Update: employment

Statutory disciplinary and grievance procedures RIP

The Employment Act 2008 has received Royal assent and will come into force in April 2009. With its commencement will go the short and not-very sweet period of SDPs and SGPs which has led to case law almost surpassing the worst cheese-riddled nightmares of the crustiest practitioners.

The focus of the Act remains, as was the intention with ss.29-33 of the Employment Act 2002, workplace resolution of disputes. This is by no means a shift in policy, just in the procedural framework for achieving a policy aim of encouraging conflict resolution without recourse to employment tribunals. The 2002 Act was designed to do the same thing, but sadly and spectacularly backfired. So how is the new law framed?

New code of practice

Instead of the SDPs and SGPs (which are repealed), there is a new ACAS Code of Practice (CoP) on Disciplinary and Grievance Procedures, which has now been approved by DBERR and will be laid for parliamentary approval probably early in the new year. The EA 2008 provides in s.3 that any unreasonable failure by the employer to comply with the Code could result in an upward award adjustment of up to 25 per cent.

It should be noted that the possible adjustment in the award under s.3 is, potentially, in both directions not just against the employer. Section 3(3), which is a mirror image of s. 3(2), states that unreasonable failure to comply with any provisions of the Code could lead to a downward adjustment of up to 25 per cent. However, unlike the currents SDPs and SGPs, the ACAS code contains very few elements that impose any sort of duty or obligation on the employee.

In respect of employer conduct the old lower limit 10 per cent uplift will no longer apply and a tribunal will be able to award no uplift at all, depending on the circumstances.

Another plus point is that the Code will not apply to redundancy dismissals or non-renewal of an expired fixed-term contract. Trying to apply the statutory procedures to these situations has been a continuing source of aggravation which is to be removed.

The Code is short, 10 pages long of which the first two are the foreword. It sets out principles of fairness. These include general propositions such as raising issues promptly, acting consistently, informing the employee of the basis of the problem, providing them with an opportunity to put their case and the right to be accompanied. It then sets out procedures for handling disciplinary issues and for dealing with grievances, which are in the main a distillation of common sense.

A wider ambit

There are a couple of intriguing provisions. The ambit of the circumstances to which the Code potentially applies has widened. For example, the Code applies to all 'disciplinary situations' including misconduct and poor performance, but it does not specify what is excluded and in particular the 'warnings exception', found in the statutory dispute resolution procedures, is not replicated in the Code. This means that potentially the ambit of what is covered is now wider. Similarly, the scope of what amounts to a grievance has widened. Grievances are defined as 'concerns, problems or complaints the employees raise with their employers'. Unlike the current SGPs, these are not necessarily limited to work, working conditions or the workplace, although the employer should in general be careful of attempting to resolve non work-related issues and thus potentially lay itself open to vicarious liability claims under discrimination legislation.

The Code reflects strongly the philosophy that workplace procedures and practices should be discussed and if possible agreed with staff. This of course echoes Community law approaches as captured in the European and domestic works council regulations (Council Directives 97/45/EC and 2002/14/EC). So the ACAS code states expressly that 'employees and, where appropriate, their representatives should be involved in the development of [disciplinary and grievance] rules and procedures'. This certainly does not reflect current practice in the majority of UK businesses without trade union recognition or other representative fora (such as a works council). It will be interesting to see whether such a provision has any resonance in tribunal proceedings. Will an employee be able to argue that a procedure with which he/she disagrees should not have been applied by the employer because it was not discussed with the employees? Conversely, might the employer be able to defend a claim by showing that it applied procedures that were discussed with staff, even if the individual claimant thinks they are unfair? This will be particularly significant if the employer's procedures permit disciplinary downgrades, or reduction in pay or suspension from duties.

Another possible cause of litigation could be the stipulation for prompt action. At present, it is decided law (Selvarajan v Wilmot, [2008] EWCA Civ 862) that unreasonable delay on the part of an employer in completing the standard procedure does not mean that the procedure has not been completed for the purposes of s.98A(1) of the 1996 Act. However that decision just reflects the fact that there is a mechanical element in the current procedures. In future, unreasonable delay could well render disciplinary action unfair and although there are no mirror image constraints on the employee, the employer may be able to argue that it was reasonable not to investigate a complaint, because of the employee's delay.

