18 months of learning: The dispute resolution procedures

The Statutory Dispute Resolution Procedures were introduced by the Employment Act 2002 (Dispute Resolution) Regulations 2004 (the Regulations) on 1 October 2004. Although breach of the statutory procedures does not give rise to a free-standing claim, a breach does have potential significant consequences: rendering a dismissal automatically unfair, may bar an employee from bringing a claim, and will, in most cases, result in an increase or decrease of compensation.

One of the aims of the Regulations was to encourage resolution of workplace disputes and reduce the number of Employment Tribunal claims. Unfortunately, the jury is still out on whether the Regulations will achieve that aim. The apparently straightforward provisions are not quite as they seem. A considerable amount of time is being spent by lawyers, tribunals and businesses alike grappling with the interpretation and application of the Regulations.

In light of the significant consequences of failing to follow the procedures, it is not surprising that cases regarding application of the new procedures have now made their way to the Employment Appeal Tribunal (EAT).

Below we review the growing body of recent case law on the application of the Regulations.

Statutory grievance procedures (SGP)

2006 began with a rush of decisions from both the Employment Tribunal and Employment Appeal Tribunal on the interpretation of the SGP. In summary an employee is obliged to send a statement of grievance in writing to his employer, the employer is obliged to deal with that complaint and finally the employee has a right to appeal if dissatisfied with the outcome. Without raising a grievance (and waiting 28 days) an employee is prevented from bringing an Employment Tribunal claim based on the issues which should have been covered by a grievance. This all sounds quite straightforward but the issues which have come before the tribunals suggest that the reality is somewhat different.

So what lessons can be learned from recent decisions?

The SGP case law lessons in summary

• There is no need for the letter to set out the exact nature of the complaint.
• The letter does not need to state that it is a grievance.
• There does not need to be any intention on the part of the employee to invoke the SGP at the time the letter is sent.
• Complaints about the way in which a grievance has been handled can amount to a fresh grievance.
• A statutory grievance may be contained in something else, such as a flexible working request.
• But, a discrimination questionnaire is not a statement of grievance!
• A complaint lodged by a third party on behalf of an employee can amount to a valid statement of grievance.

In detail…

What does the statement of grievance need to contain?

The Employment Act 2002 merely requires that the grievance should be in writing. There is no further guidance given. Tribunals are accepting as grievances very broadly worded complaints including letters of resignation where details of complaints are merely outlined. It appears that just about anything in writing indicating that the employee is unhappy about something can amount to a grievance.

In the case of Tudor v Lowbirch Ltd, the Manchester Employment Tribunal held that a resignation letter that simply said "it is with regret I now find myself in the unfortunate position of having to tender my resignation. I feel that I cannot work under the constant watchful eyes and not being trusted to undertake my job properly" followed by letters stating that the employee was considering a claim to the Employment Tribunal was sufficient to amount to a grievance.

In the case of Shergold v Fieldway Medical Centre, the EAT also concluded that the employee had made a valid grievance by setting out a grievance in a letter giving notice of resignation. As held in the Tudor case, the letter simply stated "it is with regret that I write to end my employment" and then complained in general terms about the practice manager. There was no need for the letter to set out the exact nature of the case or be identical to the content of subsequent proceedings provided that there was material similarity. There was also no requirement for the letter to invoke or mention the statutory or company's grievance procedure.

In Martin v Class Security Installations Ltd, the employee resigned without notice. After the employer complained to him that he did not give any notice, the employee wrote to the employer explaining that he did not have a good working relationship with another employee and referred to being bullied and intimidated by him. In particular, he said that he left after an incident that had been the "final straw" and that working out his notice period would have made his life unbearable. A few days later, Mr Martin's solicitors wrote to the employer claiming that Mr Martin was entitled to resign without notice as his resignation was in response to the employer's repudiatory breach of contract. They indicated that the employer's conduct would form the substance of a grievance which would follow in due course.

The EAT found both letters were sufficient to amount to a grievance as the first letter had identified that something had happened which was the "final" straw. As regards the solicitor's letter, the EAT held that as it identified that Mr Martin had resigned in response to a repudiatory breach of contract, that was sufficient to satisfy the requirements, despite the fact that the letter said the grievance would be formulated at a later date!

