Statutory dispute resolution procedures: automatically unfair dismissal case study

Rachael Wright, of Osborne Clarke, provides a case study on an automatically unfair dismissal under the new statutory procedures for workplace dispute resolution, which come into effect on 1 October 2004.

Introduction

This week's topic of the week article considers a hypothetical scenario where an employer has failed to follow the correct dismissal and disciplinary statutory procedure, and outlines the likely consequences of this failure. It also sets out the procedure that should have been followed in order to comply with the new statutory procedure.

The scenario

Z Plc is a large investment bank based in the City. Sally has worked for the bank for four years. Her performance was outstanding up until about eight months ago. Since then it has been declining rapidly to a now wholly unacceptable level. She is no longer meeting even her minimum targets.

Z Plc's actions

Sally's manager, John, has had a number of informal discussions with her over the past eight months, regarding her falling performance levels. In one of these meetings new, lower targets were set. Sally failed to meet the new targets, so another informal meeting took place. After that meeting, Sally was told that she had a further month to improve and that her failure to do so could have 'adverse consequences'.

These discussions and informal meetings were fully documented by John and copies were sent to HR.

Unfortunately there were no improvements by the end of that month, so John called Sally into his office and said: 'Sally, as you still have not improved, we have no alternative but to have a formal disciplinary meeting regarding your poor performance and your ongoing failure to meet your targets. I have tried my best but you give me no alternative.'

John and Sally agreed to hold the disciplinary meeting on 5 December. At this meeting they formally discussed the poor performance and a record was made of this. One day later, John handed Sally a letter stating that she was to be dismissed with immediate effect, although she would be paid in lieu of notice. He invited her to appeal, but Sally did not bother to do so. She has now lodged a claim at the employment tribunal, claiming unfair dismissal.

Why this was a failure to follow the statutory procedure

John failed to adhere to the standard (three-step) dismissal and disciplinary procedure, in that he omitted, prior to the disciplinary meeting of 5 December, to send Sally a written statement setting out her alleged conduct or the characteristics or other circumstances that led him to contemplate dismissing or taking disciplinary action against her.

Sally has not followed the statutory procedure either, in that she did not appeal the decision to dismiss her. However, she was under no obligation to do so, and will not suffer any consequences for this failure, since both parties are freed from the procedure once one party has failed to comply with it.

The new statutory procedure does not apply to the issuing of warnings (either oral or written), so John's failure to give Sally a right of appeal against the 'adverse consequences' warning that she was given will not have any negative impact.

The likely implications of this failure

John's failure to follow the statutory procedure will be attributed to Z Plc, and the company will automatically be found liable for unfair dismissal. Sally will receive a basic award of at least four weeks' pay as compensation for this (the basic award is dependent on an employee's age, service and the amount of a week's pay - see the Reference Manual for further details).

If the tribunal believes that the non-completion of the statutory procedure was wholly or mainly due to Z Plc's failure to comply with a requirement of the procedure (ie to send Sally a written statement of the conduct leading Z Plc to contemplate dismissing or taking disciplinary action against her), it must increase the amount of compensation payable to Sally for the unfair dismissal by 10% (except where it takes the view that there are exceptional circumstances meaning that it would not be just and equitable to do this) and may increase it by 50%.

How Z Plc should have dealt with the situation

Z Plc should have followed the standard (three-step) dismissal and disciplinary procedure to the letter, to avoid being automatically liable for unfair dismissal. John should have sent Sally a written statement outlining the nature of the concerns about her capability, and put the invitation to the meeting in writing. Even though Sally had been told orally of the concern, and of the meeting, this is not enough to satisfy step one of the statutory procedure.

Although, after the meeting Z Plc informed Sally of the outcome and offered her a right of appeal, which she refused, if it had followed the initial part of the procedure, Sally's subsequent failure to appeal would have led the tribunal to reduce, rather then increase, any compensation payable to her, by between 10 and 50%.

Warning

It should be noted that, even where the procedure has been followed to the letter, employers will still be liable for unfair dismissal if the decision to dismiss was otherwise unfair.

Next week's article will answer some frequently asked questions on the new statutory dispute resolution procedures.

Rachael Wright, senior associate at Osborne Clarke (rachaelwright@osborneclarke.com)

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