The traps

Two possible little traps for the employer in what look like sensible uncontroversial provisions: the Code provides that a decision to dismiss should only be taken by a manager who has the authority to do so. This is not usually a point of contention, but undoubtedly the existence of an express provision will provide a basis for challenging the manager's authority. So employers had better be careful that they give due regard to this point. One obvious area where it can come up is group companies, where it can be difficult to unravel who is authorised on behalf of which company. Also, many public sector bodies have specific provisions as to 'authority' and it will become even more important to follow them, given this provision in the Code.

Another potential trap is the apparently employer-friendly provision that 'where an employee is persistently unable or unwilling to attend a disciplinary meeting without good cause the employer should make a decision on the evidence available'. On the face of it, this permits the employer to try and move on in the face of employee non-cooperation. But a closer examination of the provisions reveals plenty of scope for argument about concepts such as 'persistence' and 'good cause'.

One final thought on the topic: the foreword to the Code and the guidance both emphasise that 'employers and employees should always seek to resolve disciplinary and grievance issues in the workplace'. Both go on to say 'where this is not possible employers and employees should consider using an independent third party to help resolve the problem'. This is clearly in line with the policy of removing disputes from the tribunals, but what does it mean in relation to litigation risk? Is the employer obliged to raise mediation or conciliation with the employee and seek to agree it? Will failure at least to consider such a step lead to a possible uplift? Will the well-advised employee plead his or her willingness to have considered this had it been offered as a sign of unreasonable conduct on the employer's part if it wasn't offered during the dispute or disciplinary?

Cases raising all these issues are predicted for 2009. The Act comes into force in April next year and at the time of writing it is not clear how the transition from the SDPs and SGPs will be handled.

Redundancy and race discrimination

The case of Chaggar v Abbey National (UKEAT606/07, 37/08 and 41/08) has raised many interesting questions. Mr Chaggar was made redundant by Abbey. He was one of two risk analysts who were considered for redundancy and he was chosen on the basis of both subjective and objective criteria, which were heavily criticised in the tribunal. He persuaded the tribunal to draw an adverse inference from a number of indirect evidential points. These included the unfairness of the selection process and the failure properly to answer a race discrimination questionnaire as well as the fact that decision-makers had had little or no training in equal opportunities.

The resulting award, which took account of his total life time potential earnings loss, rounded up for tax, was around £2.8m, on the basis that Mr Chaggar had abandoned his career in the financial sector and had retrained as a maths teacher. There are many warnings for employers in this decision, particularly in the current economic climate.

The consequences of getting it wrong, even in the absence of any actual evidence of discrimination, will be potentially very serious and organisations need to be aware of how the reverse burden of proof works in discrimination cases, where tribunals are required to find discrimination if the employer's explanation is not accepted. While it is dangerous to extrapolate too far from one case, those concerned with establishing redundancy processes should be particularly careful to ensure that personal considerations are kept out of the equation and in general organisations should try to understand the reverse burden of proof better than they do.

Important points

The EAT upheld the liability decision, so the stigma of race discrimination remains. It also importantly held that the reverse burden of proof applied (although the claim was framed as a 'colour' discrimination claim), because there should be no qualitative difference between claims of race discrimination whatever limb of the definition of racial discrimination was pleaded.

The EAT however allowed the quantum appeal and sent the case back to the same ET to consider and review. It made two important points. First, it made the general point that the loss in question is that of the employment with the respondent so tribunals should consider and make findings as to the likelihood of the individual being dismissed anyway (the potential Polkey deduction).

Secondly, the EAT held that Abbey should not be made liable for any difficulties the claimant might have experienced as a result of bringing his claim. The impact of his claim on the labour market was not something for which Abbey should be required to compensate him.

Finally, in an invaluable obiter section of the judgment, the future president of the EAT makes some very telling comments about the use of Ogden tables in employment tribunals. He points out the type of contingencies that are not well reflected in the tables, but which tribunals should consider, all of which could lead to a loss of the claimant's pre-dismissal earnings for causes other than the unlawful dismissal.

While not wishing to discourage tribunals from using the Ogden tables in cases where 'sophisticated calculations of long-term future loss are required', he ends 'if they are used they must be used with care and with a proper understanding of their limitations.'