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6 April 2009

Client Guide to Acas Code of Practice on Disciplinary & Grievance Procedures.

The Employment Act 2008 introduces a new regime affecting the vast majority of employment tribunal claims in England, Wales and Scotland (but not Northern Ireland) from 6 April 2009. The Act will give tribunals a discretion to increase or reduce awards by up to 25% in certain cases where the employer or employee unreasonably fails to comply with the new Acas Code of Practice on Disciplinary and Grievance Procedures (the Acas Code).

Why is it important to follow the Acas Code?

It can avoid an unfair dismissal claim

When deciding whether an employee has been unfairly dismissed for misconduct or poor performance, an employment tribunal will consider whether the employer has followed a fair procedure. In doing so, it must take account of any provisions of the Acas Code that appear to be relevant.

Dealing with a grievance effectively can avert tribunal claims by enabling the issue to be resolved internally.

It can affect the level of compensation

If the employer unreasonably failed to follow the Acas Code, the tribunal may increase the employee's compensation by up to 25%. If the employee unreasonably failed to follow it, the tribunal may reduce their compensation by up to 25%. The tribunal must decide what uplift,  or reduction, would be just and equitable.

When does the Acas Code apply?

The Code applies to grievances, misconduct and poor performance cases

The ACAS Code applies to "disciplinary situations", a concept which includes misconduct and poor performance but explicitly excludes dismissals on grounds of redundancy or the non-renewal of a fixed-term contract.

The Code is supplemented by a non-statutory guide, Discipline and Grievances at Work: The Acas Guide, which gives further guidance on best practice. While the guide itself does not have to be taken into account by tribunals, it does contain some useful guidance, and therefore employers should not ignore it.

When does the new regime apply?

There are transitional provisions governing whether the new or old regime applies. The old regime will continue to apply where:

• the employer has dismissed an employee or taken relevant disciplinary action before 6 April 2009; or
• where the employer has sent the employee a "step 1" letter or held a "step 2" meeting under the old regime before that date.

In any other case , the new regime will apply from 6 April 2009.

In general, any grievance concerning facts which occurred wholly before 6 April 2009 will fall under the old regime and any grievance which concerns facts occurring wholly on or after that date will  fall under the new regime. For most grievances about a state of affairs spanning that date, the old regime will continue to apply if the grievance or claim is submitted on or before 4 July 2009, although in some cases involving equal pay, redundancy or industrial action the date is 4 October 2009 .

The new Acas Code does not apply to collective grievances - in other words, grievances raised by a recognised trade union or other appropriate representative on behalf of two or more employees .

There is no longer an explicit requirement to follow a grievance procedure in cases involving former employees.

Potential headaches

Involving employees in developing procedures

The Acas Code states that employees and, where appropriate, their representatives (such as a recognised trade union) should be "involved" in the development of grievance and disciplinary rules and procedures, and that employers should help employees and managers understand those rules and procedures, where they can be found and how they are to be used . The Code does not explicitly require employers to seek employees' agreement.

Where an employer has failed to put any written procedures in place, or puts procedures in place without involving employees, this could technically be a breach of the Code, even if the employer ultimately follows a fair procedure. The non-statutory Acas Guide suggests that it may be sufficient to "keep rules and procedures under review", and to ensure that employees and their representatives are consulted before introducing "new or additional rules". 

Evidence at disciplinary hearings

The Acas Code recommends two significant steps (see below), which have rarely been followed even though they were also recommended by the previous (2004) version of the Acas Code. Given the additional compensation that may now flow from an unreasonable failure to follow the Code, employers should consider including these steps unless they feel confident of persuading a tribunal that it would be reasonable not to do so.

Reviewing the charges and evidence

The Code requires employers, at the start of the hearing, to "explain the complaint against the employee and go through the evidence that has been gathered". This stage has often been ignored in the past, or taken as read, since the employee should already have been given the opportunity to digest this information.

Allowing the employee to call witnesses

Secondly, employees should be given "a reasonable opportunity to ask questions, present evidence and call relevant witnesses".

There is no specific requirement for the employer to call its own witnesses, or to allow the employee to cross-examine them. In any event, if the employee challenges the evidence of a witness who is not present at the hearing, an employer should consider adjourning the hearing to re-interview the witness in the light of any new information presented by the employee.

Appeals against warnings

A failure to allow a right of appeal against any disciplinary action, including a warning, is a breach of the Acas Code. It could therefore increase compensation in the tribunal if the employee brings a successful claim (such as a victimisation claim) based on the disciplinary action.