But there is some comfort for employers. In Canary Wharf Management v Edebi, the EAT held that the objective of the SGP could only be fairly met if employers "on a fair reading of the statement and having regard to the particular context in which it is made, can be expected to appreciate that the relevant grievance is being raised". In this case the employee brought a claim for disability discrimination. In the letter he claimed was his grievance, there was no specific reference to a disability discrimination issue (although concerns had been raised nine months previously). Although the claimant had referred to health problems in relation to all employees carrying out a similar role, he had not specifically referred to a failure to make reasonable adjustments or of his less favourable treatment. The tribunal found that the wording of his letter did not raise a grievance relating to disability discrimination so he could not pursue his subsequent tribunal claim.

Must there be an intention to invoke the grievance procedure?

There is no requirement that the employee must specify in the statement of grievance that they are actually seeking to raise a grievance or that they are relying on an employer's own grievance procedure. And there is no requirement that the employee even intended the letter to amount to a grievance when the letter was sent!

In Thorpe and Soleil Investments Ltd v Poat and Lake, the EAT held that the employee's intention in sending a letter of resignation is not relevant when determining whether a valid grievance has been made. Employers must treat a letter as a grievance even though it appears that the employee is merely setting out complaints, even as part of a resignation letter, with no intention of seeking to have those issues resolved through a grievance procedure. In the Tudor case (above), the employee actually admitted that she did not intend her letter of resignation to amount to a grievance. This was considered to be irrelevant.

Also, in Galaxy Showers Ltd v Wilson, the EAT found that a letter of resignation did not need to indicate any intention to pursue a grievance procedure with the employer.

The key thing for employers to bear in mind is the need to treat such letters as grievances. A letter to the employee inviting them to a hearing or (if the SGP allows) to deal with the grievance in writing will protect the employer's position. If the employee doesn't take up the opportunity to have the grievance heard, the employer's responsibilities under the SGP have been complied with.

Can complaints about the way in which a grievance has been handled amount to a grievance?

The EAT has held that it does. In the case of Mudchute Association v Petherbridge, Mr Petherbridge raised a grievance about his line manager's conduct towards him. His grievance was considered by the employer's personnel sub-committee but rejected. Mr Petherbridge subsequently appealed this decision to his employer's Board of Trustees. The appeal was also rejected and Mr Petherbridge resigned. He then wrote to one of the employer's trustees stating that the appeal under the grievance procedure had been the "final straw". He again set out the original complaint but also made specific complaints against the individual who had considered his original grievance and the individual who had considered his appeal.

The EAT upheld the Tribunal's finding that the letter to the trustee was a grievance for the purposes of the Regulations in relation to the way in which his original grievance had been handled. The EAT found that the Tribunal was entitled to draw a distinction between the part of the letter which related to Mr Petherbridge's line manager and his new complaint about the way in which his grievance had been handled at the original and appeal hearings. This was considered to be a fresh complaint and something which had not been the subject matter of the original grievance. Accordingly, a failure to deal with a grievance properly might of itself amount to discrimination or to a breach of the implied duty of trust and confidence and this could give rise to a claim for constructive unfair dismissal.

As a result of this decision, complaints by an employee about the way in which a grievance has been handled should be considered as a fresh grievance and dealt with in accordance with the Regulations. This seems to suggest that if a grievance is raised about the way in which the grievance procedure has been dealt with, it is incumbent on the employer to investigate and treat that further complaint as a separate grievance.

Can a statement of grievance be contained in some other statutory notice?

Flexible working requests

In Commotion v Rutty, Mrs Rutty applied in writing for a variation to her working pattern under the flexible working provisions of the Employment Rights Act 1996. Her request made no suggestion that that letter should be considered to be a grievance (she had earlier made a request for variation albeit not in writing, which had not been successful). No subsequent grievance letter was filed with the employer following her resignation and claim for constructive unfair dismissal. The EAT concluded that the written request to vary her working pattern amounted in itself to a step 1 grievance letter. The EAT relied on Regulation 2(2) of the Regulations which provides that it is irrelevant whether the grievance letter deals with any other matter. Whether this decision is in fact correct is open to debate. The fact of the matter is that it was not the employee's original working pattern which was the reason for her resignation. It was the employer's failure to deal properly with her request for flexible working.

Discrimination Questionnaires?

