UK: Applying a New Discipline to Employment Procedures

Last Updated: 12 April 2005
Article by Trevor Bettany

All employers, regardless of size, will be affected by the new statutory dispute resolution procedures, which came into force on 1 October 2004. The Government has given teeth to its new procedures, encouraging employers and employees to sort out disputes internally and to penalise them for failing to comply. However, uncertainty and disputes are sure to lie ahead.

The new procedures intend to give statutory backing to the principles of natural justice and to ensure minimum standards of fairness in all workplaces. However, the procedures only apply to employees and not to workers – which is likely to provoke further litigation by "temporary workers" and independent contractors seeking the protection of these procedures.

Regrettably, the new measures are too complex and vague. For example, they include circumstances in which they do not apply, apply in modified form, or are treated as having been completed. They will inevitably cause confusion and disputes between employers and employees and lead to tribunals.

As the procedures introduce minimum standards, employers who comply will not necessarily avoid liability – they merely avoid automatic unfair dismissal and the risk of increases in compensation of 10% to 50%.

All employers must now specify or refer in the written statement of particulars to their disciplinary and, for the first time, dismissal procedures so it is important that employers review their procedures ensuring they comply.

Dismissals and disciplinary procedures

The dismissal and disciplinary procedures (DDPs) apply whenever an employer is contemplating dismissal (subject to certain exceptions, eg collective redundancies of 20 or more employees). They do not apply to constructive dismissals. Significantly, they will apply to dismissals on non-disciplinary grounds, such as individual redundancy, ill-health and on the expiry of a fixed term contract. This is likely to be one of the biggest culture changes for employers.

The DDPs also apply where an employer is taking "relevant disciplinary action" short of dismissal, based on an employee’s conduct or capability. However, they do not apply to the most common form of disciplinary action - verbal and written warnings. Neither do they apply to suspension on full pay. Indeed, relatively few employers use disciplinary sanctions (eg suspension without pay, demotion or transfer) other than warnings. This means that employers could consider operating a two-tier approach, perhaps dispensing with any formal process before issuing a warning. It is unclear whether a performance improvement program, supported by a warning of the possibility of escalating disciplinary action culminating in dismissal, would constitute "relevant disciplinary action". Prudent employers will apply at least the minimum standards to all disciplinary situations.

The rules provide for two types of procedure: standard and modified. The standard procedure will apply in all but the most exceptional cases. It comprises three steps: a written statement of grounds, inviting an employee to a hearing to discuss those grounds and an opportunity for the employee to appeal to a further meeting.

Only a brave employer is likely to use the modified procedure - in exceptional circumstances. It will apply only where an employee has already been dismissed for misconduct on or immediately after discovery of misconduct and where it was reasonable to do so without further investigation. It comprises two steps: a written statement of the grounds for dismissal and an opportunity to appeal to a meeting. In most situations, even where an employee is caught "red-handed," it will be safer to suspend the employee before using the standard procedure.

General requirements apply to both DDPs and grievance procedures. Steps must be taken without unreasonable delay, the time, date and location of meetings must be reasonable and meetings must be conducted in a manner which enables both parties to explain their cases.

A dismissal in breach of the DDPs will be automatically unfair. Even if the employer has complied with the DDPs, he must still demonstrate he has complied with a reasonable procedure. One safety valve available to employers is if they can show compliance with the DDPs whilst breaching a higher standard required by their own procedures. Then the breach will not render the dismissal unfair, provided the employer can show that compliance would have made no difference.

The cost of non-compliance

Employers face daunting sanctions for breaching the DDPs.

  • The dismissal of an employee with qualifying service will be automatically unfair if the failure to comply was wholly or mainly attributable to the employer’s non-compliance. A minimum basic award of 4 weeks pay will also be made.
  • Compensation must normally be increased by 10% to 50%. This increase is not limited to unfair dismissal – for which the compensatory award remains capped at £55,000. If dismissal was the result of unlawful discrimination or whistleblowing, the uplift could be applied to uncapped compensation awards.
  • Employees who fail to comply with the DDPs (for example by refusing to attend a meeting) face reduced compensation of 10% to 50%.
  • The normal 3 month time limit for presenting tribunal claims will be extended where the employee reasonably believes that, at the expiry of the normal time limit, a dismissal or disciplinary procedure was in progress.

Grievance procedures

Grievance procedures (GPs) apply to any complaint by an employee about action that his employer has taken, or is contemplating taking. They do not apply to the employer’s conduct towards other employees or third parties. As with DDPs, there are a variety of circumstances in which GPs do not apply or are treated as having been completed.

The standard procedure will usually apply and comprises three steps: a written statement of grievance, a meeting to discuss the grievance and a right to appeal. The modified procedure comprises two steps: the employee’s written statement of grievance and the employer’s written response. There is no meeting or appeal. This procedure only applies after employment has ended where the parties agree in relation to that specific grievance.

An employee who fails to start an applicable GP will be barred from subsequently bringing a claim to the tribunal. If either the employer or employee (having lodged the grievance) is responsible for failing to complete the GP, then the tribunal will normally increase or reduce compensation by 10% to 50%. Again, consequences could be dramatic if the grievance itself or the breach of procedure relates to a claim for uncapped compensation for discrimination.

Whilst the aim of resolving disputes internally is laudable, there is no doubt that employers will have to devote greater time and resources to dealing with these issues. The consequences of failing to do so could be dramatic. Unfortunately, claims could also become harder to settle as both employers and employees allege breaches of the minimum standards. Litigation is inevitable as tribunals try to unravel and reconcile the complexities of the new rules.

For assistance in reviewing existing policies and producing procedures to comply with the new rules, contact Trevor Bettany or another member of our employment team.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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