Employment Bulletin - January 2006

A (very) belated Happy New Year to you all. We hope you have had an enjoyable festive break, and are no doubt (by now) looking forward to the next holiday.

This month there is a special feature on the grievance procedures and an update on case law and important changes to compensation limits.

Statutory Grievances

As regular readers will be aware, the statutory procedures relating to dismissal and grievances, are extremely important and an employer’s failure to follow them can have significant consequences on the outcome of an Employment Tribunal case and the compensation awarded.

To briefly recap, in October 2004 statutory procedures for dismissals and grievances were introduced. The legislation sets out precise requirements in relation to each procedure. Both employers and employees face the possibility of compensation being increased or decreased if the procedures are not followed. In addition, for employers, they could face claims of automatically unfair dismissal if they do not comply with the dismissal procedures. For employees, they can be prevented from bringing most types of employment claims if the subject of their complaint has not been raised as a grievance, prior to proceedings being issued. It is this potential bar to bringing a claim that has been the subject of the Employment Appeal Tribunal’s attention in recent months. We set out below the relevance of these cases to employers.

What has to be included in the employee’s statement of grievance?

The Regulations provide for the employee to set out his grievance in writing and send it to the employer. The employer should then arrange for a meeting but before the meeting takes place, the employee should provide the employer with the basis of the grievance.

However, for the employee to be allowed to issue a claim, all he or she needs to do is send the statement of grievance to the employer. In the case of Shergold v Fieldway Medical Centre the Employment Appeal Tribunal held that the employee does not have to set out every detail of the grievance in that statement and only needs to provide sufficient information so that the general nature of the grievance can be understood. This is important as it confirms that the employee does not have to set out the basis of the grievance at this stage. Further, the employee will not be prevented from bringing a claim even if he or she fails to provide the basis of the grievance before the meeting. However, this latter failure may have an impact on the employee’s compensation if he or she is successful with their claim.

In that case, the Employment Appeal Tribunal also held that the procedures do not require any formality in respect of the grievance letter, other than the grievance be in writing. The employee does not have to use the word ‘grievance’ or refer to the statutory procedures.

Is a resignation letter a grievance?

In the same case, the EAT held that the grievance can be in the form of a resignation letter and it does not matter that the document which sets out the grievance is fulfilling more than one purpose.

Importantly, the Employment Appeal Tribunal has decided in the case of Thorpe & Soleil Investments v Poat & Lake that the intention of the employee is not relevant. Therefore, it does not matter whether the employee intended his or her letter to be a grievance. Therefore, it is dangerous to rely on any comment made by the employee that their letter is not a grievance, and the employee should be invited to the meeting to ensure that the employer’s position is protected.

In the case of Commotion Ltd v Rutty the Employment Appeal Tribunal decided that an employee’s request for flexible working did amount to a grievance which the employee could then rely on as enabling her to bring a constructive dismissal claim on the basis that the employer had not dealt with her request properly.

One case which actually went against the employee was Holc-Gale v Makers UK Ltd in which the EAT confirmed that a discrimination questionnaire did not amount to a grievance. This is due to a specific exemption under the Regulations. However, if an employee specifically requests that the employer treats the Questionnaire as a grievance, it would be advisable to do so.

Does the Employer’s own grievance procedure have to be followed?

In the case of Thorpe & Soleil Investments v Poat & Lake the Employment Appeal Tribunal held that an employee does not have to follow the employer’s own grievance procedure for the grievance letter to be valid as a statutory grievance. Therefore, even if the employer’s procedure specifies that a certain form has to be used for a grievance, this does not prevent an employee just setting out his or her grievance in writing.

This is important and if they haven’t been already, company grievance procedures should be reviewed to ensure that they comply with the statutory procedures and to ensure that the statutory procedures are followed, as a minimum. Line managers should be clear as to what they should do if they receive a written complaint.

These are important cases and demonstrate the Employment Appeal Tribunal’s reluctance to deny employee’s access to the Tribunal system. Basically, it is advisable for employers to treat any written complaint (in whatever format it is received, other than a questionnaire) as a grievance and to follow the statutory procedure accordingly. If not, if the employee then successfully brings a claim, his or her compensation could be increased by up to 50%.

It remains to be seen whether the same leniency will be shown towards employers in respect of the dismissal procedures. Therefore, employers should ensure that their dismissal and disciplinary procedures comply with them and are followed each time a dismissal issue arises.

Compensation Limits and Redundancy Payments

For dismissals taking effect on or after 1 February 2006, new compensation limits will apply. A ‘week’s pay’ which is used to calculate an employee’s redundancy payment and basic award in unfair dismissal cases (and other awards) will increase from £280 to £290. The maximum compensatory award for unfair dismissal claims will increase from £56,800 to £58,400. However, employers should be aware that there is no cap to compensation where there is a finding of unlawful discrimination. In addition, the Age Discrimination Regulations, which are due to come into force in October 2006, could make changes to how redundancy pay is actually calculated.