Potential headaches - grievances

Are former employees covered by the Acas Code? The Employment Act 2002 regime explicitly required a former employee (for example, one who claimed to have been constructively dismissed) to submit a written grievance before bringing a claim. The Acas Code itself does not define employee, although the definition used in the Employment Rights Act 1996 would include someone who has left employment. Therefore it is currently uncertain whether a former employee would be penalised for an unreasonable failure to submit a written grievance, and whether their former employer could be penalised for unreasonably failing to deal with it in accordance with the Code.

Handling grievances during a disciplinary procedure

Employees often submit grievances during disciplinary procedures, either regarding the procedure itself or the circumstances leading up to the initiation of that procedure. Under the statutory dispute resolution procedures, this gave rise to complicated legal and procedural issues which no longer apply.

Now employers must decide whether to suspend the disciplinary procedure in order to fully investigate the grievance or, if the issues are related, deal with both of them concurrently. The non-statutory Acas Guide gives guidance on this.

The employee should raise the grievance in writing

A grievance can be any concern, problem or complaint that an employee raises with the employer. If a grievance cannot be resolved informally, the employee should raise it in writing with a manager.  If the grievance concerns their line manager, the grievance should be raised with another manager.

A failure to raise the grievance in writing does not prevent an employee bringing a tribunal claim about the matter. However, the employee may recover less compensation if they have not done so.

The employer should hold a meeting and investigate the complaint

A meeting should be held to allow the employee to explain their grievance and how they think it should be resolved. Managers, employees and their companions should make every effort to attend the meeting. If the matter needs further investigation, the employer should consider adjourning the meeting and resuming it after the investigation has taken place. When the meeting is concluded, the employer should communicate its decision in writing without unreasonable delay, including (where appropriate) details of any action it intends to take to resolve the grievance. The  employer should inform the employee that they have a right of appeal when they communicate the decision. If the employee is not satisfied with the outcome, they should appeal in writing, specifying the grounds of their appeal. If they bring a tribunal claim without appealing, any compensation they are awarded may be reduced.

How has the law changed?

Best practice advice should not change greatly in light of the new law, although there are some important changes relating to the conduct of hearings, as mentioned  above.

The law on unfair dismissal, time limits and compensation has changed

The consequences of failing to follow the correct procedure are different under the new regime. The key differences include the following:

• A dismissal without following the old regime would have been automatically unfair. Under the new regime, the question is whether the employer acted outside the band of reasonable responses in treating misconduct or poor performance as the reason for dismissal, and the tribunal will take account of the Acas Code in deciding that issue.
• Under the old regime there were provisions for an automatic three-month extension of time in certain circumstances. There is no automatic extension of time under the new regime even if an appeal is still ongoing.
• Compensation under the old regime would normally be adjusted by 10-50% for any failure to comply,. The adjustment under the new regime is 0-25%, and will only apply where a failure to follow the Acas Code is "unreasonable”
• An employee who has not submitted a grievance is no longer barred from bringing a claim.
• The submission of a grievance under the old regime triggered a three-month extension of time to bring a tribunal claim. There is no automatic extension of time under the new regime.
• Under the new regime, the Acas Code applies to any grievance and an "unreasonable" failure to follow it can affect compensation. 

Practical steps for employers

• Involve employees and/or their representatives in developing any new grievance and disciplinary procedures, and make sure the procedures are transparent and accessible to employees.
• Manage conduct and performance issues pro-actively before they get to a formal disciplinary stage.
• Investigate issues thoroughly. Even if the employee has attended an investigatory interview, always hold a disciplinary hearing once all the evidence is available, and allow the employee to put their side of the story (including calling witnesses unless this is unreasonable), before making any decision.
• Train managers how to handle grievances effectively, when to involve HR, and how to spot when there may be a potential legal claim.
• Encourage managers to resolve issues pro-actively and informally before they get to a formal grievance stage.
• Allow the employee to put their side of the story at a grievance meeting before undertaking any necessary investigation and again before making any decision.
• Keep written records, including minutes of meetings.
• Communicate decisions effectively and promptly, setting out reasons.

There will be uncertainty over compensation

One of the main problems under the new regime is that the Acas Code is not written in the precise language of a statute. Tribunals will have a wide discretion to decide what amounts to a failure to follow the Code, whether that failure is "unreasonable" and to what extent an uplift or reduction in compensation is "just and equitable". This will lead to considerable uncertainty for employers and employees until case law has developed.

Should you have any queries or require a new discipline and grievance procedure that is compliant with the new Acas Code please contact: nick.phillips@beswicks.com

The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published.  Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.

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