October 2004 Statutory Disciplinary and Grievance Procedures What s All the Fuss About? The Employment Act 2002 ( EA ) established a framework for promoting the resolution of employment disputes in the workplace via statutory disciplinary and grievance procedures. The Employment Act 2002 (Dispute Resolution) Regulations 2004 ( the Regulations ) provides the detail as to how these procedures will operate in practice, which is by no means as straightforward as might be assumed. The new statutory procedures under the Regulations will come into force on 1 October 2004 and employers need to be aware of them. The new procedures are intended to encourage employers and employees to end up in tribunals less by communicating more but, as with most new employment legislation, it seems likely that (initially at least) the difficulty in interpreting them will actually create further case law in its own right. For the most part, the procedures are unlikely to impact greatly on an organisation s existing disciplinary and grievance procedures because most of these procedures at least where they are modelled on the ACAS guide will go beyond the new requirements in any event. The danger will come, however, where an organisation does not have good enough existing procedures and/or does not follow its own procedures; in that case, the cost of getting it wrong will potentially be significant and it is crucial that employers understand exactly what are the minimum requirements. Employers also need to beware in relation to situations which would not warrant compliance with their existing disciplinary and grievance procedures, such as individual redundancy dismissals and non-renewal of a fixed term contract, as the Regulations bring these situations within the statutory procedure requirements. Key Changes Penalties The Regulations provide that a dismissal will automatically be unfair if an applicable statutory disciplinary procedure has not been followed. In practice, however, this will not be a significant change because failure to follow a basic procedure would almost certainly result in a finding of unfair dismissal under existing common law principles. Even where there is an automatic unfair dismissal, existing requirements of qualifying service will still apply. Conversely, following a statutory procedure will not guarantee that a dismissal is fair; existing fair procedural guidelines still need to be followed on top of the statutory minimum requirements. The real teeth of the Regulations lie in the penalties. A procedural unfair dismissal under current rules might result in a negligible award where the employer can show that following a procedure would have made little or no difference to the outcome. Under the Regulations, however, if the minimum procedure is not followed, the resulting award will be increased by 10-50% (although this will still be subject to the applicable statutory cap, currently 55,000 for unfair dismissal). Similarly, if an employee brings a constructive dismissal claim, but has not followed the minimum grievance procedure, or brings an unfair dismissal claim without first exercising the right to appeal, the award may be reduced by 10-50%. In addition, the basic award under an unfair dismissal claim will be subject to a minimum of four weeks pay (subject to the statutory cap, currently 270 per week) where the relevant procedure was not followed. It is important to note that the 10-50% increase/decrease applies to a variety of tribunal claims where the appropriate procedure has not been followed by the employer/ employee not just unfair dismissal. The relevant claims 2004 Jones Day. All rights reserved.
