Changes to disciplinary and grievance procedures: overview

Tina Maxey of Steeles (Law) LLP begins a series of articles on changes to the law on disciplinary and grievance procedures with an overview that looks at the effects of the impending repeal of the statutory dispute resolution procedures and the introduction of a new Acas code of practice.

Introduction

It is now confirmed that the much criticised statutory dispute resolution procedures are to be abolished with effect from 6 April 2009, by provisions in the Employment Act 2008. In their place will be a revised Acas code of practice that sets down a number of principles for employers and employees to follow, in disciplinary, dismissal and grievance situations. At present, failure to follow a statutory dismissal and disciplinary procedure renders dismissals automatically unfair. Once the statutory procedures have been abolished, dismissals will no longer be automatically unfair on procedural grounds. Instead, employment tribunals will assess only the general fairness of the procedure that has been followed.

Whether or not a grievance is raised according to the requirements of the statutory grievance procedures is relevant in the context of the admissibility of tribunal claims, tribunal time limits and the adjustment of compensation. When the statutory procedures are repealed, this will no longer be the case. The three-step procedure (written grievance, meeting and appeal) will still apply, but is included in the Acas code as a principle to be followed, rather than being prescribed by the statute.

According to the Acas code, employers and employees should seek to resolve disciplinary and grievance issues in the workplace. The repeal of the statutory procedures will not remove the need for disciplinary and grievance procedures. It will still be good employment practice to have procedures in place so that disciplinaries and grievances can be dealt with fairly, consistently and efficiently.

Effect of repeal of statutory procedures

The repeal of the statutory dispute resolution procedures will result in a return to the position as it was prior to their introduction in 2004.

As has always been the case, employers must establish a potentially fair reason for a dismissal and act reasonably when dismissing. To act reasonably an employer must follow a fair procedure.

Fairness is ultimately a question of fact to be determined by an employment tribunal, which takes into account all the circumstances, including the size and resources of the employer, when determining whether or not it has acted reasonably.

At present, employers must follow a statutory dismissal and disciplinary procedure, or risk a finding that the dismissal is automatically unfair. However, under s.98A(2) of the Employment Rights Act 1996, provided that the statutory procedure is followed, an employer's failure to take other reasonable procedural steps will not necessarily mean that it has acted unfairly, if it can show that it would have dismissed even if it had taken those steps.

Once the statutory procedures are repealed, this will no longer be the case. There will be a return to the position established by Polkey v AE Dayton Services Ltd (formerly Edmund Walker (Holdings) Ltd) [1987] IRLR 503 HL that, other than in exceptional circumstances, a dismissal will be unfair if the employer fails to follow a generally fair procedure, even if its failure makes no difference to the outcome and it would have dismissed had it followed a fair procedure. Therefore it will be more important, following the repeal, for employers to ensure that they act reasonably and dismissals are carried out according to a generally fair procedure.

However, although a dismissal will be unfair if a fair procedure is not followed, the amount of compensation may be reduced, by a percentage, to reflect the chance that the employer would have dismissed the employee, even if it had followed a fair procedure. This is known as the Polkey reduction.

With respect to grievance procedures, there will no longer be a requirement for employees to raise a grievance to be able to bring a claim (for example for unfair constructive dismissal or unlawful discrimination) in the tribunal. However, grievance procedures will remain important. The aim of grievance procedures is to resolve issues in the workplace. Notwithstanding the requirements of the code, employers have a general implied contractual duty to "reasonably and promptly afford a reasonable opportunity to their employees to obtain redress of any grievance" (WA Goold (Pearmak) Ltd v McConnell and another [1995] IRLR 516 EAT).Failure to do so could amount to a breach of that duty, entitling the employee to resign and claim constructive dismissal.

Acas code of practice and guide

Acas has published a revised Draft code of practice on disciplinary and grievance procedures (PDF format, 58K) (on the Acas website), which is due to come into effect on 6 April 2009 (subject to parliamentary approval). The code sets out principles and guidance for employers and employees for handling disciplinary and grievance situations.

The fairness of a dismissal procedure will be heavily dependent on whether or not the employer has followed the principles enshrined in the code when dismissing the employee. Although the code is not legally binding and failure to comply with it will not, on its own, render an employer liable for a claim, it will be taken into account by the employment tribunal when it is considering whether or not the employer dismissed fairly.

However, simply following the code will not necessarily make a dismissal fair. The law on unfair dismissal is primarily concerned with whether or not an employer has acted reasonably in all the circumstances. Whether or not the employer has complied with the code will be taken into account by tribunals, but it will not be the only determining factor.

