NEW STATUTORY DISMISSAL, DISCIPLINARY AND GRIEVANCE PROCEDURES

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1 September 2004 NEW STATUTORY DISMISSAL, DISCIPLINARY AND GRIEVANCE PROCEDURES With effect from 1 October 2004, new statutory dismissal and disciplinary procedures ("DDP") and grievance procedures ("GP") will be introduced in the United Kingdom. Non-compliance with the new procedures will carry serious consequences for employers. All employers will need to understand the new procedures and take steps to ensure that their disciplinary and grievance procedures are compliant. The stated purpose of the new procedures is to give employers "the best possible chance of resolving disputes early, or without the disruption and expense of protracted tribunal cases" - it will be interesting to see if this aim is achieved. Legislative framework The new DDP and GP derive from the following legislative sources: the Employment Act 2002; and the Employment Act 2002 (Dispute Resolution) Regulations The accompanying ACAS Code of Practice on Disciplinary and Grievance Procedures (the "ACAS Code") was laid before parliament on 17 June Subject to parliamentary approval, the ACAS Code will also come into force on 1 October The ACAS Code gives hands on guidance on the legislation and sets out best practice standards for employers when applying the DDP and GP. Who is covered by the DDP and GP? The new DDP and GP will apply to all employers in the UK irrespective of the size of their undertaking and the number of employees. The new procedures will apply to all "employees" in the UK but not "workers". Employees are those who work under a contract of service or apprenticeship rather than under a contract for services (e.g. independent contractors). It will not be possible to contract out of the DDP or GP. This Client News Alert is published for the clients and friends of Bryan 1Cave LLP. Information contained herein is not to be considered as legal advice. This Client News Alert may be construed as an advertisement or solicitation Bryan Cave LLP. All Rights Reserved.

2 Unfair dismissal/other claims Currently, an Employment Tribunal may use its discretion in unfair dismissal claims to adjust the compensatory award to reflect procedural failings. From 1 October 2004, if an employer fails to comply with the new DDP or GP, an Employment Tribunal must "uplift" an award to an employee by at least 10% and can do so up to 50% (see below for effect of non-compliance with DDP and GP). This is regardless of whether there were substantive grounds for dismissing the employee or not. Please note, however, that under the new regime employees will still need one year's continuity of employment to bring an unfair dismissal claim. Note that it is not just in unfair dismissal cases that the Employment Tribunal will have the power to increase or decrease awards. The tribunal will also be able to adjust awards in the types of claims listed below. Therefore where an employee raises a grievance based on any of these types of claims (most of which do not require a qualifying service period)), the employer should be particularly careful to observe the GP, as a failure to follow the GP could increase the size of award significantly. This will be of particular concern where damages are potentially unlimited (e.g. in discrimination cases). breach of employment contract; sex, race and disability discrimination in the employment field; religion, belief and sexual discrimination in the employment field; redundancy payments; equal pay and equality clauses; unauthorised deductions from wages and unauthorised payments; detriment in employment; detriment in relation to national minimum wage; working time; detriment relating to European Works Councils; detriment in relation to trade union membership activities; and detriment in relation to trade union recognition rights. 2

3 DDP and GP - in full The DDP and GP are set out in full below. Statutory dismissal and disciplinary procedure Standard dismissal and disciplinary procedure Step 1: statement of grounds for action and invitation to meeting. The employer must set out in writing the employee's alleged conduct or characteristics, or other circumstances, which led it to contemplate dismissing or taking disciplinary action against the employee. The employer must send the statement or a copy of it to the employee and invite the employee to attend a meeting to discuss the matter. Step 2: meeting The meeting must take place before action is taken, except in the case where the disciplinary action consists of suspension. The meeting must not take place unless: (a) the employer has informed the employee what the basis was for including in the statement under Step 1 the ground or grounds given in it; and (b) the employee has had a reasonable opportunity to consider his or her response to that information. After the meeting, the employer must inform the employee of its decision and notify him or her of the right to appeal against the decision if he or she is not satisfied with it. The employee has the right to be accompanied at the meeting. Step 3: appeal If the employee does wish to appeal, he or she must inform the employer. If the employee informs the employer of his or her wish to appeal, the employer must invite the employee to attend a further meeting. The appeal meeting need not take place before the dismissal or disciplinary action takes effect. After the appeal meeting, the employer must inform the employee of its final decision. Where reasonably practicable, the appeal should be dealt with by a more senior manager than attended the first meeting (unless the most senior manager attended that meeting). The employee has the right to be accompanied at the meeting. Modified dismissal and disciplinary procedure Step 1: statement of grounds for action The employer must set out in writing - (i) the employee's alleged misconduct which has led to the dismissal (ii) the reasons for thinking at the time of the dismissal that the employee was guilty of the alleged misconduct and (iii) the employee's right to appeal against dismissal. The employer must send the statement, or a copy of it, to the employee. Step 2: appeal If the employee does wish to appeal, he or she must inform the employer. If the employee informs the employer of his or her wish to appeal, the employer must invite the employee to attend a meeting. After the appeal meeting, the employer must inform the employee of its final decision. Where reasonably practicable, the appeal should be dealt with by a more senior manager not involved in the earlier decision to dismiss. The employee has the right to be accompanied at the appeal meeting. 3

