Repeal of the statutory dispute resolution procedures: overview

Phillip Chivers and Greg Chambers of Osborne Clarke begin a series of articles on the repeal of the statutory dispute resolution procedures with an overview of the procedures.

Introduction

The statutory dispute resolution procedures are due to be repealed in April 2009 by an Employment Act. The Employment Bill (PDF format, 144K) (on the Parliament website) is currently passing through Parliament. Few HR professionals or employment lawyers are likely to experience feelings of nostalgia for the procedures. They were introduced in October 2004, with the objective of encouraging the resolution of disputes internally before they spill over from the workplace into costly and time-consuming tribunal claims. However, the procedures have been roundly criticised, principally for burdening employers and employees with unwanted bureaucracy and unhelpful complexity and for encouraging process over fair outcomes.

In light of the concerns, the Government commissioned a review of the procedures in December 2006, led by Michael Gibbons. The review recommended that the procedures should be repealed. A consultation exercise followed during 2007 and the Employment Bill was published in December 2007.

Current position

The statutory dismissal and disciplinary procedures

The statutory dismissal and disciplinary procedures apply in most situations where an employer is contemplating dismissing an employee or imposing a disciplinary penalty other than suspension on full pay or a warning. In most cases, employers are required to follow a three-step standard procedure:

• Step one - The employer must write to the employee notifying him or her of the allegations and the basis of those allegations, and invite the employee to a meeting to discuss the matter.
• Step two - The employer must hold the meeting and notify the employee of the decision and the right to appeal.
• Step three - If the employee appeals the employer must hold an appeal meeting and inform the employee of the final decision.

In limited circumstances the legislation permits employers to follow a shorter modified procedure. The modified procedure applies only to a small percentage of gross misconduct cases, where the employee is dismissed immediately and without notice, in circumstances where it is reasonable not to make any further enquiries before dismissal. This procedure is applicable only in exceptional cases.

For employers that fail to comply with the statutory dismissal and disciplinary procedures, the consequences can be severe. The primary sanctions are as follows:

Automatic unfair dismissal - Where a statutory procedure applies, it is automatically unfair to dismiss an employee without completing that procedure (although the employee must have one year's service to be able to bring a claim). The employee will normally receive a minimum of four weeks' pay as compensation.

Increased compensation - Tribunals will apply a percentage uplift (up to a maximum of 50%) to the compensation awarded to employees who are successful in unfair dismissal claims, and other claims, such as discrimination. Conversely, if the failure to complete the statutory procedure is attributable to the employee, the amount of compensation awarded if he or she wins the claim will be reduced.

Extension of time limits

The current rules also provide for an employee to benefit from an automatic extension of time of three months to bring a tribunal claim where he or she reasonably believes that a procedure relating to his or her dismissal (not necessarily the statutory procedure) is still ongoing at the time the time limit for bringing the claim would otherwise have expired. Consequently, an employee who is still awaiting the outcome of an appeal against dismissal three months after the effective date of termination (by which point he or she would, under normal rules, have had to lodge a claim for unfair dismissal) will benefit from having a further three months in which to bring the claim. There is no need to make any application to the tribunal for an extension of time.

Partial reversal of Polkey

For employers, one positive aspect of the statutory procedures has been that, in circumstances where an employer has a fair reason for dismissal, and follows the statutory procedure but fails to take other steps that are reasonable in all the circumstances, it can still argue that its failure to follow these other steps had no effect on the decision to dismiss and hence the dismissal is fair in all the circumstances. If the employment tribunal agrees, the dismissal will be fair and the question of compensation will not arise. This differs from the previous position, which did not allow tribunals to deem dismissals in these circumstances to be fair. Instead, it was open to tribunals to reduce compensation in such cases by a percentage, to take account of the possibility that the employee would have been dismissed even if a fair procedure had been followed. This previous approach resulted from Polkey v AE Dayton Services Ltd (formerly Edmund Walker (Holdings) Ltd) [1987] IRLR 503 HL, therefore the current regime is often referred to as having partially "reversed Polkey".