What can be said categorically is that a discrimination questionnaire is not a statement of grievance. Although regulation 14 is very specific on this point, it did not initially stop a debate which resulted in an EAT decision in the case of Holc-Gale v Makers UK Ltd. In this case Mrs Holc-Gale served a written questionnaire on her employers in relation to a potential claim for equal pay. As would be expected, the questionnaire provided a summary of why she believed she had not received equal pay. She then raised a number of questions in relation to her potential claims. When she subsequently brought an equal pay claim, she referred to the summary section of the equal pay questionnaire as constituting the grievance she had put in writing to her employers. The EAT accepted that regulation 14 was designed to exclude the statutory questionnaire procedure from the statutory definition of a grievance.

When does the automatic extension of the time limits apply?

Regulation 15 provides that the original time limit (generally three months) for bringing a Tribunal claim is extended by a further period of three months where the employee attempts to lodge a claim with the tribunal within the normal time limit, but in circumstances where he/she has failed first to lodge a grievance. However, to benefit from the three month extension, the employee must lodge the statement of grievance within one month of the expiry of the original time limit.

A question mark arose in relation to discrimination claims: does 'original time limit' for bringing a Tribunal claim mean the normal three months under the SGP or does it include any extension of time where the Tribunal uses its just and equitable discretion to extend time under discrimination legislation? The EAT in BUPA Care Homes (BNH) Ltd v Cann and Spillett v Tesco Stores Ltd has now confirmed that in a discrimination case, the "original time limit" includes any extension by virtue of the exercise of the Tribunal's just and equitable discretion. Therefore, even though the grievance was submitted in these cases more than four months after the act of discrimination complained of (and therefore outside the one month after the three month limit) the claims were permitted to proceed.

Who can lodge a grievance?

Does the grievance need to be written and lodged by the employee him/herself? The answer is no. A complaint lodged by a third party on behalf of an employee can amount to a valid grievance.

In Mark Warner v Aspland, the EAT upheld the Employment Tribunal finding that a solicitor's letter before action can amount to a valid grievance for the purposes of the Regulations. The EAT sitting in Scotland in Arnold Clark Automobiles v Stewart came to the same conclusion and found that there was no requirement that a grievance must be non-confrontational, without threats of legal action or mention that it is a grievance. It also made no difference that the letter was marked "without prejudice" as the subsequent claim brought by the employee related to the subject matter of the grievance.

In the case of Dr R R Vaddhi Reddy v Cardiff and Vale NHS Trust, the Cardiff Employment Tribunal accepted that a letter written by the BMA on behalf of Dr Reddy and two other employees amounted to a grievance by virtue of Regulation 9 which allows for "collective grievances" to be raised on behalf of two or more employees.

Statutory dismissal and disciplinary procedures (SDDP)

Although to a lesser extent, there have also been some case law developments in relation to the SDDP. The SDDP applies when an employer contemplates dismissal or taking relevant disciplinary action against an employee. The SDDP is normally a three-step procedure involving:

• First Stage - the employer must put in writing the circumstances that could result in the employee's dismissal or disciplinary action and send it to the employee.
• Second Stage - the employer must invite the employee to a hearing where the matter can be discussed. Following the meeting the employee must be informed of the decision and the employee must be offered the right to appeal.
• Third Stage - if the employee appeals, an appeal meeting must be held and the employee informed of the final decision.

So what lessons can be learnt in relation to the SDDP case law?

In detail…

What is meant by when an employer 'contemplates' dismissal or disciplinary action?

Two EAT decisions have considered the question as to when an employer first 'contemplates' dismissal. In the context of the specific cases, the issue was of importance as the events straddled the coming into force of the Regulations on 1 October 2004. However, in future this is still an important concept as under regulation 6 the SGP cannot be used where the grievance is that the employer is contemplating dismissal or relevant disciplinary action. In Madhewoo v NHS Direct, in July 2004 the employee was suspended during a preliminary investigation into an incident of incorrect advice being given to a caller. In September the employee was informed that the preliminary investigation was concluded and the matter would proceed to a formal disciplinary hearing. It wasn't until the end of October that the employee received a letter from the HR department specifying the charge of gross misconduct and inviting him to a disciplinary meeting and warning that the matter may result in his dismissal.