4 Standard grievance procedure Statutory grievance procedure Step 1: statement of grievance The employee must set out the grievance in writing and send the statement or a copy of it to the employer. Step 2: meeting The employer must invite the employee to attend a meeting to discuss the grievance. The meeting must not take place unless: (a) the employee has informed the employer what the basis for the grievance was when he or she made the statement under Step 1 above; and (b) the employer has had a reasonable opportunity to consider his or her response to that information. After the meeting, the employer must inform the employee of its decision as to its response to the grievance and notify the employee of the right to appeal against the decision if the employee is not satisfied with it. The employee has the right to be accompanied at the meeting. Step 3: appeal If the employee does wish to appeal, he or she must inform the employer. If the employee informs the employer of his or her wish to appeal, the employer must invite the employee to attend a further meeting. After the appeal meeting, the employer must inform the employee of its final decision. Where reasonably practicable, the appeal should be dealt with by a more senior manager than attended the first meeting (unless the most senior manager attended that meeting). The employee has the right to be accompanied at the meeting. Modified grievance procedure Step 1: statement of grievance The employee must: (a) set out in writing - (i) the grievance, and (ii) the basis for it, and (b) send the statement, or a copy of it, to the employer. Step 2: response The employer must set out its response in writing and send the statement or a copy of it to the employee. 4

5 General Requirements for both DDP and GP The following requirements must be adhered to in all cases (so far as applicable). Timetable Each step and action under the procedure must be taken without unreasonable delay. Meetings Timing and location of meetings must be reasonable. Meetings must be conducted in a manner that enables both employer and employee to explain their cases. In the case of appeal meetings which are not the first meeting, the employer should, so far as is reasonably practicable, be represented by a more senior manager than attended the first meeting (unless the most senior manager attended that meeting). Standard DDP The standard DDP will apply in all cases where an employer is proposing to dismiss (and the grounds for dismissal do not constitute clear gross misconduct) or take "relevant disciplinary action" against an employee. The three basic steps involve giving the employee a written statement, meeting with the employee to discuss the matter, and giving him/her a right of appeal. The phrase "relevant disciplinary action" is an: "action, short of dismissal, which the employer asserts to be based wholly or mainly on the employee's conduct or capability, other than suspension on full pay or the issuing of warnings (whether oral or written)." Interestingly, the issuing of warnings is excluded from the definition of "relevant disciplinary action", which is somewhat surprising given that oral and/or written warnings form a cornerstone of disciplinary action in the UK. This represents a significant exception. Thus, issuing employees with warnings will not be covered by the DDP. Note that a constructive dismissal (i.e. where an employee resigns as a direct response to a fundamental breach of contract by the employer) is not regarded as a dismissal for purposes of the DDP. However, if a constructive dismissal arises as a result of an employer's non-compliance with the DDP, then arguably it will be covered by the DDP. Note also that the standard DDP will apply to all dismissals, including dismissals on grounds of redundancy and where a fixed-term contract expires at the end of its term. Modified DDP Unlike the standard DDP, the modified DDP only involves two steps, i.e. providing an employee with a written statement regarding the reasons for dismissal accompanied by a right of appeal. The modified procedure will only apply where an employer is entitled to dismiss an employee without notice on grounds of gross misconduct, and the dismissal is to occur after the employer learns of the misconduct or immediately thereafter. It must also be reasonable in all the circumstances of the case for the employer to dismiss the employee without making further enquiries regarding the misconduct in question. 5