are listed in the Regulations and include discrimination, equal pay, unauthorised deductions from wages, breach of employment contract and breach of the Working Time Regulations 1998. There is no stand-alone penalty for breach of the procedures. Accordingly, in order to be eligible for an award, an employee would have to pursue one of the claims listed in the Regulations and then show that a breach of the procedures had occurred in relation to the subject of that claim. Dismissal and Disciplinary Procedures Application The Regulations apply to employees only (not the wider category of workers) and the statutory disciplinary procedure will be triggered where the employer is contemplating dismissal or relevant disciplinary action. Dismissal will include any dismissals, including those for redundancy, retirement or expiry of a fixed term contract. Relevant disciplinary action is confined to an action short of dismissal which is based wholly or mainly on the employee s conduct or capability, excluding paid suspension and oral or written warnings. Such actions may include demotion, a salary cut or unpaid suspension. Of course, most existing disciplinary procedures will still stipulate a procedure for the warning stages, in line with ACAS guidance, and it would be best practice to continue with that procedure even though warnings fall outside of the statutory procedural requirements under the Regulations. The fact that dismissals triggering the procedure are not confined to conduct or capability dismissals will mean, for example, that an appeal against an individual redundancy decision will now be a statutory right. There are two alternative statutory procedures which will apply in these circumstances: the Standard Dismissal and Disciplinary Procedure ( the Standard Disciplinary Procedure ) and the Modified Dismissal and Disciplinary Procedure ( the Modified Disciplinary Procedure ). Most cases will involve the Standard Disciplinary Procedure, as the Modified Disciplinary Procedure will only apply where (a) the employer dismissed the employee without notice on the basis of conduct, (b) the dismissal took place at the time the employer became aware of the gross misconduct (or immediately after), (c) the employer was entitled to dismiss for gross misconduct without notice or payment in lieu of notice, and (d) it was reasonable for the employer to dismiss, without investigating the circumstances. In other words, the employee will already have been summarily dismissed before the procedure is implemented and the employer will have to show that exceptional circumstances applied at the time. Standard Disciplinary Procedure The steps which need to be taken under the Standard Disciplinary Procedure are as follows. Step 1 Issue a statement of grounds for action - The employer must write to the employee detailing the nature of the employee s conduct, capability or other circumstances that may result in dismissal or disciplinary action. Step 2 Arrange a meeting - Before action is taken (except in cases of suspension), a meeting must be arranged with the employee to discuss the issue. After the meeting the employer must tell the employee what its decision is and offer the employee a right of appeal. Step 3 Arrange an appeal - The employee must tell the employer if he wishes to appeal. The employer must invite him or her to a second meeting and the employee should try to attend. The final decision must be communicated to the employee. Modified Disciplinary Procedure The Modified Disciplinary Procedure is a truncated version of the Standard Disciplinary Procedure, as follows: Step 1 The employer must write to the employee detailing the nature of the alleged misconduct that led to the dismissal, the evidence for the decision and the employee s right to appeal against the decision. Step 2 The employee must inform the employer if he or she wishes to appeal. The employer must invite the employee to attend a meeting to appeal against the employer s decision and the final decision is to be communicated to the employee. The Modified Disciplinary Procedure must be completed in full and failure to do so will normally result in any dismissal being found automatically unfair. However, if the employee presents his complaint to the employment tribunal before the employer has written, setting out the employee s alleged misconduct that gave rise to the dismissal, the Modified Disciplinary Procedure will not apply. Exceptions Neither disciplinary procedure will apply in the following circumstances: (a) collective redundancies - (i.e. 20 or more redundancy 2
dismissals within a 90 day period, where the duty to inform and consult employees on a collective basis applies separately); (b) dismissal then re-engagement - (provided that re-engagement is offered before or on termination of the existing contract); (c) most unofficial industrial action dismissals; (d) constructive dismissal - the employee would need to follow either the Standard or Modified Grievance Procedure if he or she wished to make a tribunal claim relating to the constructive dismissal; (e) some dismissals where the employer s business suddenly ceases to function and all employees are dismissed; (f) dismissals where continued employment of the employee would contravene a legal duty or restriction; (g) where, at the time of the dismissal, the employee is covered by a dismissal procedures agreement (with a trade union). Grievance Procedures The Regulations define a grievance as a complaint by an employee about actions which his employer