On 2 May 2008, The Arbitration and Conciliation Service (Acas) published a new draft code of practice on discipline and grievances for public consultation. The code has been revised to take into account the proposed changes for workplace dispute resolution in the Employment Bill, currently before Parliament – especially in relation to the forthcoming abolition of the statutory dispute resolution procedures.
The Employment Bill entitles tribunals to adjust unfair dismissal compensation awards by up to 25% for unreasonable failure to comply with any provision of the revised Acas code. Thus, unlike failure to follow the statutory procedures, failure to follow the code will not result in automatic unfair dismissal. But it will, for the first time, lead to a direct financial consequence where a tribunal finds that a dismissal is unfair.
Many of the responses to the government consultation on the review of the statutory dispute resolution procedures called for a shorter, more ‘principles-based’ code, and one that would suit employers of all sizes, especially smaller ones.
The revised code accommodates these suggestions well – it is not controversial and sets out the long-established and well-understood principles for handling disciplinary and grievance situations in the workplace, comprising the core principles in the current code.
More comprehensive guidance will be set out in a separate Acas booklet, but, as it will have no statutory effect, it will not be taken into account when considering any unreasonable failure to comply with the code for the purposes of applying the 25% uplift. However, the Acas guidance may well be considered when assessing whether a fair procedures has been followed.
The most notable omission from the revised code is the absence of the requirement for an employee to raise a grievance before bringing a tribunal claim, thus taking away from employers the headache of having to recognise a grievance. There is also no longer any requirement for the employer to place in writing the circumstances leading to the disciplinary action or proposed dismissal, prior to the first meeting to discuss the problem.
This will please many employers who have found that this aspect of the statutory procedures often impedes, rather than assists, any satisfactory outcome.
On repeal of the statutory procedures, unfair dismissal law will revert to the pre-2004 position.
Employers will be unable to escape liability by showing that a failure to follow a fair procedure would have made no difference (section 98A of the Employment Rights Act 1996). Instead tribunals will have more discretion in deciding the size of the compensatory award – it may be reduced to nil if it is considered that a fair procedure would have made no difference (known as the ‘Polkey principal’) or it may increase it by up to 25% for unreasonable failure to follow the code.
In one sense, this wider discretion is good since the prescriptive nature of the current law has led to some bizarre results. But with so much discretion, different tribunals will draw different conclusions leading to inconsistencies.
It will, therefore, be more important than ever for employers to follow a fair procedure when disciplining and dismissing employees.
Be warned, however: the code provides only the very basic principles of natural justice that all employers, whatever their size, will be expected to follow. Larger employers with greater resources will be required to provide a level of fairness that goes beyond the basics set out in the code. Above all, remember, prevention is better than cure!
Consultation on the draft revised code ends 25 July 2008. The Employment Bill will be enacted this summer, but will not come into force until April 2009, at the same time as the revised code.
Key points: grievance and disciplinary procedures
- n Draft code shorter and less prescriptive than current code
- n Revised to take account of repeal of statutory dispute procedures in Employment Bill
- n Sets out long-established, well-understood principles for handling discipline in the workplace
- n Discretion on tribunals to adjust compensation by 25% for unreasonable failure to comply with revised code
- n Could lead to inconsistencies and difficulties predicting size of awards
- n Likely to be in force in April 2009
Ranjit Dhindsa, employment group partner, Reed Smith