6 In short, the modified procedure should only be used in cases of the most glaring gross misconduct, e.g. if an employee is caught on CCTV stealing from an employer. We suspect that Employment Tribunals will narrowly construe the circumstances in which the modified procedure will be appropriate. For its part, the ACAS Code states that there will only be "some very limited cases where despite the fact that an employer has dismissed an employee immediately without a meeting an Employment Tribunal will, very exceptionally, find the dismissal to be fair". A useful compromise position is possible according to the ACAS Code and guidance issued by the Department of Trade and Industry for employers who are not sure whether an act constitutes "obvious" gross misconduct (entitling them to dismiss without notice) but nonetheless do not want the employee to remain at work whilst investigations are carried out. In these circumstances, an employer can impose a short suspension on full pay pending a disciplinary meeting. Except in the most obvious cases of gross misconduct where the available evidence speaks for itself, it will be safer for employers to suspend employees on full pay pending a full investigation/meeting or treat the misconduct as being covered by the standard DDP. Exceptions - when the DDP will not apply The DDP procedure will not apply (according to the ACAS Code) where: factors beyond the control of either party make it impracticable to carry out or complete the procedure for the foreseeable future; or the employee is dismissed in circumstances covered by the modified dismissal procedure and presents a tribunal complaint before the employer has set out in writing the employee's alleged conduct or characteristics; or all of the employees of the same description or category are dismissed and offered reengagement either before or upon termination of their contract; or the dismissal is one of a group of redundancies covered by the duty of collective consultation of worker representatives under the Trade Union and Labour Relations (Consolidation) Act 1992 (but remember that the DDP does apply to individual redundancies); or the employee is dismissed while taking part in unofficial industrial action, or other industrial action which is not "protected action" under the Trade Union and Labour Relations (Consolidation) Act 1992 ("TULRA"), unless the Employment Tribunal has jurisdiction to hear a claim of unfair dismissal; or the employee is unfairly dismissed for taking part in industrial action which is "protected action" under TULRA; or the employer's business suddenly and unexpectedly ceases to function and it becomes impractical to employ any employees; or the employee cannot continue in the particular position without contravening a statutory requirement; or the employee is one to whom a dismissal procedure agreement designated under section 110 of the Employment Rights Act 1996 applies (i.e. a stand alone agreement that is agreed with employees and trade unions and which replaces the right to claim unfair dismissal with analogous rights); or following the DDP would be contrary to the interests of national security. 6

7 GP - general The GP will apply where an employee has a grievance about an employer's action which could form the basis of certain types of Employment Tribunal claim. For purposes of the GP a grievance is defined as: "a complaint by an employee about action which his employer has taken or is contemplating taking in relation to him." The definition of "grievance" is quite narrow, and only relates to acts of an employer in relation to the complainant. The GP will not apply, for instance, where a complainant wishes to make a grievance about another employee or the employer's treatment of another employee. Further, the definition only applies to "acts" taken by an employer and not omissions. It will be possible for employee representatives or trade unions to raise a grievance in writing on behalf of two or more employees, and this will be deemed to comply with the GP. Standard GP There are three basic steps involved in the standard GP. An employee must submit a written grievance, the employer must hold a meeting with the employee before reaching any decision, and give him/her the right of appeal. If an employee does not exhaust the appeal procedure set out in the GP, this will be grounds for an Employment Tribunal to reduce any compensation award that is made to him/her. Modified GP The modified GP will only apply if an employee has already been dismissed and the standard GP has not already been completed with respect to the grievance. Further, the employer and employee must agree in writing to use the modified procedure or else the standard procedure will apply. Exceptions - when the GP will not apply The GP will not apply (according to the ACAS Code) where: the employee is no longer employed, and it is no longer practicable for the employee to set out in writing the grievance and the basis for it; or the employee wishes to complain about an actual or threatened dismissal; or the employee raises a concern as a "protected disclosure" in compliance with the provisions of the Public Interest Disclosure Act 1996; or the employee wishes to complain about (actual or threatened) action short of dismissal to which the standard DDP applies, unless the grievance is that this involves unlawful discrimination (including under the Equal Pay Act) or is not genuinely on grounds of capability or conduct; or following the GP would be contrary to the interests of national security. GP and dismissal If an employee's grievance is that he/she has been dismissed (and it is no longer practicable for the employee to set out in writing the grievance and the basis for it), neither the standard or modified GP will be relevant. In this case, an appeal under the DDP will be the appropriate recourse. 7