has taken or is contemplating taking in relation to him. The intention is to make it more difficult for employees to bring claims based on grievances they had not previously raised with their employer. The Standard Grievance Procedure is intended to apply in cases where an employee is aggrieved about action taken by his employer in relation to him and the employee asserts that the main reason for that action is something unconnected with his conduct or capability. The types of action in question will typically include warnings (written and oral), investigatory suspensions and those actions giving rise to constructive dismissal, but will exclude other dismissals and collective actions. It will also apply when an employee wishes to complain about actions taken by colleagues, should the employer fail to address the issue. Where the procedure applies, an employee will generally be prevented from bringing a claim (e.g. harassment or discrimination) in an employment tribunal arising from a grievance of this nature, until he has submitted a written grievance under the procedure and has waited for 28 days to pass. The Modified Grievance Procedure will apply when there is no ongoing employment relationship and the parties have no interest in following the procedures and have mutually agreed as such or where the employer was not aware of the grievance before the employment ended. 3 Standard Grievance Procedure As with the Standard Disciplinary Procedure, the Standard Grievance Procedure will be the applicable procedure in most cases and must include the minimum steps set out below. Step 1 Issue a written grievance - The employee must write to the employer detailing the nature of the alleged grievance. (The employee must allow 28 days before a claim will be admitted to the tribunal.) Step 2 Arrange a meeting - The employer must invite the employee to a meeting to discuss the alleged grievance. The employee must take reasonable steps to attend the meeting and after the meeting the employer must inform the employee about any decision and offer the employee a right of appeal. Step 3 Inform of appeal - The employee must inform the employer that he wishes to appeal against the employer s decision or failure to make a decision if he considers that the grievance has not been satisfactorily resolved. The employer must then communicate the final decision to the employer. Modified Grievance Procedure Where the Modified Grievance Procedure applies, the required steps are as follows: Step 1 The employee must set out in writing the nature of the alleged grievance to the employer. Step 2 The employer must set out his response in writing and send it to the employee. Exceptions Neither the Standard nor the Modified Grievance Procedure will apply where the employment has ended, neither of the grievance procedures has been commenced by that point and since the end of employment it has become not reasonably practicable for the employee to send the Step 1 letter to initiate either of the procedures. The parties will be treated as having complied with the grievance procedures where: (a) the grievance is raised in writing during a dismissal and disciplinary procedure; (b) the grievance procedure is not completed because it is not reasonably practicable; (c) the grievance has already been collectively raised; or (d) an alternative collectively agreed resolution procedure exists and the employee has raised his or her grievance using that procedure.
Grievance about disciplinary actions In cases where the employer has dismissed or is contemplating dismissing an employee, there is no requirement for the employee to raise a grievance as the situation would be covered by the dismissal and disciplinary procedures. However, the grievance procedures will apply if the employer has taken or contemplates taking conduct or capability related disciplinary action and the employee feels either that it is or would be on an unlawfully discriminatory basis or that, contrary to the employer s assertion, it is not being taken on conduct or capability grounds. Important Factors Applying to All Procedures Employers should bear in mind the following requirements during any statutory procedures, whether modified or standard: there should not be an unreasonable delay in any step by either side; timing and location of any meetings arranged must be reasonable; meetings must be conducted so that both parties can explain their case; appeals should, where possible, be dealt with by a more senior manager than dealt with the initial meeting; the employee can choose to be accompanied to the Step 2 meeting and/or Step 3 appeal by either a colleague or a trade union or elected employee representative, provided that it constitutes a disciplinary or grievance meeting for the purposes of section 10 of the Employment Relations Act 1999. Exemptions Which Apply To All Statutory Procedures There will be no need to follow any procedure if one party has reasonable grounds for believing that following the procedures would result in a significant threat to any person or property; or where the person has been subject to harassment and has reasonable grounds to believe that following the procedures would result in further harassment; or if it is not practical to commence or comply with the procedures within a reasonable period (what is reasonable is likely to be judged narrowly and on the circumstances of each particular case); or if there are issues of national security involved. Failure to Attend Meeting Where a meeting has been arranged under