The EAT stated that the term "contemplating" a dismissal involves the employer having considered a course of action which might result in dismissal but the decision to dismiss not having been made. What is 'contemplated' by an employer is what is in its mind and there is no element of communication to the employee required. The relevant date was not when the employee had actual knowledge that the employer was contemplating dismissal.

Furthermore, although an earlier incident may be part of a chain of events resulting in dismissal, that does not mean that dismissal was in the employer's contemplation at that earlier time.

In Ferrao v Hertz (UK) Ltd, an incident of misconduct was detected in August 2004 (just before the employee was to go on a 4 week holiday). The employee was informed on 6 September that the matter would be reported to the area manager. The matter was then dropped. It was only after similar incidents occurred 14 to 22 October that the employer decided something had to be done and instigated an investigatory interview leading to the eventual dismissal in December. It was found that the employer did not contemplate dismissal until October.

What information must be provided in the Stage 1 letter and at the Stage 2 meeting?

What happens if in the course of a disciplinary hearing, evidence emerges that would identify potential misconduct, which, although closely related to the original misconduct, was a variation of it - does the employer have to send a fresh Step 1 letter?

In the case of Silman v ICTS (UK) Limited the employee was invited to attend a disciplinary hearing into "allegations of unauthorised absence and falsification of company records". During the course of the disciplinary hearing the employee maintained that he had come to work but did not sign in as he had stayed in his car doing paperwork. The original disciplinary hearing was adjourned and at a second hearing there was focus on what the employee had been doing whilst in his car. One of the reasons for the employee's dismissal was misuse of company time related to the time spent in his vehicle. The Employment Tribunal rejected his claim for unfair dismissal and the employee appealed stating that one of the reasons for his dismissal - misuse of time - had not been referred to in the stage one letter.

The EAT considered that there had merely been a shift in focus and there was no obligation on the employer to send out a new stage one letter on each occasion. This was merely a variation to the original misconduct.

We now also have the EAT decision in Alexander & Hatherley v Bridgen Enterprises, in which the EAT took the opportunity to issue guidance on how each step of the SDDP should be taken. The EAT emphasised that the statutory procedures are not concerned with the reasonableness of the grounds for dismissal, or the basis for those grounds, but merely if the information has been provided. Briefly, the EAT advised that to comply with the SDDP:

1) In step 1 the employer must set out in writing the grounds which lead it to contemplate dismissing the employee (in broad terms) and invite the employee to a meeting.

In a conduct case this would involve identifying the nature of the misconduct in question (for example, fighting, insubordination or dishonesty). In a redundancy situation the employee simply needs to be told that he or she is at risk of dismissal and why i.e. redundancy.

2) In step 2, the employer, prior to the meeting, must inform the employee of the basis of the grounds referred to in the Step 1 letter. This is essentially the reasons why the employer is contemplating dismissing the employee on the grounds which have been stated. This information does not need to be provided in writing.

In a misconduct case, this will be the case against the employee, not the detailed evidence, but sufficient detail to enable the employee to put their side of the story. In redundancy cases, the employer must explain why there is a redundancy situation and why the employee is being selected. Details of the selection criteria which have been used must be provided to the employee in addition to their own assessment. The assessments of other employees do not need to be provided, nor the "break point" (that is, the mark which the employee would have to attain to avoid being selected for redundancy).

What amounts to a request for appeal under Stage 3?

Following the Stage 2 meeting, the employee must be offered the right of appeal to comply with Step 3.

In the case of Piscitelli v Zilli Fish Ltd, the EAT found that a solicitor's letter before action did not raise an appeal against dismissal. On the facts of that case, the solicitor's letter did not request reinstatement or reengagement. Only a cash settlement of a potential claim was sought.

An interesting point has arisen in Van Dieren v Edwards. The employer offered the employee the opportunity to have an appeal heard by way of written representation. This was as an alternative to attending a face-to-face meeting. The employee accepted the offer. It is tempting to take the view that all the employee is obliged to do under the terms of the statutory procedures is to inform the employer of his or her desire to appeal. However, in this case the EAT stated that:

"there is nothing in the Regulations which exempts an employee from the obligation to attend a meeting called under either the grievance or the disciplinary procedure on the basis that the employer had offered to consider the matter in writing, however unfortunate that may be".

So no written process can be substituted even if the parties agree (unless the two-stage modified procedure applies).

How are tribunals approaching compensation uplifts?

