New statutory workplace dispute resolution procedures outlined

The statutory disciplinary and grievance procedures set out in the UK's Employment Act 2002 will be brought into force in October 2004. This feature highlights the main aims of the new legislation, and employer and trade union reaction.

One of the aims of the Employment Act 2002 was to help avoid litigation over employment issues through better communication in the workplace and improved conciliation (UK0210103F). To this end, the Act provided for statutory minimum dispute resolution procedures to apply to all workplaces. These provisions will come into effect on 1 October 2004, as a result of the Employment Act 2002 (Dispute Resolution) Regulations 2004, adopted by parliament in March 2004. A revised draft Code of Practice drawn up by the Advisory, Conciliation and Arbitration Service (Acas), taking account of the new legislative changes, was laid in parliament in June 2004 and is also due to come into effect on 1 October 2004.

The statutory procedures, which set out basic standards for handling disciplinary and grievance cases, will apply to every employer and employee. The government estimates that up to 800,000 firms have either inadequate procedures in place or no procedures at all. According to Gerry Sutcliffe, employee relations minister, 'that means that up to 7.2 million employees have no clear right to discuss employment problems in the workplace'. Almost all of these are in firms employing fewer than 20 workers. Mr Sutcliffe said that 'the new procedures are specifically designed for the needs of small firms and their employees, so they are minimum standards. Many employers already use more sophisticated procedures.'

As well as improving employees’ basic rights to access formal employment procedures, the government hopes that the new measures will help take pressure off employment tribunals (UK0403101T) by encouraging the resolution of disputes within the workplace. According to research findings quoted by the government, for example, over one-third of applications to employment tribunals in 1998 proceeded without any prior discussion of the dispute between the claimant and his or her manager.

Discipline and dismissal provisions

The Employment Act (Schedule 2) provides for a three-step procedure to be used when an employer contemplates dismissing or taking disciplinary action against an employee based on the latter's conduct or ability. The standard procedure involves:

  1. the employer providing the employee with a written statement of the grounds for action;
  2. a meeting between the employer and the employee to discuss the matter, at which the employee has the right to be accompanied (UK0010195F), and after which the employee must be informed of the employer’s decision; and
  3. an opportunity for the employee to appeal if dissatisfied with the employer’s decision.

Employers will now have an obligation to rearrange a meeting (but only once) if it becomes not reasonably practicable for one or other of the parties, or an employees’ representative where a right to be accompanied applies, to attend. If either party has not completed the relevant procedure, the tribunal may increase or decrease compensation by 10%-50%. Finally, the new Regulations will, in certain circumstances, extend by three months the usual time limit for making tribunal applications in order to encourage and enable both parties to complete the statutory procedures.

Suspension on full pay and the giving of warnings, both oral and written, will not count as relevant disciplinary action for the purposes of the new legislation. A modified, two-step dismissal procedure will apply to a very limited number of gross misconduct dismissals. To date, an instant dismissal is usually unfair, unless the employer has first completed some form of procedure or investigation, even in a case of apparently obvious gross misconduct. However, tribunals have occasionally ruled this kind of dismissal to be fair, where they decided that the decision to dismiss would not have been affected by prior investigation. The modified dismissal procedure will allow that situation to remain. However, the employer will in future have to go through the modified dismissal procedure after the event, or the dismissal will be automatically unfair and enhanced compensation will apply.

The Regulations provide that there are certain exceptional circumstances were the parties are not required to follow the statutory dismissal and disciplinary procedures. These include collective dismissals that are already subject to other statutory requirements for collective dialogue, for example over collective redundancies or the dismissal of strikers. There is also an exemption where the business has ceased. Furthermore, there are certain circumstances in which the parties will be treated as having complied with the statutory procedures, even if they have not, for example where an interim relief application is made to a tribunal before the appeal stage has taken place, or where an employee has appealed against dismissal under a collectively agreed dispute resolution procedure.

Grievance provisions

A similar three-step procedure will govern employee grievances concerning any action by an employer, starting with a written statement of the employee’s grievance. If the employee does not initiate this procedure, he or she will normally be barred from making a tribunal claim. There is also a modified two-step grievance procedure, which is required to be used only in a narrow set of circumstances. The employee’s employment must have ended, and the parties must mutually agree to use the modified procedure, rather than the standard procedure, for the particular grievance.

In certain circumstances, the parties will be treated as having complied with the relevant statutory grievance procedure even though they have not. Those circumstances include where: employment has terminated; the grievance has been raised collectively (ie by a trade union official or some other employee representative acting on behalf of two or more employees under an established procedure); or it has been dealt with under a collectively agreed industry-level grievance procedure. It also covers 'overlapping disputes', when grievances arise out of disciplinary procedures, in order to avoid the use of multiple procedures around the same issue. These dual procedures are, however, allowed if the employee considers either that the employer’s action is unlawfully discriminatory or that the employer’s real ground for taking the action is different from the conduct or capability ground asserted by the employer. Basically, this involves the employee giving the employer a written statement of the grievance. This would grant the employer prior notice before the employee can make the grievance the basis of an employment tribunal claim, and provide the opportunity to resolve it through workplace dialogue. The matter can then be discussed simultaneously under the disciplinary procedure, or if that meeting has already taken place, the full grievance procedure will have to be invoked.

