Keeping the house in order

The recently published Employment Bill proposes new statutory procedures for
resolving disputes. Both sides will be forced to try to resolve disputes within
the workplace before resorting to litigation. 
Sheila Fahy and Rachel C Smith examine the likely impact on employers

All relationships have their ups and downs and that of employment is no
different. It makes sense to establish at the outset how to deal with any
breakdown, perhaps even divorce, so that both parties know what to expect. The
Employment Bill goes some way towards this ideal, but needs much clarification
during its remaining parliamentary stages.

Most applications to employment tribunals come from employees who have not
attempted to resolve their disputes privately. Indeed, 60 per cent of small
employers who defend claims in the tribunal system have no internal
disciplinary and grievance procedures. Armed with statistics like these and the
three-fold increase in the volume of claims to tribunals over the last decade,
the Government has set out to reduce the number of workplace disputes that end
in litigation.

Ministers have tackled the issue of rising claims head-on by making the
tribunals the last port of call. It has devised a scheme of minimum procedural
standards for handling workplace dispute and grievances, and placed obligations
and incentives on both employer and employee to use them. The Government
predicts that its proposals will reduce the number of applications by 30,000 to
40,000 per year.

New procedures

Two sets of procedures are introduced for each area: a standard procedure
for dismissals and disciplinary action (DDPs) with a modified version for cases
of gross misconduct under the new regime. Similarly, grievance procedures (GPs)
are also dealt with by both a standard procedure and a modified one where the
person raising the grievance is a former employee. The right to be accompanied
will still apply to both new procedures.

General requirements are that each step and action under the procedures must
be taken without unreasonable delay, and that the timing and location of
meetings must be reasonable, and allow both sides to put their case. A more
senior manager than attended the first meeting should, as far as is reasonably
practicable, represent the employer at appeal meetings.

These minimum standards are mandatory for all employers and will become
incorporated into every contract of employment. Of course, many employers have
enhanced procedures which mirror the Acas standard.

The Employment Bill caters for this by stating that the minimum standards
shall not affect employers’ procedures that are additional to, and consistent
with, the statutory procedures. However, it does mean that there are now two
standards: the statutory minimum and the Acas enhanced model.

Much comment has been made about the dual standard during the Bill’s passage
through Parliament. Many MPs are concerned that the statutory model will
interfere with the Acas Code of Practice and employers will opt for the minimum
standards.

The minister responsible for the Bill, Alan Johnson, responded by saying
that the employment tribunals will still use the Acas code as their benchmark.
This raises questions about the usefulness of minimum standards that fall short
of those required by a tribunal.

It may well be that tribunals will expect higher standards from employers
with larger resources whereas small businesses can get away with the statutory
minimum. Hopefully, this point will be made clear by the time the Bill reaches
the statute book.

The extent to which a statutory minimum standard applies to redundancy
dismissal also requires clarification. On reading the Bill, there is no reason
to assume it will not apply. This should not, in itself, create difficulties
for those employers facing genuine redundancy situations.

However, it might be problematic if the fairness of the selection process is
in doubt, or if the true reason for the dismissal relates to performance rather
than redundancy. If the employer intends to rehire to fill the position of a
dismissed former employee, recording written reasons could present
difficulties.

Presumably the written reasoning will need to record some detail regarding
selection, emphasising the need for fair selection criteria. These potential
ramifications are likely to increase an employer’s appetite for settlement or
the imposition of more rigorous standards.

Sticks and carrots

To ensure the employment tribunal is a place of last resort, the Bill has
woven a number of carrots and sticks into its processes. A new category of
unfair dismissal has been introduced for employee redress against employers who
fail to follow the relevant statutory procedure.

However, there is a defence available to employers if it can be shown that
the failure to follow procedures would have made no difference to the outcome
and the employee would have been dismissed anyway. As the Bill is currently
drafted, the ‘no difference’ defence would apply to the statutory minimum.
However, the minister responsible for the Bill has made it clear that this
defence is only available to employers that have complied with the statutory
minimum, but have made a minor compromise on their enhanced procedures.

The ramifications of failing to follow standards may go even further than
the Bill envisages. Since the statutory model will be an implied term of the
employment contract, failing to follow it will be a breach of contract. In such
cases, employers will not be able to rely on post-termination restrictions,
such as restrictive covenants, once the employee has departed. This may have
serious consequences in the case of senior employees whose departures are often
negotiated, and are frequently in breach of disciplinary procedures.

Employee incentives

Employees too are encouraged to use the new procedures. Employment tribunals
will be required to reduce compensatory awards for those who failed to use the
procedures before bringing a claim to the tribunal. The reduction will range
from 10 per cent to 50 per cent, but may be less than 10 per cent if such a
reduction would be unjust or inequitable.

One of the most controversial aspects of the Bill is the possibility of
excluding claims from employment tribunals where employees have made use of the
statutory procedures. Very little detail is known about this provision, but the
Bill is drafted to give the Secretary of State the power to make regulations
for this purpose. Employers should watch the situation carefully.

Standard disciplinary procedure

– Step 1 – statement of grounds
for action and invitation to meeting

The employer must set out in writing the employee’s alleged
conduct, characteristics, or other circumstances leading to contemplation of
dismissal or disciplinary action against the employee. The employer must send a
copy to the employee and invite the employee to attend a meeting to discuss the
matter.

– Step 2 – the meeting

The meeting must take place before action is taken, except in
the case of suspension. The employee must take all reasonable steps to attend
the meeting.  After the meeting, the
employer must inform the employee of its decision, and notify a right of appeal
should the employee not be satisfied with the decision.

– Step 3 – the appeal

An employee wishing to appeal must inform the employer, and the
employer must invite the employee to attend a further meeting. The employee
must take all reasonable steps to attend the meeting. The appeal meeting need
not take place before the dismissal or disciplinary action takes effect. After
the appeal meeting, the employer must inform the employee of his final decision.

– Modified procedure

In cases of gross misconduct, the employer must provide a
statement of grounds for summary dismissal, notify the right of appeal, and
arrange an appeal meeting if requested.

Standard grievance procedure

– Step 1 – Statement of grievance

The employee must set out the grievance in writing and send a
copy of the grievance to the employer.

– Step 2 – The meeting

The employer must invite the employee to at least one meeting
to discuss the grievance. The employee must take all reasonable steps to attend
the meeting. After the meeting, the employer must inform the employee of its
decision as to its response to the grievance, and notify a right of appeal
should the employee not be satisfied with with the decision.

– Step 3 – The appeal

An employee wishing to appeal must inform the employer, and the
employer must invite the employee to attend a further meeting. The employee
must take all reasonable steps to attend the meeting. After the appeal meeting,
the employer must inform the employee of its final decision.

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