Similarly, the grievance procedures outlined in the code will be relevant. If either the employer or employee chooses not to follow the principles and guidance set out in the code in relation to handling grievances, this will be taken into account by the employment tribunal as part of its determination of a subsequent claim.

Both employers and employees will be expected to comply with the code. If either party unreasonably fails to follow the guidance and principles set out in the code, this could result in the tribunal increasing or decreasing the compensatory award by up to 25%, depending on which party is at fault. This leaves open the question of what amounts to an "unreasonable failure" to follow the code, which the code does not answer.

To accompany the code, Acas has also published a revised Discipline and grievances at work: draft Acas guide (PDF format, 650K) (on the Acas website), which aims to assist both employers and employees by providing more detailed advice on dealing with discipline and grievances in the workplace. However, there is nothing in the guide to clarify what amounts to an unreasonable failure to follow the code or the relevant factors that will be taken into account by tribunals when they determine whether or not to make an adjustment to compensation. This may result in variances in the decisions made by tribunals across different regions.

Tribunals are not required to have regard to the guide when determining the fairness of dismissals.

The code is aimed at promoting the resolution of disciplinary and grievance issues in the workplace and ensuring that issues are dealt with in accordance with the basic requirements of fairness. Both the disciplinary and grievance procedure set out in the code essentially retain the three-step procedures, therefore it may have little impact on how employers deal with disciplinary and grievance issues.

The second article in this series of topic of the week will examine the provisions of the Acas code and guide in more detail.

Changes to compensation

Where the statutory procedures apply and the employer or employee fails to follow the relevant procedure, the tribunal must adjust any award made (which is not limited to unfair dismissal awards) by 10% unless there are exceptional circumstances, and it can increase or decrease the award by up to 50%. Following the repeal of the statutory procedures, although there will be a possible sanction of an adjustment of up to 25% to the award, for failing to follow the Acas code, it will not necessarily follow that the tribunal will make this adjustment. It has the discretion to make the adjustment if it considers it just and equitable to do so.

Transitional arrangements

The relevant provisions of the Employment Act 2008 come into force on 6 April 2009. However, transitional arrangements in the Employment Act 2008 (Commencement No.1 Transitional Provisions and Savings) Order (SI 2008/3232) set out when the statutory procedures continue to apply after that date.

The statutory dismissal and disciplinary procedures will continue to apply after 6 April if, on or before 5 April, the employer has:

• complied with step one or two of the standard procedure or step one of the modified procedure;
• taken relevant disciplinary action against the employee (ie action short of dismissal that is based on conduct or capability, other than the issue of a warning or suspension on full pay); or
• dismissed the employee.

(See the Disciplinary rules and procedures section of the XpertHR employment law manual for details of when the employer will be deemed to have complied with the relevant steps of the statutory dismissal and disciplinary procedures.)

The statutory grievance procedures will continue to apply where the action that is the subject of the employee's complaint took place wholly before 6 April 2009. The statutory procedures will also continue to apply where the action to which the grievance relates started on or before 5 April 2009 and continues beyond that date, but only if the employee presents a claim to the tribunal or submits a valid grievance:

• on or before 4 July 2009 for most claims;
• on or before 4 October 2009 for equal pay or redundancy pay claims.

As a result of the transitional arrangements employers must continue to comply with the statutory procedures for some time after their repeal where the dispute arose before the repeal, or the procedure has already been commenced. Given the consequences for employers and employees of failing to comply with procedures, the interpretation of the transitional arrangements may generate some case law in itself.

The future

It is hoped that the Acas code will encourage dispute resolution in the workplace without recourse to the employment tribunals, as was the original aim when the statutory procedures were introduced. Whether or not a statutory procedure has been followed impacts on the award of compensation, and for employees, whether or not a claim can be brought. As a result, the procedures have encouraged litigation.

The code is far less prescriptive than the statute, setting out a number of broad principles. It is intended to be simpler for employers to follow. It remains to be seen whether or not it provides a clear route for resolving disputes in the workplace.

However, the code is more detailed than the statutory procedures. It also imposes very little obligation on employees, which is not going to be universally welcomed by employers. Given the additional detail and the penal sanction for failure to follow the code, the potential for parties to seek adjustments to compensation will remain. Only time will tell how the code will operate in practice and whether or not the number of tribunal claims will drop.

Next week's topic of the week article will look in more detail at the revised Acas code of practice and guide and will be published on 18 February.

Tina Maxey is a solicitor in the employment team at Steeles (Law) LLP (TMaxey@steeleslaw.co.uk).

Further information on Steeles (Law) LLP can be accessed at www.steeleslaw.co.uk.