Recent Changes in UK Employment Law

Fall 2004

Statutory Disciplinary/Termination and Grievance Procedures

Employers in the UK have historically been at risk of liability if employees with one or more years of service (who can therefore bring claims for unfair dismissal) are dismissed on grounds of performance or conduct where no disciplinary procedure has been followed. The failure to follow a procedure was not, in itself, conclusive evidence of the unfairness of the dismissal and therefore an employee bringing a claim needed to show other relevant factors which rendered the dismissal unfair.

Similarly, liability could arise for an employer where a grievance raised by an employee was not properly addressed or dealt with but, again, the employee would need to show additional factors to bring such failure within an actionable head of claim.

With effect from 1 October 2004, the position has now changed. New legislation has been introduced which provides that any disciplinary or termination procedure and any grievance procedure must comply with those set out in the new regulations. This applies to disciplinary, grievance and termination issues in respect of all employees.

(a) Disciplinary/Termination Procedure

The mandatory disciplinary/termination procedure is a 3-step process as follows:

Step 1 - The employer must set out in writing the employee's alleged conduct, characteristics or the other circumstances which lead the employer to contemplate dismissal and must send a copy to the employee. The employee is then invited to a meeting to discuss the notice and the invitation must inform the employee of their right to be accompanied by a colleague or trade union representative (if they are a member of a trade union).

Step 2 - The meeting must only take place once the employee has had a reasonable opportunity to consider his/her response to the notice. The employee and employer must take all reasonable steps to ensure attendance and after the meeting the employer must notify the employee of the employer’s decision and the employee's right of appeal.

Step 3 - If the employee wishes to appeal, he/she must tell the employer and the employer must invite him/her to attend a further meeting. The appeal should be dealt with by a different (preferably more senior) manager/director and the employee must again be informed of his/her right to be accompanied. The employee must then be notified of the employer's final decision after the appeal meeting.

In very exceptional cases, a modified procedure can be used. However, it is likely that this will be very tightly restricted and interpreted by employment tribunals and would only apply in exceptional circumstances of termination for gross misconduct or cause. It is likely that it will only apply where termination comes immediately after discovery of the employee's conduct and it is reasonable in the circumstances to dismiss the employee. At present there is no case law as to when it is appropriate to use the modified procedure.

The modified disciplinary/termination process is a 2-step process as follows:

Step 1 - The employer must set out in writing the employee's alleged misconduct which has led to dismissal, the reasons for believing he/she was guilty of such misconduct and the employee's right of appeal against dismissal. This must then be sent to the employee.

Step 2 - If the employee wishes to appeal, he/she must tell the employer and the employer must invite him/her to attend a further meeting. The employee must be informed of his/her right to be accompanied. The employee must then be notified of the employer's decision after the appeal meeting. If possible the meeting should be held with a (preferably more senior) manager/director not involved in the decision to dismiss the employee.

All details of the employee's conduct should really be made available to him/her prior to any initial or appeal meeting (i.e. where either the standard or modified procedures are followed).

The right to be accompanied has also been significantly modified with one of the most major changes being enhanced rights for the accompanying colleague or trade union representative to make representations on behalf of the employee (whereas previously their role was much more restricted).

If an employee is dismissed and the employer fails to comply with the relevant mandatory procedure, such failure will lead to an automatic finding of unfair dismissal by an employment tribunal in respect of any employee with one or more years of service and an award of compensation to such employee.

The compensation awarded to such employee could be increased by the employment tribunal in such situations by between 10% and 50% (albeit it would still be subject to the statutory cap in respect of compensatory awards which is currently set at £55,000).

Whilst the procedure is required in respect of employees with less than one year's service, failure to comply in relation to such an employee will not entitle him/her to claim unfair dismissal but could give rise to a breach of contract claim (which would likely only be for the salary and benefits they would have received during the relevant procedure had it been properly carried out).

Of greater potential significance is the fact that failure to comply will also increase any discrimination award by between 10% and 50% (i.e. if the employee successfully claimed the employer had discriminated against him/her on the grounds of race, gender, sexual orientation, disability or religion). A discrimination claim may be brought by any employee and compensation in respect thereof is unlimited. This could therefore represent a significant cost to an employer.

In addition, if an employee is dismissed in breach of his/her contract of employment (e.g. payment of notice entitlement is not made), regardless of length of service the amount of damages awarded in respect of such breach would also potentially be subject to the 10-50% uplift referred to above.

(b) Grievance Procedure

The mandatory grievance procedure is also a 3-step process as follows:

Step 1 - The employee must set out in writing the relevant grievance and must send a copy to the employer.

Step 2 - The employee must then be invited by the employer to a meeting to discuss the grievance. The meeting must only take place once the employee has informed the employer of the basis of the grievance and the employer has had a reasonable opportunity to consider their response to the grievance. The employee and employer must take all reasonable steps to ensure attendance and after the meeting the employer must notify the employee of the employer’s decision and the employee's right of appeal.

In very exceptional cases, as with the disciplinary/termination procedure, a modified procedure can be used. However, the situations where the modified procedure can be used are likely to be very tightly restricted and interpreted by employment tribunals and would only apply where employment has ceased, the employer was unaware of the grievance before such cessation (or the standard procedure had not been commenced or completed) and the parties have agreed (after the employer has become aware of the grievance) that the modified procedure should apply.

The modified grievance process is also a 2-step process as follows:

Step 1 - The employee must set out in writing the grievance and the basis for it. This must then be sent to the employer.

