New Disciplinary and Grievance Rules

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1 March 2009 / Special Alert A legal update from Dechert s Employment Law Group New Disciplinary and Grievance Rules d Introduction The Employment Act 2008, which comes into effect on 6 April 2009, repeals the statutory minimum dismissal and grievance procedures which have caused so much confusion, uncertainty and difficulty for employers (and indeed employees) over the period since their introduction in The statutory minimum disciplinary and grievance procedures are to be replaced by the new ACAS Code of Practice on Disciplinary and Grievance Procedures (the ACAS Code ), breach of which will have potential consequences for both employers and employees in terms of the compensation awarded in respect of successful statutory employment claims. ACAS has also issued new non-statutory guidance on disciplinary and grievance issues, which is explanatory in effect but to which employment tribunals will be able to refer, and by which they will no doubt be influenced, in their consideration of what should constitute good practice. Employers will need to familiarise themselves with both the ACAS Code and the non-statutory guidance. In this update, we provide an outline of the new regime, which aims to establish for employers and employees, in the context of disciplinary and grievance matters, the basic requirements of fairness and the standard of reasonable behaviour in most cases. Whilst this briefing is not a comprehensive summary of the new rules, it aims to highlight the key issues which employers need to consider as 6 April 2009 approaches. Compensation Adjustments Breach of the new rules will have financial consequences for employers and employees. If an employer or an employee fails to comply with the provisions of the ACAS Code and that failure is unreasonable, then the employment tribunal will be entitled to adjust the award of compensation made to an employee in a successful employment tribunal claim in respect of the various relevant jurisdictions, such as unfair dismissal and unlawful discrimination. This power is to adjust compensation upwards or downwards by up to 25% (subject of course, in normal unfair dismissal cases, to the maximum compensatory award of 66,200). The employment tribunal may make such an adjustment if it considers that it is just and equitable to do so in all the circumstances of the particular case and will take into account the size and resources of the employer in reading its decision. Good News The introduction of the new rules is good news for employers in that: No longer will a technical breach of the statutory dismissal procedures lead to a dismissal being automatically unfair. The maximum potential adjustment to a compensation award will now be 25% rather than 50%. There will no longer be any possibility of an extended time limit for filing employment tribunal claims beyond the usual 3-month time limit. There will no longer be a modified grievance procedure. The new statutory rules do not in principle apply to dismissals by reason of redundancy or the expiry of fixed term contracts, although care will nevertheless still need to be taken to ensure that such dismissals are substantively and procedurally fair.

2 Less Good News However, employers need to be aware of some continuing challenges: The continued availability of compensation uplifts means that the importance of proper procedures in dismissal and grievance situations is undimmed (especially in discrimination cases where compensation is unlimited). It is unlikely that the introduction of the new rules will make much difference to the grievance culture that many employers have seen develop over recent years, partly spurred on by the introduction of the statutory minimum grievance procedures in Employers need to be aware of the transitional provisions that could still cause problems by extending the application of the current statutory minimum grievance procedures beyond 6 April 2009 in certain situations. The ACAS Code often gives general and aspirational guidance rather than establishing precise requirements. In an environment where the employment tribunal will be operating under a new set of procedural standards, but will still have the ability to increase compensation to reflect an employer s breach of the ACAS Code, it will be unclear for some time to come how employment tribunals will approach interpretation of the ACAS Code, the decision as to whether a breach of the ACAS Code was unreasonable and, if so, to what extent compensation should be adjusted accordingly. Disciplinary Situations General Principles So far as disciplinary situations are concerned, the ACAS Code makes clear that, for its purposes, this concept extends to misconduct and/or poor performance. There are a variety of key principles established by the ACAS Code that will need to be borne in mind when dealing with disciplinary situations and these include: Promptness meetings should be held without unreasonable delay whilst allowing the employee reasonable time to prepare his or her case. Consistency employers should approach disciplinary situations and apply sanctions consistently. Investigation employers may need to conduct investigations to establish the facts of the case. Informing the employer should inform the employee of the problem as part of the process. State case the employee should be given the proper opportunity to state his or her case. Comparison employees have the right to be accompanied to any formal meeting. Appeal there should be a right of appeal at each stage. Disciplinary Situations Particular Issues The ACAS Code s guidance on disciplinary matters raises a number of particular issues that need to be borne in mind by employers, many of which reflect existing good practice: The ACAS Code does not of itself apply to capability or sickness dismissals (although it indicates that it provides the basic principles of fairness for those situations). In principle, different people should conduct the investigatory and disciplinary hearing stages. So far as witness statements are concerned, the principle is that an employee being put through a disciplinary process should be given sufficient information in order to enable the employee to prepare. This may require the provision of witness statements to the employee. The Code also makes clear that, in cases of persistent non-attendance at disciplinary meetings without good cause, an employer may be entitled to proceed to make a decision about a disciplinary action on the basis of the information available to it. March 2009 / Special Alert 2