the Standard or Modified Disciplinary or Grievance Procedures and the employee fails to attend, the employer will be released from all future obligations under that procedure if the employee has not taken all reasonable steps to attend the meeting. If, however, the employee can show that it was not reasonably practicable for him or his chosen companion to attend, this will not count as a breach and the employer must rearrange the meeting, provided that the failure to attend was for a reason which was not foreseeable when the meeting was arranged. The employer must notify the employee of the details of the new meeting. If it is not reasonably practicable for either party to attend the rescheduled meeting, there is no statutory obligation to rearrange it again and the parties will be deemed to have complied with the statutory procedure note that this deemed compliance is only with the statutory procedure; under common law rules a failure to attempt to rearrange a further meeting may well be considered unfair or unreasonable. Extension of Time Limits Standard Disciplinary Procedure Where the employee has reasonable grounds for believing a disciplinary procedure is still ongoing at the point where the normal time limit for bringing a tribunal claim applies, the time limit will be extended by three months. (This is only where discussions are still continuing.) Standard Grievance Procedure Where this procedure applies, the deadline for bringing a tribunal claim is extended by 3 months where the employee has written a Step 1 grievance letter within the normal time limit, or where the employee has issued a claim within the normal time limit but has not issued a Step 1 grievance letter. In the latter case, the grievance letter must be submitted within 28 days of the expiry of the normal time limit. Contractual Effect and Written Particulars Originally, it was proposed that the statutory disciplinary and grievance procedures would be implied into all contracts of employment and section 30 of the EA allows for this. This proposal has been shelved, however, for the time being at least. It is scheduled to be reviewed in 2006. 4
The Regulations do, however, contain more stringent requirements governing the information to be given to employees in relation to the applicable disciplinary and grievance procedures. Before employment starts or within two months of its commencement, written particulars must be provided to the employee detailing (or referring to a reasonably accessible document which sets out these details) the disciplinary rules, the procedure that applies to any decision to dismiss or discipline an employee, the person to whom the employee can appeal if dissatisfied with a disciplinary decision or in order to bring a grievance, and any other steps necessary to make such an application. If an employee brings one of the claims listed in the Regulations and also proves a breach of this requirement, the tribunal may make an additional award of two to four weeks pay (subject to the 270 maximum weekly pay). Action Points Employers should act now to ensure that they are not caught out by the new Regulations. Suggested actions include: (a) audit existing procedures (disciplinary, grievance and where necessary, redundancy) to ensure compliance with the minimum statutory requirements; (b) ensure the procedures are outlined or referred to in the written statement of terms and conditions of employment/employment contract; (c) get in the habit of setting out any concerns to employees in writing, holding meetings to deal with them and offering appeals; (d) audit existing fixed term contract employees and diarise the need to write to them and convene a meeting in accordance with the Standard Disciplinary Procedure, in sufficient time before the scheduled expiry of the fixed term; (e) remember that these statutory procedures are intended to provide a minimum legal standard, not a best practice standard, so the ACAS model and guidance (which have been updated to take account of the statutory procedures) should still be used in disciplinary and grievance situations; (f) although the subject matter is deceptively simple, the precise rules of the Regulations are complicated. Therefore, avoid seeking to rely on procedural loopholes (thereby risking becoming embroiled in litigation over the intricate workings of the Regulations) and aim to follow the minimum procedures in all dismissal, disciplinary and grievance situation. Further Information This commentary is a publication of Jones Day. It is intended to raise your awareness of certain issues (as at September 2004) under the laws of England and Wales; it is not intended to be comprehensive or a substitute for proper advice which should always be taken for particular queries. The contents are for general information purposes only and may not be quoted or referred to in any other publication or proceeding without the prior written consent of the Firm, to be given or withheld at its discretion. The mailing of this publication is not intended to create, and receipt of it does not constitute, a solicitor-client relationship. If you need help and advice on the issues raised in this commentary, please contact any of the following: Martin Piers 44.20.7039.5266 mjpiers@jonesday.com Richard Martin 44.20.7039.5269 rtmartin@jonesday.com Nicola Whiteley 44.20.7039.5268 nwhiteley@jonesday.com Mandy Perry 44.20.7039.5267 mjperry@jonesday.com Leigh Warden 44.20.7039.5271 ljwarden@jonesday.com Catherine Connor 44.20.7039.5184 cconnor@jonesday.com 5