8 Effect of non-compliance with DDP and GP In respect of claims to which the DDP and GP apply, an Employment Tribunal must increase an award to an employee if the employer has failed to comply with the DDP or GP before the claim was commenced and this was wholly or mainly attributable to the employer failing to comply with one of the statutory requirements. However, if an employer's non-compliance with the DDP or GP was wholly or mainly due to a failure by an employee to comply with his/her duties or to exercise a right of appeal, then an Employment Tribunal must reduce the award. Where an increase or reduction in an award is to be given, an Employment Tribunal must make an adjustment of 10% and can further increase or decrease the award by up to 50% based on what it thinks "just and equitable in all circumstances". Please note that in respect of unfair dismissal cases, the basic award (i.e. up to 8,100 currently) cannot be adjusted; only a compensatory award (i.e. up to 55,000 currently) can be adjusted. Time limits Where the DDP and/or GP procedures are relevant, the normal time limits for commencing Employment Tribunal claims may be extended by three months in certain circumstances. The regulations are quite complex on this subject. Contractual effect Originally, the government's intention was that the DDP and GP would be incorporated into every employee's contract of employment. Had this intention been carried through, failure to follow the correct procedures would have constituted breach of contract. This would have further increased liability for employers. For the time being however the government will not be introducing this stipulation but has indicated that it intends to reassess the situation in Statement of initial employment particulars Employers should be aware that from 1 October 2004, the statutory statement of initial employment particulars ("Written Particulars") will have to include a section setting out the applicable disciplinary rules, the procedure that will apply to any decision to dismiss or discipline an employee, details of the person to whom an employee should appeal or for the purposes of obtaining redress relating to a grievance and any other relevant steps relating to a grievance application. The Written Particulars can, however, refer to an external document in relation to disciplinary/dismissal and grievance procedures that is "reasonably accessible" by employees (such as an employment handbook or a separate disciplinary/grievance procedure document). From 1 October 2004, failure to provide any of the statutory Written Particulars in the form required (not just those relating to the DDP and GP) may lead to an award of between 2 and 4 weeks' pay. An award will only be given if, when a claim was commenced, (i) the employer had not provided the employee with the required Written Particulars and (ii) the employee succeeds in one of the claims that are covered by the DDP and GP. ACAS Code The ACAS Code, which does not constitute legislation but is admissible as evidence by an Employment Tribunal, contains "core principles of reasonable behaviour". The "core principles" are as follows: use procedures primarily to help and encourage employees to improve rather than just as a way of imposing a punishment; 8

9 inform the employee of the complaint against them, and provide them with an opportunity to state their case before decisions are reached; allow employees to be accompanied at disciplinary meetings; make sure that disciplinary action is not taken until the facts of the case have been established and that the action is reasonable in the circumstances; never dismiss an employee for a first disciplinary offence, unless it is a case of gross misconduct; give the employee a written explanation for any disciplinary action taken and make sure they know what improvement is expected; give the employee an opportunity to appeal; deal with issues as thoroughly and promptly as possible; and act consistently. Meetings Please note that it is not clear whether the word "meeting" in the context of the new legislation or the ACAS Code means a meeting at which all parties are physically present. Until this is clarified, it would be safest for all parties to be physically present at dismissal/disciplinary or grievance meetings as opposed to participating by way of telephone or video conference, which could be deemed a procedural defect. Conclusion All employers should ensure that they familiarise themselves with the provisions of the new legislation as soon as possible and take steps now to ensure that their internal disciplinary/dismissal and grievance procedures comply in full with the new DDP and GP. Where a company's employee handbook or contracts of employment contain disciplinary/dismissal and/or grievance procedures, they should be updated to accord with the new legislation. Further, from 1 October, employers should make sure they provide their new employees with full Written Particulars of the terms of employment, including details of their disciplinary/dismissal and grievance procedures, or else refer them to, for instance, an employee handbook that specifies the procedures (which must comply with the DDP and GP). It will not be enough, however, to update the contractual documentation - this is just the starting point. Employers will need to ensure that all levels of staff that could be involved in disciplinary/dismissal or grievance matters are familiar with the new legislation and are aware of its implications. * * * * * * For further information, please consult the following lawyer: Bryan Cave: London Office Sarah Linton Tel: +44 (0)

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