3 With regard to the issue of whether employees are entitled to be accompanied to investigatory (as opposed to disciplinary) meetings, the Code does not require this nor does it suggest that it is good practice. The Code provides that a companion may be allowed. Warnings should specify their duration, the nature of the problem, the required improvement (with a timescale) and set out the consequences of further issues arising. Employers should not normally dismiss for a first offence save in cases of gross misconduct. A criminal conviction should not of itself be a reason for disciplinary action. The employer should focus on the impact of the conviction on the employee s ability to do the job in question. If disciplinary action is proposed in relation to a trade union representative, then it is recommended that (with that representative s agreement) the employer discuss the matter direct with the union at an early stage. Suspension should be as brief as possible and it should be made clear that suspension on full pay is not a disciplinary sanction. Disciplinary procedures should give examples of gross misconduct. Witnesses So far as the role of witnesses in disciplinary hearings is concerned, the ACAS Code provides that: Employees should have a reasonable opportunity to call witnesses. Employees should have an opportunity to raise points about the information provided by witnesses. Where an employer or employee intends to call witnesses, advance notice should be given of this intention. Grievances With regard to grievances (which the ACAS Code describes as the concerns, problems or complaints d which employees raise ), the ACAS Code sets out various principles: Employers should seek informal resolution of their employees grievances. Employees should raise their grievances in writing, setting out the nature of their complaints, and should direct the grievance to a manager who is not the subject of the grievance. A grievance hearing should be held at which the employee has the right to be accompanied by a fellow worker or trade union representative. There should not be an unreasonable delay in convening the meeting and the employee should be notified in advance of its time and place. The employer should seek the employee s view on how the grievance should be resolved. There should be an appeal against any grievance decision to a manager not previously involved. Overlapping Grievances and Disciplinary Processes Where a grievance is lodged in connection with an ongoing disciplinary process, the ACAS Code indicates that it may be appropriate to suspend the disciplinary process pending resolution of the relevant grievance or for the grievance and disciplinary process to be conducted concurrently. Employers will still need to consider carefully whether a grievance potentially affects the ongoing disciplinary procedure sufficiently that the grievance needs to be resolved first in order for the disciplinary then to proceed without being open to undue criticism. Companions As already noted, the ACAS Code refers to the existing statutory right of an employee to be accompanied to a disciplinary or grievance meeting by a fellow employee or trade union representative. The fact that the ACAS Code reflects this statutory requirement as part of its own requirements potentially leaves an employer open to a double penalty if the right is breached (i.e., the 2 weeks pay award payable under the Employment Rights Act 1999 for failure to allow an employee to be March 2009 / Special Alert 3

