After a three-year wait, the Acas arbitration scheme has
arrived to resolve unfair dismissal cases without the need for costly
litigation. But, according to Stefan Martin and Lucy Baldwinson, there are a
number of reasons why it is only likely to have a limited impact
The DTI finally launched its new Advisory, Conciliation and Arbitration
Service (Acas) arbitration scheme on 21 May, promising to put an end to costly
unfair dismissal cases. It was published alongside various changes to the
employment tribunal rules of procedure, as part of a package to improve
tribunal case management and to deter spurious claims. However, there are some
serious limitations.
Scope of the scheme
First, it is important to note that only unfair dismissal cases will be
eligible for arbitration. The scheme does not extend to any related or
additional claims that may form part of the same tribunal application. In, for
example, an unfair dismissal case on the grounds of sexual harassment, any
claim under the Sex Discrimination Act 1975 would need to be settled
separately, referred to the employment tribunal, or be withdrawn.
So, although unfair dismissal claims are the most common type of claim made
to the tribunal, they are often combined with other types of claim, which means
that in many cases they’ll not even qualify for the scheme.
Also, the scheme is not designed to resolve disputes concerning
jurisdictional issues – for example, if a claim is out of time or if a
dismissal has taken place. It is also inappropriate in cases involving complex
legal issues or questions of EC law.
Entry into the scheme
The scheme is voluntary and will only apply if both parties have entered
into a written "arbitration agreement", either under a conciliated
agreement through Acas or a statutory compromise agreement. In addition to an
arbitration agreement, the parties must sign a "waiver form", which
requires them to waive any rights they would have had if they had referred
their dispute to an employment tribunal. And, importantly, once the parties have
referred their dispute to arbitration, they cannot return to the employment
tribunal.
The arbitration agreement (together with the waiver form and any forms IT1
or IT3) must be notified to Acas within six weeks of its conclusion. When a
valid arbitration agreement has been accepted by Acas, the employer cannot
unilaterally withdraw from the scheme, while any withdrawal by the employee
will constitute a dismissal of the claim.
Alternatively, the parties can settle the claim at any stage of the
proceedings. However, although the result of the procedure is binding, once the
parties have agreed to use it, neither applicants nor respondents can be
compelled to enter into it. Unfortunately, in many cases, relations between the
parties may be such that agreement to use the scheme will be a remote
possibility.
Pre-hearing procedure
Following the acceptance of an arbitration agreement, Acas will appoint an
arbitrator to the case. The arbitrator will arrange for a hearing to take place
within two months of the initial notification (unless an agreement has been
made between the parties to a purely written procedure).
The parties must lodge a written statement of case with Acas at least 14
days before the hearing, along with supporting documentation and, where
appropriate, a list of persons who will accompany each party or be called as
witnesses.
The statement of case is intended to briefly set out the main particulars of
each party’s case, which can then be expanded upon at the hearing. The
arbitrator has no power to order the disclosure of documents or the attendance
of witnesses but it can call the parties to a preliminary hearing to give
procedural directions.
Arbitration hearing
One significant difference in using arbitration, rather than a tribunal, is
that an arbitration hearing and all associated procedures are confidential and
conducted in private. Only the arbitrator, the parties, their legal advisers
and witnesses may attend an arbitration hearing.
In some cases, where applicant and respondent are keen to keep details of
their dispute private, this fact is likely to provide a strong incentive to use
the procedure.
However, in many situations, the threat of adverse publicity for an employer
could give the applicant a powerful bargaining tool in negotiations, making
arbitration an unattractive option.
At the hearing, the arbitrator will take the initiative in eliciting the
facts of the case and addressing questions to the parties directly. Again,
unlike a tribunal hearing, there is no cross-examination and strict rules of
evidence and procedure do not apply.
When deciding whether or not a dismissal is unfair, the arbitrator will
adhere to the general principles of fairness and good conduct in employment
relations (including, for example, the principles set out in the Acas
"Disciplinary and Grievance Procedures" code of practice) rather than
by applying legal tests or rules.
However, the scheme does provide for the arbitrator to refer to part X of
the Employment Rights Act 1996, when deciding cases where it has been alleged
that dismissal is for an automatically unfair reason. Although these provisions
are intended to make the procedure less legalistic, in practice the arbitrator will
usually rely on similar principles to those applied by an employment tribunal
when deciding a case.
Remedies
It is here that the arbitration route is very similar to an employment
tribunal, as the remedies available and relevant conditions for their award are
almost identical to those of an employment tribunal. So, if the arbitrator
finds that a dismissal was unfair, he or she can make an order for
reinstatement or re-engagement, if appropriate, or, make a compensation award.
This will consist of a basic amount and a compensatory amount, which are
subject to the limits on a week’s pay (currently £240 per week) and the maximum
compensatory award (currently £51,700), which also apply to compensation for
unfair dismissal in an employment tribunal.
The arbitrator may also include a supplementary amount (not exceeding the
equivalent of two weeks’ pay) in any award of compensation, where the employer
provided a procedure for appealing against dismissal but prevented the employee
from exercising the right to appeal. If a dismissal is found to be unfair under
EC law, the arbitrator will apply the relevant remedies under English law,
where they differ from those set out in the scheme.
