Repeal of the statutory dispute resolution procedures: frequently asked questions

Matthew Briggs and Julie Secker of Osborne Clarke conclude a series of articles on the repeal of the statutory dispute resolution procedures with some frequently asked questions.

What are the current rules on resolving employment disputes?

Statutory dismissal and disciplinary and grievance procedures apply to most situations involving the dismissal or discipline of an employee, or situations where an employee has a grievance that could form the basis of an employment tribunal claim. The procedures were introduced with the aim of encouraging employers and employees to resolve employment disputes before they result in tribunal claims.

An employer's failure to follow the statutory dismissal and disciplinary procedure will, in most cases, result in a dismissal being automatically unfair. If an employee fails to comply with the statutory grievance procedure, the employment tribunal will not normally permit his or her claim to proceed. Employment tribunals will increase or decrease (depending on which party is at fault) any award made, by between 10% and 50%, where the statutory procedures apply but have not been followed.

There is no free-standing right for employees to claim breach of the statutory procedures. The breach must, essentially, attach to another claim, such as unfair dismissal or unlawful discrimination.

In addition to the statutory procedures, employers must comply with the implied contractual term of trust and confidence when dealing with disputes. In dismissal situations the general requirements of fairness must also be satisfied.

Have the procedures been a success?

Although the statutory procedures appear, at face value, to be straightforward, the rules concerning their application, and their impact on time limits, are complex. The procedures have also necessitated more formality than might otherwise have been required. Most minor complaints must be dealt with under the statutory grievance procedure if they are expressed in writing, as opposed to being resolved informally.

There has also been a deluge of cases before the employment tribunals and the Employment Appeal Tribunal concerning the procedures and their application. In response to criticism of the procedures, the Government commissioned a review (the Gibbons review), which recommended that the statutory procedures should be abolished.

What happens next?

Following the Gibbons review, the Government confirmed its intention to repeal the statutory procedures. An Employment Bill (PDF format, 152K) (on the Parliament website), which will repeal the procedures, is currently passing through Parliament. The Bill is likely to receive Royal Assent during autumn 2008. The relevant sections of the Bill, repealing the statutory procedures, are due to come into effect on 6 April 2009.

An ACAS code of practice is due to take the place of the statutory procedures. A revised Draft code of practice on discipline and grievance (PDF format, 85K) (on the ACAS website) has been published. It is proposed that the revised code will come into effect at the same time as the repeal of the statutory procedures. The draft code and its accompanying draft guidance (Discipline and grievances at work: draft ACAS guide (PDF format, 368K) (on the ACAS website)) have been the subject of consultation. They may, therefore, be subject to modification. The guidance is also due to come into effect when the procedures are repealed. See Repeal of the statutory dispute resolution procedures: ACAS code of practice and guidance in this series for more details.

The Government is currently consulting on secondary legislation that may need to be implemented as a consequence of the repeal of the statutory procedures. This consultation (Dispute Resolution: Secondary legislation consultation (PDF format, 268K) (on the DBERR website)) closes on 26 September 2008.

Pending the abolition of the statutory procedures employers should continue to comply with their requirements.

What will the revised code require employers to do?

The draft code proposes an approach to resolving disputes that reflects the current obligations under the statutory procedures, and the requirement to follow a fair procedure in all the circumstances (for example to avoid successful claims for unfair dismissal). Key principles (applicable to disciplinary and grievance procedures) are set out.

To help ensure that matters are dealt with fairly, employers should follow certain steps when following formal procedures. These include: dealing with issues promptly and consistently, carrying out investigations, informing employees of the problem, and giving them the chance to put their case and the right of appeal.

What are the requirements in relation to disciplinary matters?

The code sets out key steps to handling disciplinary problems fairly. These require employers to establish the facts of each case, inform the employee of the problem, hold a meeting with the employee to discuss the problem, allow the employee to be accompanied at the meeting, decide on appropriate action, and provide the employee with an opportunity to appeal.

What are the requirements in relation to grievances?

The code also sets out the key steps in relation to grievances. Under the code there is an obligation on employees to let their employer know the nature of their grievance. The employer should hold a meeting to discuss the grievance (at which the employee should be allowed to be accompanied), and decide on appropriate action. The employee should be able to take the grievance further if it is not resolved.

Will employers be required to do anything else?

As is the case now, employers will need to follow a procedure that is fair in all the circumstances if they are to avoid successful claims for unfair dismissal. While compliance with the code should go some way towards assisting employers to meet this requirement, further steps may be needed, depending on the circumstances.

What are the consequences of not following the code?

The consequences of failing to follow the revised ACAS code will be less serious than those for failing to follow the statutory procedures.

It is unlawful to fail to follow the statutory procedures and this may lead to a dismissal being declared automatically unfair. An employee will normally be entitled to a minimum of four weeks' pay as compensation. Tribunals will also adjust compensation awarded by between 10% and 50%. An employee may be unable to proceed with a claim where he or she has failed to initiate the statutory grievance procedure.

By contrast, the code will have no legal status. Employment tribunals may, at their discretion, take any unreasonable failure to follow the code into account when deciding cases and making awards. Awards can be adjusted upwards or downwards by up to 25%, depending on which party was culpable.

To minimise the risk of successful employment tribunal claims, and upward adjustments to tribunals awards, employers should familiarise themselves with the finalised versions of the code and guidance and ensure that relevant HR personnel and management receive training on their provisions.

Will small employers be bound by the code?

The revised draft code recognises that it is not always practicable for small organisations to take all the steps that it sets out. However, it indicates that there are key elements that all employers should work to. Employers should be cautious of deviating from the code unless they can show that they are justified in doing so.

What is the purpose of the ACAS guidance?

The draft guide complements the code and contains useful advice on good practice for dealing with discipline and grievances, and specific advice on dealing with absences. In addition, it contains draft letters and policies.

Will the repeal of the statutory procedures have any other consequences?

When the statutory procedures are repealed, the Polkey principle will be resurrected. The Polkey principle was established before the statutory procedures came into force and arose from Polkey v AE Dayton Services Ltd (formerly Edmund Walker (Holdings) Ltd) [1987] IRLR 503 HL. Previously, where there was a procedural irregularity, the employment tribunal had to find that the dismissal was unfair, even where the employee would have been dismissed if the correct procedure had been followed. The tribunal could make an adjustment to the compensation awarded to reflect the fact that the employee would have been dismissed in any event.

Since the statutory procedures were introduced, an employer that has a fair reason for dismissal and follows the statutory procedure, but fails to take other steps that are reasonable in all the circumstances, can argue that its failure to follow these other steps had no effect on the decision to dismiss, 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. However, when the Polkey principle is resurrected the consequences for employers will be that they will no longer be able to put forward this argument. A procedural failure could result in an unfair dismissal finding even if a fair procedure would have made no difference to the decision to dismiss.

The next topic of the week article will be the first in a series on disability discrimination and will be published on 8 September.

Matthew Briggs (matthew.briggs@osborneclarke.com) is an associate and Julie Secker (julie.secker@osborneclarke.com) is a solicitor at Osborne Clarke.

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