If an employer fails to follow the appropriate statutory procedure, and the employee brings a successful tribunal claim, the tribunal must uplift the employee's award by 10 per cent and may, if it considers it just and equitable to do so, increase the award by up to 50 per cent.

Views currently diverge on the starting point for the applicable uplift. Some legal commentators advocate a starting point of 10 per cent, which should only be departed from where it is "just and equitable" to do so. Others suggest that, in the event of failure of procedure, 50 per cent uplift should be applied unless there are good reasons to award less.

There have now been a small number of reported cases on the Employment Tribunal's approach to exercising its powers to uplift compensation for breach of the statutory procedure.

• In Norris & Robertson v Lamberts (T/A Black Bull Inn), the Employment Tribunal awarded the maximum uplift for unfair dismissal, wrongful dismissal and sexual orientation harassment. In this case, the employee had been summarily dismissed and marched off the premises without any procedure or written reason for the dismissal. The Tribunal did not give any particular reason for the 50 per cent uplift other than that there had been a total failure of procedure. It is also interesting to note that the 50 per cent uplift in this case was applied not only to the compensation for unfair dismissal, but also to the compensation for harassment, deductions from wages and unpaid holiday pay, even though the requirement to follow the SDDP only applied in relation to the dismissal.
• In Varoujian v Chelsea Textiles Limited, an employee was dismissed without any advance warning of the disciplinary meeting, and she was not given any evidence of the grounds for her dismissal or any time to consider her position. Her employer also failed to allow her to be accompanied at the meeting, following which she was summarily dismissed and promptly removed from the premises. The tribunal awarded the maximum 50 per cent uplift in compensation (although five per cent was deducted to reflect the employee's contribution to her dismissal).
• In Giles v Cornelia Care Homes, a case of indirect sex discrimination concerned a female employee who was refused permission to reduce her working hours to fulfil her childcare needs. After a long period of discussion with her employer, she submitted a formal grievance letter but received no response from her employer, despite sending a reminder letter shortly afterwards. The Tribunal viewed this as a clear breach of the Regulations and uplifted her compensation by 40 per cent. The reported cases to date, indicate that, at least in the event of a total failure of procedure, 50 per cent uplift is likely to be applied unless there are good reasons to award less.

On the other hand, where it is the employee's failure, the Employment Tribunal must decrease the amount of any award by 10 per cent and may, if it is just and equitable, make a further reduction of up to a 50 per cent in total.

In Ferrao v Hertz (UK) Ltd, the employee failed to comply with the statutory procedure, in failing to exercise his right to under the employer's appeal procedure. The Tribunal applied the minimum 10 per cent discount.

The future

The department of trade and industries (DTI) will be carrying out a review of the operation of the Statutory Dispute Resolution Procedures later this year, which will hopefully address whether they do in fact resolve disputes without reference to the tribunals. In particular, it will hopefully consider issues that have arisen such as what amounts to a statement of a grievance. There are also inconsistencies, as the procedures do not include all complaints - part timers claims, fixed term employee claims, right to be accompanied are all excluded from their ambit. Accordingly if a female (part-time) employee is treated less favourably than her (mostly male) full-time colleagues, she must submit a grievance before bringing a sex discrimination claim, but not if she only wishes to bring a claim under the Part-Time Workers Regulations 2000. See chart below setting out when the Dispute Resolution Procedures apply in relation to some of the most common types of claims.

What is certain, is that cases will continue to arise as to the application of the Dispute Resolution Procedures and employers will need to be aware how the Procedures fit in with internal procedures and best practice.

Do the dispute resolution procedures apply?

 

Claim	Apply
Unfair Dismissal	v
*Breach of Contract	v
Statutory Redundancy Payments	v
Sex Discrimination	v
Race Discrimination	v
Disability Discrimination	v
Religion or Belief Discrimination	v
Sexual Orientation Discrimination	v
Less favourable treatment of part-time workers	X
Less favourable treatment of fixed-term workers	X
Protected disclosures (whistleblowing)	v
Working time	v
Deductions from wages	v
Time off for antenatal care, parental leave, time off for dependants, trade union/work council duties	X
Failure to consult over Collective Redundancies	X
Failure to consult under TUPE	X

*In breach of contract cases, the rules on admissibility of claims do not apply, but a tribunal can increase or reduce compensation where the SDDP or SGP applies but has not been followed.