Dispute resolution - the new regime

By Employment Group


Abolition of Statutory Disciplinary, Dismissal and Grievance Procedures

From 6 April 2009, employers will no longer have to follow the statutory 'three-step' procedures introduced by the Employment Act 2002 and the Dispute Resolution Regulations 2004.  The legislation that introduced the statutory disciplinary and dismissal procedures and the statutory grievance procedures has been repealed.

A new ACAS Code of Practice on Disciplinary and Grievance Procedures, which will come into effect on 6 April 2009, will replace the statutory procedures.

The ACAS Code is already available in draft form on the ACAS website: http://www.acas.org.uk/.  As with all ACAS codes, it will not have the force of law.  This means that employers will have more latitude in how they deal with disciplinary matters, dismissals and grievances. 

However, the Code may be taken into account in proceedings before an employment tribunal where it is relevant in deciding an issue before that tribunal, so employers will still need to ensure that they comply with it when dealing with disciplinary and grievance issues.

The ACAS Code's basic principles are similar to those that were enshrined in the statutory 'three-step' procedures, e.g. an employee should be notified in writing before any disciplinary action is taken against him/her; there must be a disciplinary hearing at which their side of the case can be put; and, if the decision goes against them, they must be given an opportunity to appeal.

However, tribunals will be concentrating in future on the overall fairness of any procedures, not whether any particular procedural steps were slavishly followed. This is good news for employers.

Points made in the new ACAS Code (November 2008 draft)

  1. Tribunals will take into account the size and resources of the employer.  The statutory procedures contained no such latitude and were very definitely "one size fits all".

  2. Disciplinary procedures will apply only in cases of misconduct and poor performance – unlike the statutory procedures they will not apply to redundancies or the non-renewal of fixed-term contracts.

  3. Where disciplinary and grievance cases are related, they may both be heard together.  This will make them much easier to manage than under the statutory procedures where the two were kept artificially separate in most cases.

  4. Employees will still have a statutory right to be accompanied at disciplinary, grievance or appeal hearings (s.10 Employment Relations Act 1999), provided that they have made a "reasonable request".

What will this mean in practice?

For grievances:

  • employees will no longer have to raise a grievance and then wait 28 days before they can bring a tribunal claim;

  • employers will be relieved from the administrative burden of having to decide which employee communications are, or might be, formal grievances; and
    it will be easier for employees to claim constructive dismissal or unlawful discrimination without any prior warning to the employer; but

  • tribunals may still reduce any compensation awarded to employees for failing to raise a grievance before bringing a tribunal claim (see Changes to the Compensation Regime below).

For disciplinary issues/dismissals:

  • employers should still ensure that they have procedures for dealing with disciplinary matters and dismissals and those procedures should be compatible with the new ACAS Code.  A dismissal may still be unfair if a fair procedure has not been followed (see below); and

  • failure by an employee to appeal against an employer's decision to dismiss may still result in compensation being reduced (as was the case under the statutory procedures). 

For all tribunal claims:

  • the repeal of the statutory procedures will mean that the strict (generally three-month) time limits for bringing tribunal claims will apply once more;

  • the extensions of time for bringing a claim that were allowed in order to enable the statutory procedures to be completed will be abolished; and

  • claims made out of time will only be allowed to proceed at the tribunal's discretion (in the case of a discrimination claim, where it is "just and equitable" or, in other cases, where it was "not reasonably practicable" for the claim to have been filed within the statutory time limit).

Changes to the compensation regime

Under the statutory procedures, tribunal awards of compensation could be adjusted up or down by between 10% and 50% where either the employer or employee had failed to follow all or part of the relevant procedure.  Where there had been a failure, the tribunal was required to apply an uplift or reduction to the award.

In future, under a new section 207A of the Trade Union and Labour Relations (Consolidation) Act 1992, an unreasonable failure by either the employer or the employee to follow the ACAS Code will allow tribunals to increase or reduce awards by up to 25% if they deem it "just and equitable" in the circumstances to do so.

Removal of conciliation periods

When the statutory procedures were introduced, the role of ACAS as conciliator in disputes between employer and employee was restricted.  In many claims, including unfair dismissal, ACAS was only required to conciliate for a limited period, and the parties to tribunal proceedings often found that by the time settlement discussions had begun, ACAS was no longer under a duty to conciliate.

Those restrictions have now been removed.

From 6 April 2009, ACAS reverts to its former statutory duty to try and promote settlement of any dispute between employer and employee at any time.  It may do so without proceedings being instituted or once a tribunal claim has been filed.  In an unfair dismissal claim, an ACAS-conciliated settlement may take the form of re-instatement or re-engagement or an award of compensation.

Changes to the effect of procedural unfairness

When the statutory procedures were introduced, a new section 98A was introduced into the Employments Rights Act 1996 which:

  • made a dismissal automatically unfair if the relevant statutory procedure had not been complied with; but

  • provided that where the statutory procedure had been complied with, if any non-statutory procedure (e.g. a company policy) had not been followed, a dismissal would not be unfair if the employer could show that following the procedure would have made no difference to the outcome.

Section 98A has now been repealed so the old rule (following the 1987 decision in Polkey v AE Dayton Services Ltd) on procedural unfairness is revived.

This means that if there has been any procedural failure in the dismissal (i.e. failure to comply with a company policy or failure to comply with the ACAS Code), the dismissal will be technically unfair.  However, the amount of compensation awarded may be reduced (a so-called Polkey deduction) by up to 100% if the employer can show that the procedural failure made no difference to the outcome, i.e. that the employee would have been dismissed in any event.

Transitional provisions

The new rules take effect from 6 April 2009, but there are also very complex transitional provisions.

The Department for Business Enterprise and Regulatory Reform has issued guidance on these transitional arrangements.

In summary, the date of a "trigger" event will decide which regime should apply.

In the case of disciplinary or dismissal action, the "trigger" event will be when the employer starts disciplinary or dismissal action, which will usually be when the employer sends the employee a letter ( the "step 1" letter under the statutory procedure) or invites the employee to a disciplinary meeting.  If this happens before 6 April 2009, the statutory procedures will apply.

In relation to grievance procedures, the action about which the employee complains will be the "trigger" event.

Where the "trigger" event happens on or after 6 April 2009, the new regime will apply.

However, special rules apply where an employee is complaining about a continuing state of affairs or a "continuing act" on the employer's part. This will usually arise in the case of an equal pay or discrimination claim.

Where the "continuing act" begins on or before 5 April 2009 and continues after that date, the pre-6 April 2009 regime will continue to apply, subject to final cut-off dates. 

For the old regime to apply, the employee must submit a written grievance or employment tribunal claim:

  • on or before 4 July 2009, if the claim in question is subject to a 3-month time limit (i.e. discrimination claims); or

  • on or before 4 October 2009, if the claim in question is subject to a 6-month time limit (i.e. equal pay claims).

These transitional provisions mean that tribunals will be operating the two regimes in parallel, probably well into 2010.