Charles
Newman recently led a seminar for HR professionals on the new Employment Act.
Here, focusing on the new dismissal, disciplinary and grievance procedures, he
answers the main practical questions and concerns that came out of those
discussions
When will the new procedures be in force?
The Government has indicated the new legislation is not likely to be in
force before the second half of 2003, following consultation this winter.
What should HR managers be doing to prepare?
– Carry out an audit of current practice among HR managers and line managers
regarding procedures on dismissal. Unless a picture of best practice emerges, I
recommend training HR and line managers well ahead of the new legislation to
reduce the risk of the employer facing the extra cost of dismissals without
basic procedures.
– Inform line managers they will need to re-think some of the basics
regarding termination of employment. For example, many currently work on the
basis that employees in their probationary period and employees of less than
one year’s service can be dismissed without any procedure, whereas once the law
changes, in most cases following the basic procedure will be warranted.
– Train HR managers and line managers on the increased importance of getting
the paperwork of the employment relationship in place. At the moment many
managers know there are no teeth to the legislation that requires a basic
section 1 written statement/written contract of employment. They need to be
aware that once the new legislation is in place, financial penalties could flow
from not providing an employee with a written statement of terms and
conditions.
What is the bottom line for unfair dismissal compensation without any
proper procedures?
Assuming the employee has one year’s service, if the new basic procedures are
not followed the employment tribunal can award an adjustment to unfair
dismissal compensation of up to 50 per cent (it will normally be between 10 and
50 per cent).
In money terms, this means that if an employer is held liable to pay the
maximum compensatory award for unfair dismissal which currently stands at
£52,600, this maximum award could be increased by 50 per cent, giving in effect
a maximum compensatory award for unfair dismissal of £78,900.
Added to this, if the employer fails to provide a written statement of terms
and conditions, it could also be hit with a further four weeks’ pay on top.
On a dismissal, do I only have to worry about the new procedures after the
first year of employment?
The new procedures will apply from day one of employment. There is no
separate legal claim for failure to follow the new procedures, rather the new
law will come into play on the back of the existing Employment tribunal claims.
In other words, the potential 50 per cent uplift in an unfair dismissal award will
only come into play if an unfair dismissal claim has been brought successfully,
so the risk of an increase in unfair dismissal compensation will still only
apply (in most cases) where the employee has been dismissed after more than one
year’s service.
Nevertheless, it is important to note that the potential 50 per cent uplift
in awards applies not only to unfair dismissal claims, but to all other common
tribunal claims, including sex, race and disability discrimination and breach
of contract.
In unlawful discrimination cases the stakes will be raised by the new rules.
Discrimination awards are uncapped – they can already be very high in some
cases – so a 50 per cent uplift on a large award could be extremely
significant.
The point to note with breach of contract claims is that any dismissal, even
where the employee has less than one year’s service and therefore does not have
unfair dismissal rights, could still lead to a 50 per cent uplift in
compensation for breach of contract (usually the payment in lieu of notice).
This is because the new procedures are to be incorporated into every employment
contract, and therefore failure to follow them will be a breach of contract.
In practice, the financial risk in breach of contract claims will not be
significantly increased for employees on very short notice periods, but
employers could be faced with significantly increased payouts to higher paid
staff on longer notice periods. For example, an employee earning £80,000 on a
three-month notice period would currently be entitled to £20,000 in lieu of
notice, but under the new rules this could rise to £30,000. It is unclear just
how the jurisdiction limit of £25,000 on breach of contract claims in tribunal
will operate in such circumstances.
Will the new procedures apply even during the probationary period?
Yes, the new procedures will apply from the first day of employment,
regardless of whether the employee is subject to an initial probationary
period.
This does not mean that probationary periods will not still serve a useful
purpose. Many employers provide that a shorter notice period applies during the
probationary period, and for the reasons set out above regarding breach of
contract claims, it would be sensible for employers who do not currently do
this to consider it.
If we follow the new procedures does that mean any dismissal is
automatically fair?