4 accompanied, together with the compensation uplift that is available for breach of the ACAS Code). The ACAS Code also makes clear that an employee s request to be accompanied may not be reasonable if the attendance of the proposed companion would prejudice the hearing or if the proposed companion is from a remote geographical location and a suitable and willing alternative is available on site. Other Points The ACAS Code also makes a number of other points which are worth noting: In contrast to the statutory minimum dismissal disciplinary and grievance procedures, if one party breaches the new rules, then the other is not released from its obligations to continue with the required process. The parties should make every effort to attend relevant meetings in contrast to the statutory minimum disciplinary and grievance rules where they were previously obliged to use their reasonable efforts. There was considerable discussion in the early stages of the development of the ACAS Code of the role of mediation. In the foreword to the ACAS Code and in the ACAS non-statutory guidance, employers are reminded of the potential desirability of mediation. Nonetheless to mediate disputes is not a requirement of the ACAS Code itself. Transitional Provisions The statutory minimum disciplinary and grievance procedures cease to apply in principle on 5 April The old disciplinary rules apply if any stage is taken on or before 5 April 2009 i.e., a dismissal, the taking of relevant disciplinary action, the issuing of stage 1 letter or the holding of a stage 2 meeting. The old grievance rules apply if the action complained of took place entirely before 6 April 2009, and the ACAS Code applies if the action occurs entirely on or after 6 April However, there is one potential wrinkle in relation to grievances where the action complained of started before, but continues after, 6 April The old rules will still apply if an employee commences a grievance process (by lodging a grievance or making an application to an employment tribunal) before 5 July 2009 (or 5 October 2009 in cases of claims of equal pay, for a redundancy payment or in certain trade union situations). Implementation The ACAS Code emphasises the need for manager training and to ensure that employees are aware of the relevant procedures which the employer adopts. Since, in order to comply with the obligations imposed by Section 1 of the Employment Rights Act 1996, employees also need to be made aware of where disciplinary and grievance rules can be located, it will be sensible to notify staff of the introduction of new rules in any event. Those employers who had adopted detailed disciplinary procedures that reflect the full detail of the statutory minimum disciplinary grievance procedures may wish to review their current documentation in order to take advantage of the extent to which the ACAS Code is more flexible and less prescriptive than those statutory minimum disciplinary and grievance procedures. Employers disciplinary and grievance procedures may also need to be updated in relation to issues specifically addressed in the ACAS Code, such as the ability to call witnesses, the provision of witness statements, whether companions should attend investigatory meetings and overlapping grievances and disciplinaries. It is also important to note that the ACAS Code recommends that employers should have separate policies on bullying, harassment and whistleblowing. Perhaps unsurprisingly, the Code recommends that policies should be set down in writing, should be specific and clear, but more intriguingly also recommends the involvement of employees or their representatives in the development of employers policies. The introduction of the ACAS Code is therefore not only an impetus to employers to ensure compliance in their employment documentation it also provides employers with an opportune moment to update their policies and ensure that managers are aware of their roles and responsibilities. March 2009 / Special Alert 4

5 Action Points Employers therefore need to consider: Updating their existing disciplinary and grievance procedures to reflect the new rules. Whether to update or adopt new policies on bullying, harassment and whistleblowing. Implementing training and awareness initiatives to ensure that managers and staff alike are aware of (and properly apply) the applicable procedures. Practice group contacts For more information, please contact one of the lawyers listed, or the Dechert lawyer with whom you regularly work. Visit us at Charles Wynn-Evans +44 (0) Karen Ferries +44 (0) Georgina Rowley +44 (0) Jason Butwick +44 (0) Kate Holbrook +44 (0) Emma Byford +44 (0) Michael McCartney +44 (0) D Dechert is a combination of two limited liability partnerships (each named Dechert LLP, one established in Pennsylvania, US, and one incorporated in England). Dechert has over 1,000 qualified lawyers and a total complement of more than 1,800 staff in Belgium, France, Germany, Hong Kong, Luxembourg, the UK, and the US. Dechert LLP is a limited liability partnership registered in England & Wales (Registered No. OC306020) and is regulated by the Solicitors Regulation Authority. The registered address is 160 Queen Victoria Street, EC4V 4QQ, UK. A list of names of the members of Dechert LLP (who are referred to as "partners") is available for inspection at the above address. The partners are solicitors or registered foreign lawyers. The use of the term "partners" should not be construed as indicating that the members of Dechert LLP are carrying on business in partnership for the purpose of the Partnership Act Dechert (Paris) LLP is a limited liability partnership registered in England and Wales (Registered No. OC332363), governed by the Solicitors Regulation Authority, and registered with the French Bar pursuant to Directive 98/5/CE. A list of the names of the members of Dechert (Paris) LLP (who are solicitors or registered foreign lawyers) is available for inspection at our Paris office at 32 rue de Monceau, Paris, France, and at our registered office at 160 Queen Victoria Street,, EC4V 4QQ, UK. Dechert LLP is in association with Hwang & Co in Hong Kong. This document is a basic summary of legal issues. It should not be relied upon as an authoritative statement of the law. You should obtain detailed legal advice before taking action. This publication, provided by Dechert LLP as a general informational service, may be considered attorney advertising in some jurisdictions. Prior results do not guarantee a similar outcome Dechert LLP. Reproduction of items from this document is permitted provided you clearly acknowledge Dechert LLP as the source. EUROPE Brussels Luxembourg Munich Paris U.S. Austin Boston Charlotte Hartford Newport Beach New York Philadelphia Princeton San Francisco Silicon Valley Washington, D.C. ASIA Beijing Hong Kong March 2009 / Special Alert 5

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