Review of employment dispute resolution

Introduction
Repeal of the statutory dispute resolution procedures
Guidelines on good practice
Unfair dismissal law
Resolving disputes early
Managing tribunal claims
Simplifying employment law
Consultation in brief

Introduction

The statutory dispute resolution procedures introduced by the Employment Act 2002 and the Employment Act 2002 (Dispute Resolution) Regulations 2004 (SI 2004/752) have been widely unpopular and caused a torrent of complicated, and often contradictory, case law. At the time the procedures were introduced, the government said it would review their operation after two years to see if they were meeting their objective of encouraging employees and employers to resolve disputes in the workplace, with employment tribunals used only as a last resort. In December 2006, the government appointed Michael Gibbons - a member of its Better Regulation Commission - to undertake an independent review of the dispute resolution framework.

The Gibbons review has now been published, along with a Department of Trade and Industry (DTI) consultation document seeking views on the review's recommendations. The recommendations are dramatic. Michael Gibbons reports the "strong consensus" of those he consulted and worked with while undertaking the review is that the statutory dispute resolution procedures have not been successful and in fact have had negative consequences. The review recommends that they should be repealed in their entirety.

Repeal of the statutory dispute resolution procedures

Gibbons reports that the dispute resolution Regulations have had the effect of formalising disputes that could better have been dealt with informally. Because of the legal penalties involved in not following the appropriate procedure, the parties tend to focus on ensuring that the procedure is followed correctly, rather than on finding the best possible way to resolve the dispute. The review finds that many issues that could have been resolved informally are being escalated as a result of the procedures, and are taking up a disproportionate amount of management time.

It also finds a considerable amount of anecdotal evidence that legal advice is being sought earlier in the process and that more lawyer time is required per case. In particular, the need for an employee to write a grievance letter initiating the grievance procedure appears to have become a trigger for legal advice to be sought.

Gibbons is critical of the fact that the dismissal procedures apply in such a wide range of dismissals, including redundancy and the expiry of fixed-term contracts. For small businesses, the appeal stage of the standard procedure presents an unnecessary burden, with the same manager having to conduct both hearings. In multiple-applicant claims - such as large-scale equal pay claims - the process must be completed for each of the claims. In many cases, disciplinary and grievance issues are raised at the same time, and it is not clear how the two strands of dispute resolution Regulations should operate.

The review concludes that, given the variety and complexity of employment disputes, it would be impractical to design regulations that could successfully address all circumstances without becoming unacceptably complex. The overwhelming consensus of the interested parties is that both the disciplinary and the grievance procedures should be repealed. In its consultation document the government is seeking views on this recommendation.

Guidelines on good practice

The DTI consultation accepts that repealing the procedures would give employers and employees the flexibility to choose the best means of resolving a dispute. However, the increase in flexibility would, says the government, mean a reduction in certainty about the most appropriate process to follow. To give employers and employees "confidence to resolve disputes" it would be necessary to develop "clear, non-prescriptive guidelines on good practice and recommended actions for different sets of circumstances".

The government accepts that the Acas Code of Practice on disciplinary and grievance procedures "provides a solid foundation". However, the code is perceived as difficult for small businesses to understand and apply. It could also be amended to cover situations in which employment has already terminated, and cover alternative dispute resolution techniques. The government is therefore inviting views on whether or not it should provide clear guidelines on good practice for resolving disputes, "building on the work already done by Acas". If such guidance were put on a statutory basis, tribunals would have to refer to it when deciding the merits of a case to which the guidance was relevant.

The review also recommends that the government ensure that there are incentives to comply with the new guidelines, through maintaining and extending tribunals' discretion to take into account reasonableness of behaviour and procedure when making awards and cost orders. The government is seeking views to determine what penalties should be imposed on the parties. In particular, it would welcome "innovative suggestions" beyond the imposition of costs orders or the modification of compensation.

Unfair dismissal law

If the statutory dispute resolution procedures are repealed, this will have important ramifications for the operation of the law on unfair dismissal, and particularly the issue of procedural fairness. There would no longer be an automatically unfair dismissal where an employee was dismissed without being given a disciplinary hearing - although, under the law as it applied before the procedures came into force, the failure to follow a fair procedure would normally lead to a finding of unfair dismissal. One option that the government is considering is retaining the so-called "no difference" provision found in s.98A(2) of the Employment Rights Act 1996. This would allow any procedural failure to be disregarded if the employer could show that it had made no difference to the outcome. However, the consultation does not seek views on this. Instead, it asks whether or not the whole area of procedural fairness in the context of unfair dismissal should be reviewed.