It seems this will not be the case. Although it is not entirely clear from
the new Act or the Government’s commentary on it, the general view is that in
unfair dismissal cases there will be a two-tier assessment of the fairness.
First, tribunals will need to consider the basic procedures under the new Act
to determine whether the dismissal is automatically unfair.
If the employer overcomes that hurdle, the tribunal will go on to consider
whether the dismissal was fair or not in all circumstances, taking into account
current principles of reasonableness.
If, as expected, it will be possible for an employer to comply with the new
contractual disciplinary procedures, but still end up losing an unfair
dismissal case, this could lead to confusion among employers.
How do these new procedures fit in with the Acas code?
There is no reference in the new Act to how the new procedures will operate
alongside the Acas Code of Practice on Disciplinary and Grievance Procedures,
which has become the benchmark for tribunals considering the fairness of an
employer’s procedures. It has been generally assumed the new Act will establish
minimum procedures, and that best practice, as set out in the Acas code, will
continue to require procedures that are significantly more extensive.
However, the DTI has recently suggested Acas will be invited to revise its
Code. We will have to wait and see what is decided on this after consultation
and discussions between Acas and the DTI.
Why are there two different levels of basic procedure?
It is not entirely clear why the Government has chosen to introduce
‘ordinary’ disciplinary and grievance procedures, and ‘modified’ disciplinary
and grievance procedures. It appears to have taken the view that if an employee
commits an act of gross misconduct then dismissal can take place immediately
with only the ‘modified’ procedure applying thereafter.
However, this seems to confuse ‘summary’ dismissal with ‘instant’ dismissal;
it has long been a well-established principle of reasonableness in unfair
dismissal cases that simply because an employee is accused of gross misconduct,
it does not mean that they should be instantly dismissed without further investigation
and a hearing.
The proposal seems to overlook the possibility of the employer suspending an
employee pending an investigation.
The modified grievance procedure seems to have been put in place to enable
employees to resign and claim constructive dismissal immediately without having
to set out the reasons why they feel they have been constructively dismissed in
a written grievance first. The employee will still have to state the grievance
in writing after termination, however, otherwise they could be barred from
claiming.
Do the new procedures apply only to dismissals for disciplinary issues?
No, the new procedures will apply on any dismissal. This means dismissals
for redundancy and ill health, for example, will need to be conducted in
accordance with basic procedures. This could lead to employees in redundancy
situations being able to appeal against the decision to select them for
redundancy, a step not always provided for by employers at the moment.
What about the right to be accompanied – how does that fit in?
The right to be accompanied does not form part of the new minimum
procedures. However, this right already exists for all employees, regardless of
length of service, for disciplinary and grievance procedures, so it is only
dismissals that do not fall into the disciplinary bracket where the right to be
accompanied will not apply.
It will be interesting to see whether in practice employees will be offered
the right to be accompanied in all dismissal situations where the employer has
decided to comply with the minimum procedures. Allowing an employee to be
accompanied at all dismissal meetings is likely to become best practice.
Charles Newman is a partner in the London employment department of
Beachcroft Wansbroughs
Late changes to the Employment Bill
Prior to receiving Royal Assent the following late changes were added:
Written terms and conditions
The penalty for not providing a written statement of terms and
conditions of employment will be two or four weeks pay at the tribunal’s
discretion. The original idea of an increase in any award by up to 25 per cent
has been dropped. However, it remains the case that there will be no
free-standing right to bring a claim to be awarded this penalty, rather it will
only be applicable if the employee has brought another claim in the tribunal,
for example an unfair dismissal claim.
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Tribunal costs – preparation time
One of the most radical changes in the new legislation will be
the right of a party in a tribunal claim to recover costs in respect of
preparation time if the other party’s conduct has been vexatious, abusive,
disruptive or otherwise unreasonable. Up until the final draft of the
Employment Bill it looked as though this right would be introduced alongside the
right to be awarded legal costs in those circumstances as well, but at the last
minute a change was introduced so that a party will have to choose whether to
claim for recovery of preparation time costs or recovery of legal costs.
