Following Procedure or Going through the motions?
Part 3 of The Employment Act sets out the framework intended to reduce the burden on Employment Tribunals and aid the in-house resolution of individual employment disputes. It is the most controversial part of the Act and appears to chip away at existing unfair dismissal rights. Much will depend on the as yet unpublished regulations that will accompany the Act, and the timetable for implementation is vague - mid 2003 at the earliest. Here we outline the main provisions.
New Statutory Disciplinary and Grievance Procedures
The Employment Act introduces statutory disciplinary and grievance procedures which set out minimum standards employers and employees will be required to meet. It will be a contractual requirement (Section 30) that every employer and employee comply with the requirements of the statutory disciplinary and grievance procedures.
This is welcome, but the standards fall short of the ACAS Code which was revised as recently as last year with the involvement of employers' organisations and unions.
Failure to follow the procedures also has consequences for tribunal claims, as are set out below.
DDP: poison or palliative? There are two forms of Dismissal and Disciplinary Procedure (DDP).The standard DDP proposes three steps: notification of the reason for discipline; a meeting to take place before disciplinary action is taken; and, a right of appeal. The meeting will count as a hearing which gives the worker the statutory right to be accompanied by a trade union official or fellow worker.
The standard DDP does not appear to require decisions to be notified to the employee in writing.
Worryingly, there is also a modified DDP which consists only of an appeal when the dismissal has already taken place. There appears to be a suggestion that it may be appropriate for employers to dismiss for alleged gross misconduct without a hearing and merely to allow a right of appeal after the dismissal has taken effect.
The consequences of a failure to follow a DDP are set out below.
Prescribed GPs: what the doctor ordered? There are similar provisions for grievance procedures (GPs). The employee must set out their grievance in writing; the employer must arrange a meeting and then notify the employee of the decision and of the right of appeal. The employee must inform the employer if they wish to appeal and another meeting must be arranged. There is a modified procedure which is likely to be required to be followed in cases where the employee no longer works for the employer.
The procedures are critical for employees who will, if they fail to follow the GP:
(i) have their compensation reduced (see Section 31); or
(ii) be prevented from bringing a Tribunal claim (Section 32).
The government has however indicated that the GP not need to be invoked in unfair dismissal cases other than constructive dismissal claims where the modified procedure only will apply.
Non-completion of statutory procedure: effect on compensation Employment Tribunals (ETs) can (and in some cases must) adjust compensation if the statutory discipline and grievance procedures have not been completed before the tribunal proceedings were begun. This applies to most claims capable of coming before an ET including all forms of discrimination, equal pay, breach of contract, unauthorised deductions, unfair dismissal and working time regulation breaches.
If the failure was wholly or mainly the employee's fault, the ET must reduce compensation by 10% and may reduce it by up to 50%. If it was wholly or mainly the employer's fault, the ET must increase compensation by 10% and may increase it by up to 50%.
The 10% increase or reduction must be made whenever there is a failure, unless the ET decides it would not be just and equitable or there are exceptional circumstances.
The adjustments are to be made before reductions for contributory fault or redundancy payments in excess of the basic award (Section 40).
Complaints about grievances (Section 32) This provision seriously restricts an employee's ability to pursue Employment Tribunal claims if she or he has not complied with the statutory grievance procedure. The list of claims covered is again extensive all forms of discrimination, equal pay, unauthorised deductions, unfair dismissal and working time regulation breaches. The only jurisdiction absent appears to be breach of contract claims and the government has indicated that GPs will not apply in dismissal cases apart from constructive dismissal.
In particular, an employee is prevented from presenting a complaint to a tribunal if she/he has not completed step one of the relevant GP. This means that the grievance must be put in writing and further, the employee must then wait for 28 days before lodging a tribunal claim. The aim is to give employers an opportunity to address the grievance before tribunal proceedings are instituted, but another effect is to raise barriers to access to tribunals.
However an Employment Tribunal is only prevented from hearing a complaint if failure to comply with the grievance procedure is apparent from the information supplied by the employee or the employer has raised it as an issue.
The Secretary of State has power to make further provisions relating to the application of the statutory GPs including what constitutes compliance with putting a grievance in writing and the circumstances in which an employee is to be treated as having complied with the statutory grievance procedures.
The time limits they are a-changing? (Section 33) The requirement to follow procedures before lodging an ET claim means that employees and their representatives will need to keep a keen eye on the three month time limit for lodging employment tribunal claims.
Under section 33, the Secretary of State may make regulations about the time limits for employment tribunal claims including extending the time limit, exercising discretion or treating cases as having begun in time. Although there are no firm details on this as yet, the government intends to extend time by three months where procedures have not been completed within the existing time limit.