From the 1 April 2006, statutory sick pay will increase to £70.05 per week and statutory maternity, paternity and adoption pay will increase to £108.85 per week. These are increases of about £2 per week. There is also an increase in the earnings threshold which determines whether employees receive these payments. This increases from £82 per week to £84 per week.

Unfair Dismissal Compensation

For a dismissal to be fair, an employer must follow a fair procedure. This is the case even if the statutory procedures are followed to the letter. Compliance with the statutory procedures does not necessarily make a dismissal fair; it just means that the dismissal is not automatically unfair.

Following the introduction of the statutory procedures, the legislation on unfair dismissal was changed so that minor procedural failings, which would not have made any difference to the ultimate outcome, would not necessarily make the dismissal unfair. This is beneficial to an employer but is likely to have an impact on how compensation is assessed where there is a finding of unfair dismissal. This is because a Tribunal can reduce compensation where it is of the view that there was a possibility of dismissal given the circumstances of the case. This is referred to as a Polkey reduction after the case in which the principle was stated. However, where the statutory procedures are followed, it is likely that any Polkey reduction will be limited to a maximum reduction of 50%. This is because if the Tribunal were of the view that there was a lower than 50% chance of dismissal had the procedures been followed, the procedural failing would have been minor and, therefore, the dismissal would have been fair, and no compensation awarded.

Where the statutory procedures have not been followed (and therefore, there are major procedural failings and the dismissal is automatically unfair) it is still possible for compensation to be reduced by up to 100%, in appropriate cases.

The case of Gover v PropertyCare Ltd 2005 has confirmed that Polkey reductions should be considered in cases where there is a possibility that the dismissal could have fairly taken place. In this case, the employer wanted to change the terms and conditions of the employees’ contracts which it eventually did by dismissing and offering new terms. However, the procedure adopted by the employer was unfair. Despite this, the Tribunal reduced the employees’ compensation to reflect the fact that the employees would have been dismissed in any event had a fair procedure been followed. The employees appealed to the Employment Appeal Tribunal which dismissed the appeals and clarified that there are 4 possible outcomes where there has been an unfair procedure:

1. length of time cases i.e. where the dismissal would have occurred eventually (this was the category relied upon by the employer in the Gover case);

2. loss of chance cases i.e. where there was a possibility of not being dismissed (such as in a redundancy situation where the position of 1 of 2 employees is to be made redundant - the employer may be able to argue that there was up to a 50% chance of the employee being made redundant);

3. cases where an employee was likely to have been dismissed on another ground;

4. cases where the procedure is a complete sham (for instance, where an employer makes an employee redundant when no redundancy situation exists).

In respect of option 1, compensation can be limited to the period of time it would have taken for a fair procedure to have been carried out. In respect of option 2, compensation could be reduced by the percentage chance of dismissal. For option 3 there could be a substantial reduction due to the chance of being dismissed anyway. In respect of option 4, there would be no reduction.

Tribunals can also reduce compensation where the employee’s conduct has contributed to their dismissal, most notably in misconduct cases.

Obviously, whilst the above case is helpful for employers, an employer should always try and follow as fair a procedure as possible when dismissing an employee as the costs of defending an unfair dismissal claim (even if the outcome is a reduction in compensation) can be considerable.

Employment Status

Many factors are taken into account when determining whether an individual is self-employed or an employee, such as mutuality of obligation, control and personal service. i.e. whether that individual is obliged to provide his or her services personally or whether they can delegate their responsibilities to someone else. If they can only delegate their responsibilities if they are unable to perform their duties, then this is more likely to suggest that the individual is an employee. However, if they can delegate their duties if they are simply unwilling to perform them, this is consistent with the individual being self-employed.

This was confirmed by the Employment Appeal Tribunal in the case of Alan Bryant Green v St Nicholas Parochial Church 2005. In this case, the music director sought to argue that he had been an employee, rather than self-employed, and, as such, had unfair dismissal protection. One of the major factors which determined the case was the fact that he could delegate his duties, subject to the approval of the rector and such approval was not to be unreasonably withheld. The Employment Appeal Tribunal held he was self-employed.

Where parties are entering into a genuine self-employed agreement, consideration should be given to whether a substitution clause should be included which would enable the individual to delegate work, thus weakening any later arguments that he was an employee. Such a clause cannot be viewed in isolation, and the other characteristics of the relationship have to indicate self-employed status, but it will be beneficial.

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