Awards made by the arbitrator are sent to the parties after the hearing. Details
of any award are kept confidential, although a general summary of cases heard
under the scheme will be published by Acas without identifying individual
parties.
Appeals
There is no right of appeal from an arbitration decision, save in limited
circumstances, including cases of serious irr- egularity, in relation to a
question of EC law or concerning the application of the Human Rights Act 1998.
In a recent survey conducted by IRS, almost half of the 62 employers
questioned welcomed the introduction of the scheme and stated they were likely
to use it as a means of resolving unfair dismissal claims.
When the scheme was delayed last year (it was originally due to be in
operation by last summer), the overall reaction from both employee and
employers’ representative organisations such as the TUC and the IoD was one of
disappointment.
The main advantage of the scheme, as identified by employers in the IRS
survey, was the possibility of a quicker and cheaper alternative to the
employment tribunal. The informality of proceedings and the confidentiality of
the overall process are also thought to be advantageous in sensitive cases and
where the parties are keen to avoid publicity.
However, the scheme has been met with a mixed response from some quarters. A
report published by the Industrial Society suggests that the scheme may not
offer consistency or guarantee fairness in outcomes.
The limited right of appeal and the lack of any power to order discovery or
compel witness attendance have been highlighted as disadvantages of the scheme.
There is also uncertainty as to how claims will be dealt with, given that
arbitrators are not required to follow legal precedent or the statutory tests
of unfairness.
Also, as we have outlined above, the fact that the scheme only applies to
"pure" unfair dismissal cases and is voluntary is likely to limit its
impact.
In terms of the cost of pursuing arbitration, there is a danger that the
scheme could become as expensive for the parties involved as a tribunal case.
This is because the parties are permitted to have legal representation at
arbitration hearings and cases still involve preparing a written statement of
case with supporting documentation, as well as organising witness attendance,
where appropriate.
How will scheme work in practice?
Acas estimated that the scheme would deal with 1,000 unfair dismissal cases
in its first year of operation. Comparing this figure with the 52,791 cases of
unfair dismissal that were reported by Acas for 1999-2000, it looks as if the
scheme will only be able to relieve the tribunal system of just less than 2 per
cent of claims.
This is a disappointing figure in terms of the Government’s intentions for
the scheme to help unburden employment tribunals.
Recent press releases issued by Acas have highlighted the scheme’s successes
in terms of public satisfaction, highlighting its advisory function and its key
role in assisting trade unions and employers to achieve voluntary union
recognition agreements.
It remains to be seen how popular its arbitration scheme will be now it has
come into force. Employers’ enthusiasm for an alternative to the tribunal
system should be tempered with a degree of realism.
At first sight, the scheme appears a good option for small, straightforward
claims where both parties are keen to avoid the publicity and formality of a
tribunal hearing. But, bear in mind that some applicants are unlikely to give
up the leverage of potentially embarrassing publicity.
However, employers must not lose sight of the disadvantages:
– Limited predictability, due to the lack of any requirement to follow legal
precedent
– Expense – potentially as costly as the tribunal system
– No right of appeal.
In this light, the case for Acas arbitration appears weak.
Stefan Martin is a partner and Lucy Baldwinson a professional support
lawyer at Allen & Overy
Acas and tribunal main differences
The main differences between the Acas arbitration scheme and employment
tribunal procedure:
– Arbitration only covers unfair dismissal cases with no jurisdictional
points to be resolved
– Arbitration is entirely voluntary
– Arbitration hearings are conducted in private, whereas tribunal hearings
can be heard in public
– Arbitration hearings are inquisitorial in approach, with no scope for
cross-examination, unlike the adversarial system in the tribunal
– Strict rules of evidence and the application of legal precedent and
legislation, as applied in tribunal cases, do not apply to arbitration
– Unlike the tribunal, arbitrators have no power to order interim relief or
compel discovery of documents or the attendance of witnesses
– Right of appeal in arbitration cases is limited compared with tribunal
cases.
The changing role of Acas
Acas was established in 1974 as an independent industrial relations
organisation (originally known as the Conciliation and Arbitration Service) and
later became a statutory body under the Employment Protection Act 1976. Acas is
currently directed by a council, which consists of employer, trade union and
independent members and its chair, Rita Donaghy.
The services offered by Acas include:
– Preventing and resolving collective industrial disputes through
conciliation, mediation or arbitration
– Resolving individual disputes over employment rights (Acas is under a
statutory duty to attempt to conciliate settlements of disputes where a claim
has been made to an employment tribunal)
– Providing information and advice on most employment matters via a
country-wide telephone enquiry service.
Acas’s general statutory duty was recently revised by the Employment
Relations Act 1999 and the reference to its role in dispute resolution was
dropped in favour of a wider all-encompassing duty to "promote the
improvement of industrial relations".
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In 2000, Acas’s role was extended by Schedule A1 of the Employment Relations
Act 1999 to include helping employers and unions to resolve differences over a
statutory request for union recognition.
From 21 May 2001, Acas’s services were expanded further by offering the new
Acas arbitration scheme as an alternative to the employment tribunal in unfair
dismissal cases.