Step 2 - The employer must set out their response in writing and provide a copy to the employee.

Once again, if the employer fails to comply with the statutory grievance procedure, an uplift in compensation awarded to the employee of between 10% and 50% may be granted by an employment tribunal on the same basis as referred to above in respect of the disciplinary/termination procedure.

In relation to failure by an employee to comply with either procedure (other than failure to formally lodge a grievance as mentioned below), the compensation awarded to the employee can be reduced by between 10% and 50% (although the employment tribunal can choose not to apply any reduction if it deems it equitable to do so).

Of particular significance in relation to employee claims, however, is that if no formal grievance has been lodged by the employee and the employee has not waited 28 days from the time of lodging such grievance, any claim filed by the employee with the employment tribunal will be struck out (i.e. the employee will not be permitted to proceed with his/her claim).

The intention of the regulations is therefore to try to ensure that employers and employees are given a fair opportunity to hear allegations and to resolve issues, prior to the involvement of employment tribunals and legal proceedings.

The statutory procedures are, as mentioned above, implied into every contract of employment as a matter of law. Any breach of the process (no matter how small) can lead to a finding of automatic unfair dismissal and/or an increase in compensation as mentioned above.

It is therefore vital that employers review their procedures to ensure compliance. If current procedures are consistent with the statutory regime, there should be no real issue provided the procedures are properly and consistently applied. If employers do not currently have disciplinary and/or grievance procedures, the statutory procedures will apply.

In either case, employers are strongly advised to train management and human resources staff in the implementation of the relevant procedures to avoid future liability.

One further point to note is that extensions of time for employees to file claims may arise if the parties are engaged in disciplinary and/or grievance procedures. It is therefore still important for an employer to seek to deal with the matters as promptly as possible.

Disability Discrimination

The Disability Discrimination Act (Amendment) Regulations 2003 have now come into force and they effect many changes to the previous disability discrimination protections for employees and obligations for employers.

Previously it was unlawful for employers with 15 or more employees to discriminate on grounds of disability (and this applied to both employees and candidates at interview). Any claim by an employee in relation to less favourable treatment could be defended by an employer if the employer could show that such treatment was justified by a reason which was substantial and material in the circumstances. Employers were also required to make reasonable adjustments to accommodate disabled employees.

The new requirements change the above to remove the exemption for employers with less than 15 employees. As a result, the legislation and its requirements now applies to all employers.

In addition, direct discrimination by an employer can no longer be justified as mentioned above. The only defence left open to an employer where an employee claims direct disability discrimination is to prove that the discrimination did not occur. An example of direct discrimination would be refusing to interview a candidate for a job purely because they suffered from a disability.

The burden of proof in disability claims has also been shifted so that if employees can prove facts which set out a case of disability discrimination, the employer will effectively be deemed to have unlawfully discriminated unless it can prove its innocence.

Harassment on grounds of disability is also now prohibited and the requirement to make reasonable adjustments to accommodate disabled employees has been extended, requiring more effort and care to be taken by employers.

Companies that provide services to the public also need to be aware of additional obligations which require them to take steps to remove obstacles in their premises which may prevent or hinder the use of their services by disabled people.

This area of law is continuing to develop and additional legislation is expected in the relatively short term which will cover matters such as banning discriminatory advertisements, requiring public sector companies to promote equal opportunities for the disabled and including specific medical conditions (such as cancer and HIV) within the definition of disability for the purposes of anti-discrimination legislation.

Employers must be careful to ensure that their employment policies and practices are consistent with the new legislative requirements and that no unlawful discrimination occurs. Again, training for management and employees is useful to try to ensure consistency and fairness in the workplace.

Employment Tribunal Rules

Various amendments to the rules relating to employees’ claims before employment tribunals have been made but the most significant changes are as follows:

Employees now complete a “Claim Form” to file their claim and employers are required to complete a “Response Form”.
The time limits for employers to respond have been changed. Employers must now respond within 28 days of the date the Response Form is sent out to the employer by the tribunal (rather than 21 days from the date of its receipt). This provides greater certainty but can also lead to slightly less time being available to file the employer’s preliminary defence.
It is now possible for default judgments to be entered in relation to monetary sums where these can be assessed from the contents of the employee’s claim (whereas previously liability could be confirmed in a default judgment with liability only being quantified later).
Significant changes have been made to costs rules, permitting greater rights to costs for unrepresented parties (i.e. individual employees without legal representation may be better placed to claim costs than previously was the case).

Minimum Wage Level

The minimum level of wage required by law to be paid has also changed (with effect from 1 October 2004) and is now increased to £4.85 per hour for adult workers over the age of 22 and to £4.10 per hour for employees aged 18 to 21 (inclusive).

Further Information

If you wish to discuss any aspect of the recent changes to UK employment legislation, or any other UK or European employment law matter, please telephone your usual Dorsey contact or Stephen Milne, who will be pleased to assist you.

Dorsey & Whitney’s UK Employment Law Department provides advice across the full spectrum of employment law practice acting for both employers and employees including: recruitment and termination of both executives and low to mid-range staff; redundancy; unfair dismissal; drafting and varying employment contracts, policies and handbooks; transfer of undertakings issues on business acquisitions; multi-jurisdictional reviews of, and advice regarding, employment terms and all related issues. We also provide seminars on general or specific employment law topics for clients on request.

Our clients are extremely varied and include single individuals, small and mid-range domestic businesses as well as large, multinational corporations.