The statutory grievance procedures

Grievance procedures provide a means for employees to raise complaints and concerns. However, not all complaints by employees trigger the statutory grievance procedures. A complaint must be about action by an employer that could form the basis of a complaint to a tribunal by an employee. Like the statutory dismissal and disciplinary procedures, the standard statutory grievance procedure involves three steps:

• Step one - The employee must set out the grievance in writing and send the statement, or a copy of it, to the employer.
• Step two - The employer must invite the employee to a meeting to discuss the grievance, notify the employee in writing of the decision, and inform the employee of the right of appeal.
• Step three - If the employee appeals the employer must hold an appeal meeting and inform the employee of the final decision.

The modified grievance procedure, which does not involve meetings but is, instead, conducted in writing, may be followed in certain circumstances where the employee has ceased to be employed, and both the employer and the employee agree that it should be followed.

As with the statutory dismissal and disciplinary procedures, there are significant penalties for non-compliance. Employees will, in most cases, be barred from bringing tribunal claims if they have not first submitted a written grievance and waited 28 days. If an employee has submitted a grievance and brings a claim after 28 days have passed but before the grievance procedure has been completed, the tribunal will hear the claim. However, if the employee wins the claim, the tribunal will either:

• increase the amount of compensation that it awards the employee, by up to a maximum of 50%, if the non-completion was the employer's fault; or
• decrease the amount of compensation that it awards the employee, by up to 50%, if the non-completion was the employee's fault.

Repeal of the statutory procedures

When enacted, the Employment Bill will abolish the statutory dispute resolution procedures. Instead of being required by law to follow set procedures, employers will be encouraged to follow principles set out in a revised ACAS code of practice on discipline and grievance. Failure to follow the code will not, by itself, render an employer liable to legal proceedings, and employers will no longer face claims for automatic unfair dismissal arising from having failed to complete statutory procedures. However, to avoid unfair dismissal claims, employers will still need to show that dismissals are for a fair reason and procedurally fair in the particular circumstances. In considering procedural fairness, tribunals will refer to the new ACAS code in relevant cases. In addition, the Bill proposes that an "unreasonable failure" to comply with the code will entitle tribunals to adjust compensation awards by up to 25%. However, it is worth noting that the ACAS code does not deal with redundancy dismissals or dismissals arising on the expiry of a fixed-term contract - both of which are catered for under the current statutory procedures.

The Bill also proposes to revert to the position established under Polkey. This means that if an employer fails to comply with a procedure, the tribunal will make a finding of unfair dismissal. The employer will no longer be able to avoid this finding by showing that the employee would have been dismissed even if the correct, fair, procedure had been followed. However, in such cases tribunals will be able to reduce the compensation awarded to reflect the likelihood that the dismissal would have taken place even if the employer had adopted the correct procedure.

The Government envisages that the repeal of the statutory procedures will take effect in April 2009. It is currently consulting on secondary legislation that may be necessary as a result of the changes to dispute resolution proposed in the Bill (Dispute Resolution: Secondary legislation consultation (PDF format, 268K) (on the DBERR website)). This consultation closes on 26 September 2008. ACAS intends that its revised code will also come into effect in April 2009. Consultation on the Draft Code of practice on discipline and grievance (PDF format, 85K) (on the ACAS website) closed on 25 July 2008. ACAS is also revising its guidance on conducting disciplinary and grievance matters in light of the changes. Consultation on Discipline and grievances at work: draft ACAS guide (PDF format, 368K) (on the ACAS website) also closed on 25 July. In the meantime, pending the abolition of the statutory procedures, HR professionals and employment lawyers must remain alert to their requirements.

Next week's article will look at the revised ACAS code of practice and guidance and will be published on 11 August.

Phillip Chivers (phillip.chivers@osborneclarke.com) is a senior associate and Greg Chambers (greg.chambers@osborneclarke.com) is a solicitor in the employment team at Osborne Clarke.

Further information on Osborne Clarke can be accessed at www.osborneclarke.com