Who is covered? The DDP and GP provisions will apply to employees. This means that although workers have a right to be accompanied the statutory disciplinary and grievance procedures will not apply until the Secretary of State invokes the power to apply the procedures to workers. The possible extension of employment rights beyond the narrow confines of 'employees' is currently being considered. The government has announced a review, under S.23 Employment Relations Act 1999 which enables employment rights to be extended without the need for primary legislation. We will keep you abreast of developments.
It ain't fair
Procedural fairness in unfair dismissal (Section 34) The Act introduces a new section 98A of Employment Rights Act: the cornerstone of unfair dismissal law.
A dismissal in breach of the new statutory DDP would be automatically unfair (which is welcome). Furthermore an ET will be able to award compensation of 4 weeks' pay for such dismissals 'unless it considers that such an award would result to an injustice to the employer'.
However, the Act undermines the impact of the House of Lords decision in Polkey v AE Dalton Services Ltd [1988]. This means that it is no longer unfair for an employer to dismiss without following a fair procedure, where the employer can show: 
the employer followed the statutory procedure the employer would have decided to dismiss anyway had they followed a fair procedure.
Existing case law on unfair dismissal focuses on the reasonableness of an employer's investigation and procedural steps in relation to the reasonableness of the employer's decision to dismiss. There is the danger that these new provisions will reduce the incentive on employers to carry out a proper and fair investigation.
Where the employer has followed the statutory procedure, a failure to follow the employer's own procedure will not of itself make the dismissal unfair. The employer must show that he would have decided to dismiss the employee if he had followed his own procedures.
It is already extremely difficult to win unfair dismissal cases. It is necessary to show that the decision to dismiss fell outside the 'band of reasonable responses'. In other words, that no reasonable employer could reasonably have dismissed: a very strict test.
It will now be very difficult to win cases where the employer can show that the statutory procedure has been followed.
This is particularly so as all an employer will need to show (see Section 34(2) proposed new section 98A(2)) is 'that he would have decided to dismiss the employee if he had followed the procedure'. The effect of this provision is likely to be more examples of employers dismissing after following only the statutory minimum procedure without following existing agreed procedures and will consequently result in more tribunal cases.
It could therefore be counterproductive to the stated aim of reducing tribunal cases by aiding the in-house resolution of disputes.
The Regulatory Impact Assessment with the Bill anticipates benefits to employers of between £4-6 million per year through 'transfers from employees due to changes in the structure of tribunal outcomes'! That is one way of describing a change which means employees will lose more cases and employers will win more! A saving of £6 million when average unfair dismissal compensation is in the region of £2,500 would imply that each year 2,400 employees who would win under the current system would lose after the changes.
Statement of Particulars
The Act also introduces new provisions relating to the statement of particulars employers are required to produce.
Particulars of procedures relating to discipline or dismissal (section 35) This adds a requirement that the note about disciplinary procedures which should be supplied with the statement of particulars must specify the procedure for discipline/dismissal or refer the employee to a document reasonably accessible to the employee.
The procedure must also specify the person to whom an employee can apply if they are dissatisfied with the decision to dismiss. The general requirements to the statutory procedures provide that in the case of appeal meetings the employer should be represented by a more senior manager.
Removal of exemption for small employers (section 36) This means that all employers must provide details of discipline and grievance procedures. The exemption for employers with fewer than 20 employees is removed.
Use of alternative documents to give particulars (section 37) The duty on employers to provide a statement of particulars will be met if the contract of employment or letter of engagement supplies the information required for statement of particulars.
These documents can be given before employment starts or within two months of commencement.
Failure to give statement of employment particulars (section 38) At present there is no financial penalty against an employer who does not provide employment particulars or who provides inaccurate employment particulars. Lack of sanction leads to lack of compliance and at last the Employment Act partly plugs this gap.
Where the applicant succeeds in an ET claim and the employer is in breach of the obligation to provide a statement (i.e. has provided no statement, an inadequate statement or has not notified changes), the ET shall: if no other award on the claim itself, order two weeks pay (for complete failure) or one week's pay (inadequate statement or not notified change); if another award is made, shall increase an award by a minimum of the above figures or 5% of the award, whichever is greater and may increase by up to 25%.
Where there is an increase for failure to follow procedures the total increase may not exceed 50%.
The amounts are to be applied before reductions for contributory fault or redundancy payments in excess of the basic award (Section 40).
The statutory cap on the week's pay applies and there is no free standing right to claim compensation for a failure to provide a statement which is unfortunate.
An employee can only get compensation where they have already lodged a claim for another matter. It will be important to include this in any employment tribunal claim where the employee has not been given a statement of particulars, where no changes to the statement have been notified or where the statement is inadequate, for example, it does not include reference to the statutory or disciplinary grievances.
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