEC's management did not have a genuine belief that collective bargaining was already at an end and its purpose in making the offer had been to impose the pay award.

The employment tribunal awarded each claimant the fixed statutory amount of compensation of £3,907 (£4,883,750 in total). LNER appealed.

The EAT’s decision

The EAT dismissed the appeal on the basis that:

1) Collective bargaining had not been exhausted

There remained a real possibility that the disputed terms could still have been agreed through collective bargaining when the direct offer was made because:

• The collective bargaining agreement was relatively flexible and did not contain a rigid, structured process for determining when negotiations had ended.
• There was no agreed mechanism for declaring bargaining exhausted.
• The parties were objectively close to agreement.
• Negotiations had not reached a genuine impasse.
• There was nothing preventing further meetings between management and the RMT.
• Further negotiations did in fact take place after the direct offer was made and resulted in a collective agreement.

The EAT emphasised that, unlike in Kostalv Dunkley, the bargaining arrangements were not highly prescriptive. Therefore, the employment tribunal was entitled to examine the overall factual circumstances rather than simply ask whether a particular procedural stage had been completed.

2) The employer's purpose in making the direct offer was to achieve the prohibited result under section 145B

The EAT held that VTEC did not genuinely believe collective bargaining had already ended. Rather, it made a business decision to stop participating in the bargaining process and impose its preferred outcome directly on the basis that management:

• believed negotiations had gone on long enough;
• was frustrated with the RMT's conduct;
• wanted employees to receive their back pay before Christmas; and
• did not wish to continue with collective bargaining.

The relevant purpose was the employer's decision not to continue using the agreed collective bargaining arrangements, not the underlying commercial reasons which motivated that decision.

Key takeaways

This decision confirms that the safest course for an employer is to ensure that the collective bargaining process has been exhausted before making direct offers to employees.

Employers should not assume that collective bargaining has ended or been exhausted simply because negotiations have taken longer than expected and/or become difficult or fractured. A genuine belief that collective bargaining has been exhausted will put an employer in a better position to defend section 145B claims successfully only if it can evidence the basis for that belief. Tribunals will look closely at the practical reality of the situation.

In cases where collective bargaining arrangements are flexible, the courts are likely to take a broad and practical view of whether bargaining has truly come to an end, making it harder for employers to move into individual conversations.

An employer that decides to make direct offers where there is any realistic prospect that negotiations with recognised unions could continue should be extremely cautious. In these circumstances, the employer's only defence to any section 145B claims will be to argue that its sole or main purpose in making the offers was not to achieve the prohibited result. This can be a difficult defence to prove. The EAT made the point that employers that make direct offers will always be motivated by underlying business reasons, but those reasons are not determinative of the sole or main purpose question; otherwise, section 145B could never be breached.

We suggest that where Recognition Agreements are being updated/renegotiated, employers ensure that there is a clear dispute resolution process within it. That process should also be clear on the point where it has been exhausted so that the employer can rely on this if it then seeks to make a direct offer to its employees.

How Capsticks can help

Capsticks has significant experience supporting employers before, during and after any collective bargaining process (including delivering training, supporting decision makers and HR involved in the management of the process and defending any legal challenges or claims that may arise).

For further information on how we might assist your organisation, please contact Paul McFarlane, Nicola Green and Andrew Rowland.