Social partner reaction

The Trades Union Congress (TUC) broadly welcomed the introduction of a universal system for dealing with problems within the workplace, particularly in small businesses, which could avoid expensive and stressful tribunal claims. However it expressed disappointment that the minimum procedures 'fall well short of the standards recommended by the Acas Code of Practice'- for example, there is no duty on employers to carry out an investigation in disciplinary cases. The TUC and member unions would also have preferred to see the statutory procedures extend to all workers, and not just 'employees'.

The TUC also said that it was 'seriously concerned' about two issues in the final proposals. First, a decision not to trigger provisions in section 30 of the Employment Act 2002 to incorporate the procedures into employment contracts would reduce their effect and mean that 'bad employers will only use them where they think a dispute is likely to end up in a tribunal or they have already decided to sack someone'. The GMB general union also said that the failure to proceed with statutory incorporation would leave many employees ignorant of the new law.

However, the Confederation of British Industry (CBI) said that making the procedures an implied term of employment contracts could open the door for a large number of breach of contract claims, and undermine the one-year qualifying period for unfair dismissal. Similarly, the director of employment and legal affairs at the Engineering Employers’ Federation (EEF), Peter Schofield, welcomed the decision not to incorporate the procedures into employment contracts, which he said would be 'unduly confusing and burdensome'. The government has said that it will evaluate this decision following research into the impact of the Regulations in two years. If this finds that the procedures are working well but adoption levels are inadequate then there may be a good case to commence the implied right.

The second major concern of the TUC was that the disciplinary procedures will not apply to oral or written warnings or to suspensions. The TUC pointed out that the vast majority of disciplinary actions involve warnings, and this is what is commonly understood by formal employee discipline. Furthermore, this makes it less likely for disputes to be settled amicably since 'if the procedures are only used once a dispute has escalated and the employer has already decided to dismiss an individual, the likelihood of the employee holding on to their job will have been seriously diminished and the likelihood of a claim for unfair dismissal will have been increased'. The EEF partly agreed by stating that maintaining such a distinction would be confusing. However, the government responded that it would be too onerous, especially for small firms, for employers to have to invoke a three-stage procedure for issuing a warning to an employee and, perhaps more to the point, a warning or suspension on full pay rarely constituted grounds for making a tribunal complaint.

The TUC concludes that that the new rules 'will create confusion and uncertainty for employees and employers alike and could lead to an increase in tribunal applications and appeals', and Brendan Barber, the TUC general secretary, said that 'the opportunity to set up a proactive universal system for solving problems in the workplace before they escalate has been squandered'. Mr Schofield of the EEF said that the procedures 'will not, by themselves, help and could make the situation worse ... those disputes which do go to tribunal will now be significantly more complex (and) their outcome will be more likely to depend on legal technicalities'.

Commentary

The number of employment tribunal cases more than doubled in the 1990s, though in the last few years there was a significant fall, from 130,408 in 2000-1 to 98,617 in 2002-3. Nevertheless there are widespread concerns that the growing body of legislation on issues from the right to seek flexible working (UK0304104F) to the extension of discrimination law (UK0308106T) will add to the already high cost, inconvenience and stress involved in making and defending tribunal claims. The new dispute resolution provisions are an attempt to encourage the parties to resolve their differences in the workplace before this stage is reached. They form part of a wider review of the tribunals system designed to improve its efficiency (UK0403101T).

The government clearly believes that the new procedures will have a major impact on many employers. According to the Department of Trade and Industry (DTI), the public consultation process conducted in developing the new Regulations was one of its most comprehensive and in-depth to date. Furthermore, in order to allow for a further awareness raising campaign to take effect, the Regulations were laid before Parliament well before the implementation date of 1 October 2004.

It is to be hoped that the DTI proceeds with its plan to conduct research into the impact of the new provisions in a couple of years’ time, especially if it focuses on the experience of small employers and their staff. Employment relations in small firms, which account for a large proportion of tribunal cases, can be notoriously informal and ad hoc. This reflects the close proximity and personal relationships between management and staff, and the fact that managers in small firms often have multiple responsibilities with no specialist expertise in personnel. It also reflects the absence of trade unions or other forms of collective representation. Given these constraints, if the new legislation really is to have a major effect, much depends on the work of Acas and other bodies such as trade associations in encouraging systematic good practice and providing practical advice and education. (Jane Parker and James Arrowsmith, IRRU)

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