Data file: Dispute Resolution

Our continuing series of articles which give the basics on key areas of
employment legislation

The facts

Part 3 (Sections 29 to 40) of the Employment Act 2002 (
introduces statutory dispute resolution procedures for dealing with dismissals,
disciplinary issues and grievances. These are set out in Schedule 2 of the Act
and should be in force by late 2003.

The statutory procedures are the minimum procedures which employers and
employees are obliged to follow and a term incorporating these procedures will
be implied into every contract of employment.

The key stages of the statutory procedures (for grievances, disciplinaries
and dismissals) are that:

– they must be initiated in writing;

– the employer must invite the employee to a meeting to discuss the matter;

– the meeting must be conducted in a manner that enables both the employer
and employee to explain their cases;

– after the meeting, the employer must inform the employee of its decision
and of its right of appeal;

– if the employee appeals, the employer must invite him/her to a further

– after the further meeting, the employer must inform the employee of its
final decision.

Employers and employees are required to act reasonably in these procedures,
and this is detailed in the General Requirements set out in Part 3 of Schedule

The Act also introduces shorter ‘modified’ procedures but we await
regulations for clarification as to when these will apply.

Failure to follow statutory procedures

For the employer

– If the employer fails to follow the statutory procedures, any dismissal
will be automatically unfair, bringing with it a minimum basic award of four weeks’
pay, unless the tribunal considers that this would cause injustice to the
employer. To bring a claim of automatic unfair dismissal, the employee must
have completed one year’s continuous service.

– As the obligation to comply with the minimum requirements is an implied
contractual term, a breach of the obligation can also constitute wrongful

For the employee

– Employees who do not raise a grievance in writing are barred from bringing
the claims listed in Schedule 4 of the Act, which include the most common
claims such as unfair dismissal and discrimination claims.

– The Act imposes new time limits on employees, which they must observe in
order to bring a claim. For example, an employee must wait 28 days after his or
her grievance was raised before lodging a claim.

For either the employer or the employee

– If the statutory procedure is not completed before the proceedings are
commenced, the tribunal will look to see if the employer or the employee is at
fault and will increase or reduce the compensation accordingly by between 10
per cent (unless exceptional circumstances make this unjust or inequitable) and
50 per cent.

Status of non-statutory procedures

– Acas is to revise its code of practice on disciplinary and grievance
procedures. The employment tribunals will continue to take the code into

– The Act does not affect procedures agreed between employers and employees
which go further than the statutory minimum procedures.

– Section 34(2) of the Act provides a new Section 98A(2) to the Employment
Rights Act 1996. An employer’s failure to follow its own procedure when
dismissing an employee shall not make his action unreasonable if he has
followed the statutory procedure and can show that he would have decided to
dismiss the employee even if he had followed his own procedure. This modifies
the position set out in Polkey v A E Dayton Services Ltd [1998] ICR 142, HL.

Reading around the subject

Incomes Data Services

Business Link

Further information

Department of Trade and Industry

Confederation of British Industry (CBI)

Small Business Council


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