Resolving disputes early

The review is also keen to promote the early resolution of employment disputes. In particular, it recommends that employers and employees should be encouraged to pursue alternative dispute resolution, including independent mediation. The government agrees that the use of alternative dispute resolution should be promoted more widely, and that the CBI, the TUC and other representative organisations should use their influence to aid this. The government is inviting views as to whether or not these organisations should be invited to develop guidelines on best practice in dispute resolution, including greater use of in-house mediation, early neutral evaluation and the use of "mediation provisions in contracts of employment".

Managing tribunal claims

For those using the tribunal system, the review recommends that there should be a helpline and internet site available to give advice on the "realities of tribunal claims" and the potential benefits of alternative dispute resolution. The whole tribunal application process should be amended so that potential claimants access it through the helpline and receive advice on alternatives when doing so. The government is seeking views on these proposals.

To reduce the number of claims that reach a tribunal hearing, the review recommends the introduction of a simple process to settle monetary disputes on issues such as wages, redundancy and holiday pay, without the need for tribunal hearings.

The consultation therefore asks whether or not there should be a new service of this kind - suggesting that it could be delivered by an existing body, either within or outside the current system. The DTI suggests that Acas is the sort of body that could have a role in such cases. It is envisaged that the service could be provided by phone and mail. Those who made use of the service would still have the right to seek a full tribunal hearing.

The review recommends that the government should offer a free early dispute resolution service - including, where appropriate, mediation, before a tribunal claim is lodged in those cases that are likely to benefit from this. The government's response is to suggest that Acas's role in the pre-claim period could be boosted to provide for conciliation, mediation or other interventions. If demand turned out to be high, Acas could be empowered to target these additional resources on the claims that were most likely to involve costly employment tribunal disputes; those where the employee was still in employment; and those involving employers with fewer than 250 employees.

In any event, Acas's role in conciliation will remain central. The review recommends that the current fixed periods for conciliation should be abolished, allowing Acas to conciliate at any point in the process, right up to the day before the hearing. The government is seeking views on this proposal.

Simplifying employment law

With regard to the tribunal system, the review recommends that the government simplify the employment tribunal claim and response forms, removing the requirement for unnecessary and legalistic detail. The government points out that the current claim form is eight pages in length, and asks if the tribunal forms can be shortened and simplified. Prompted by the review, it is also asking whether or not claimants should be required to include a statement of loss when submitting an application form. However, whether or not such a change can be reconciled with a desire to simplify the application process is explored in neither document.

The review asserts that time limits could be made easier for the parties to understand and apply. It recommends that the government unify the time limits for employment tribunal claims, as well as the grounds for extension of those limits. The government says that the removal of the statutory dispute resolution procedures will do much to simplify the current rules around time limits. However, it is also seeking views on whether or not any further simplification is necessary - and what the appropriate time limit for tribunal claims should be. As for the extension of time limits, the rules are influenced to some extent by the requirements of European law, but the government welcomes views on whether or not any change is desirable.

The review recommends that tribunals be given enhanced case-management powers for multiple claims - although it stops short of recommending representative actions. The DTI consultation refers to the Discrimination Law Review undertaken by the new Department of Communities and Local Government. That review has concluded that there could be scope for extending tribunals' powers, for example through the use of "test" cases, the outcome of which would bind other cases. The government is therefore asking for views on what changes might be appropriate. It is also considering if employment tribunals are the best forum to decide multiple-claimant cases, or if "other mechanisms" might better serve the interests of all parties concerned.

The review also deals with the problem of weak or vexatious claims, which it says can waste a great deal of time and undermine the credibility of the whole system. It recommends that the government consider whether or not the employment tribunals have appropriate powers to deal with weak and vexatious claims - and whether or not the tribunals use them consistently. The government requests views on this, and also suggests that a new discretion for tribunals to consider the behaviour of parties before, as well as during, a case would give them a further way of discouraging parties who have acted unreasonably.

The increasingly technical nature of employment law - and the need for tribunal judgments to deal with complicated legislation - has, suggests the review, led to the added value of lay tribunal members being reduced. It recommends that the government review the situations in which tribunal chairs sit alone. The Department of Constitutional Affairs is looking at this issue as part of a broader review of the role of lay members across the whole tribunal service. This review will be taken forward once the Tribunals, Courts and Enforcement Bill has made its way through parliament.

As far as the powers of tribunals are concerned, one issue that has been considered by the Discrimination Law Review is a wider power in discrimination cases to make recommendations that are binding on the employer involved. However, the government has decided not to pursue this, believing that "the policy aim can be better addressed through advice and guidelines for employers on employment law".

The government is currently reviewing how best to improve its advice and guidelines as part of an overall process looking at the simplification of employment law. This links in with one of the less-specific recommendations made by the review - that the government should simplify employment law. In 2006, the government launched the Employment Law Simplification Review. A practitioner panel appointed in December 2006 has been asked to suggest ways in which employment law could be simplified and clarified. Views on this issue are not sought in the current consultation.