Statutory dispute resolution is soon to be abolished which should be good news for employers… shouldn’t it?
Q I hear the statutory dispute resolution procedures are to be repealed after being in force for less than three years. What are they, and why does it matter?
A In 2004, legislation was passed to force employers and staff to try to solve employment disputes before they reached an employment tribunal by following a three-stage procedure, which includes letter, meeting, appeal – for both grievances and disciplinary/dismissal issues.
Q Surely this must be a good thing – why are they so unpopular?
A There are Draconian sanctions for both employers and employees if they do not follow the procedures.
Q What are these sanctions?
If the employer fails to follow this procedure before they dismiss the employee the dismissal is considered to be automatically unfair.
The employer could be hit by a potential increase in compensation of between 10-50% if the procedures are not adhered to.
Employees could be completely banned from bringing a claim to the employment tribunal if they have not followed the appropriate procedures by lodging a grievance in the first instance.
Q What is so wrong with that?
A The independent Gibbons Review on dispute resolution stated: “The intention of the regulations was sound and there was a genuine attempt to keep them simple.” But it concluded: “They have had unintended consequences, which have outweighed their benefit”.
In practice, the statutory procedures demand a great deal of formality and paperwork, and the informal resolution of disputes is discouraged. Even a minor written complaint from an employee could be a grievance lodged in preparation for a claim. Trade unions and the CBI both agreed the procedures have not worked and the number of tribunal claims hasn’t fallen.
Q What will happen now?
A Under the proposals in the Employment Act currently being debated in parliament, there will still be potential financial penalties for failure to follow a proper procedure if it’s set out in a statutory regulation or code of practice by Acas.
If an employer or employee has failed to comply with the code, and that failure was unreasonable, then the employment tribunal has the discretion to increase any award it makes to the employee, or decrease it by no more than 25%. This is a significant softening of the mandatory increase/decrease provisions that are currently set out in the statutory regime.
Q What if they would have been dismissed even if a fair procedure had been followed?
A A further effect of the Employment Bill is to revive the significance of the case of Polkey. This 1998 House of Lords decision established that an employee had a right to be consulted before being dismissed, except where there were exceptional circumstances. This was even the case where consultation would have made no difference to the decision to dismiss.
The softening element of Polkey is that when an individual is found to have been unfairly dismissed for procedural reasons, a compensatory award can be reduced. So if the employer can satisfy the tribunal that the employee would have been dismissed in any event, even if a proper procedure had been followed, the compensation may be limited.
It also enables the compensatory award to be reduced in redundancy situations to avoid the employee making double recovery.
Q Can we forget about the statutory procedures now?
A No. The revised rules are yet not in force. It’s anticipated the process will be concluded by 2009. In the interim, both parties should continue to follow the three-step procedures.