Discipline under the new ACAS Code: a quick guide

This is a quick guide to the key issues in disciplinary procedures covering misconduct and poor performance, including practical steps to help employers avoid unfair dismissal and uplifts to compensation under the Employment Act 2008.

This guide reflects the law from 6 April 2009. It does not apply to dismissals taking place or disciplinary procedures started before that date.

The Employment Act 2008 (EA 2008) introduces a new regime affecting the vast majority of employment tribunal claims from 6 April 2009. It repeals the statutory dispute resolution procedures under the Employment Act 2002, and the associated Employment Act 2002 (Dispute Resolution) Regulations 2004, which are widely viewed as unworkable. The rules on procedurally-unfair dismissal found in section 98A of the Employment Rights Act 1996 will also be repealed, heralding a return to the old law under the leading case of Polkey v A E Dayton Services [1987].

At the same time, 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

The ACAS Code is intended to help employers and employees deal effectively with issues of alleged misconduct or poor performance in the workplace. 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, taking account of the provisions of the ACAS Code (section 207, Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA)).

It can affect the level of compensation

If an employee brings a successful claim for unfair dismissal or a number of other common types of claim (including those related to discrimination, breach of contract, working time, detriment, and deduction of wages) arising out of dismissal or disciplinary action for misconduct or poor performance, the level of compensation awarded to the employee can be affected if either party failed to follow the Code. If the employer unreasonably failed to follow it, 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. (Section 207A, TULRCA, as inserted by section 3, EA 2008).

The full list of claims to which this regime applies is set out in the new Schedule A2 of TULRCA.

When does the ACAS Code apply?

The Code applies to misconduct and poor performance cases

The ACAS Code is part of a new regime under the EA 2008 which replaces the statutory dismissal and disciplinary procedures (DDPs). Whereas the DDPs applied to dismissal for nearly any reason, the ACAS Code only 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 (paragraph 1, ACAS Code). Whether a "disciplinary situation" can cover anything other than misconduct or poor performance is not dealt with in the Code. It is also not clear whether non-renewal of a fixed-term contract for reasons of misconduct or poor performance should be included or not.

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 developed from unfair dismissal case law, and therefore employers should not ignore it.

How should misconduct or poor performance be handled?

The employer should investigate the issues

It is an important principle established in the case law of unfair dismissal that an employer should carry out a reasonable investigation, and this is reflected in the ACAS Code. This may involve investigatory meetings with the employee under investigation or it may simply involve the collation of other evidence. Any investigatory meeting should not result in disciplinary action without a disciplinary hearing.

If paid suspension is necessary during the investigation, this should be as brief as possible and kept under review. The employer should make clear that this is not in itself a form of disciplinary action.

The employer should inform the employee of the issues in writing

If there is a case to answer, the employee should be notified in writing of the alleged misconduct or poor performance and its possible consequences (including, where appropriate, the risk of dismissal) in sufficient detail to enable them to respond at a disciplinary hearing. Any written evidence, which may include witness statements, should be provided to the employee.

The notification should set out the time and place of the disciplinary hearing (which should be held without unreasonable delay while ensuring the employee has reasonable time to prepare their case). It should also set out the employee's right under the Employment Relations Act 1999 to bring a companion (either a fellow worker or a trade union representative) to the hearing.

There must be a disciplinary meeting or hearing

It is a basic principle of fairness that a decision whether to dismiss or take other disciplinary action should not be taken without a disciplinary hearing or meeting. Managers, employees and their companions should make every effort to attend the meeting. If the employee is persistently unable or unwilling to attend without good cause, the employer should make a decision on the available evidence. Either side should give advance notice of any witnesses they intend to call.

At the hearing:

The employer should explain the allegations and go through the evidence.
The employee should be allowed to set out their case and answer the allegations.
The employee should have a reasonable opportunity to ask questions, present evidence, call relevant witnesses and raise points about any information provided by witnesses.

The employer should inform the employee of the decision in writing

Following the hearing, the employer's decision should be sent to the employee in writing without unreasonable delay. If misconduct or poor performance is established, a dismissal would usually only be appropriate if there has been a written warning and a final written warning. Gross misconduct can justify dismissal for a first offence, but not without following the disciplinary procedure.

Written warnings should set out the nature of the misconduct or poor performance, the improvement required, and the timescale for improvement. They should also specify how long they will remain current, and the consequences of further misconduct (or failure to improve) within that period.

The employee has a right of appeal

If the employee feels the disciplinary action against them is unjust, 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.

The appeal should be heard without delay, ideally at an agreed time and place, and should be conducted impartially by a manager who (where possible) has not been previously involved. The employee can bring a companion to the appeal hearing.

How has the law changed?

Best practice may change

The ACAS Code is part of a new regime under the Employment Act 2008 which replaces the statutory dispute resolution procedures under the Employment Act 2002 from 6 April 2009. 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.

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

Almost any type of dismissal was potentially covered by the statutory DDPs, but there were complex regulations governing which procedure applied and when they might be excluded. The new regime only applies to disciplinary matters (including misconduct and poor performance).

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 an applicable DDP under 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 could be adjusted by 10-50% for any failure to complete a DDP, although less than 10% was permissible in exceptional circumstances. The adjustment under the new regime is 0-25%, and will only apply where a failure to follow the ACAS Code is "unreasonable".

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. It will also apply where the employer has sent the employee a "step 1" letter or held a "step 2" meeting under the DDPs before that date (Employment Act 2008 (Commencement No. 1, Transitional Provisions and Savings) Order 2008). However, in any other case (including where the statutory DDPs would not have applied anyway), the new regime will apply from 6 April 2009.

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 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 (paragraph 2, ACAS Code). The Code is not specific about how to involve employees and does not explicitly require employers to seek employees' agreement. Neither is it clear why the Code refers to employee and their representatives, rather than employees or their representatives.

Where an employer has failed to put any written procedures in place, or has put procedures in place without involving employees, this could technically be a breach of the Code, even if the employer ultimately follows a fair procedure. It is not clear what view tribunals will take of this, especially where the employee has not suffered any additional injustice as a result.

Evidence at disciplinary hearings

The ACAS Code recommends two significant steps (see below) that are viewed by many as not strictly necessary from an unfair dismissal perspective, 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". While asking questions and presenting evidence is generally viewed as essential to natural justice, the right to call witnesses to the hearing is not. Case law has established that a disciplinary hearing is not a quasi-judicial process, and it would usually have been considered sufficient for the employer to interview witnesses (including those whose evidence favours the employee) as part of its investigation, and to rely on their statements at the hearing without having to call the witnesses themselves.

There is no specific requirement for the employer to call its own witnesses, or to allow the employee to cross-examine them. The Code does not even explicitly state that employees must be allowed to question their own witnesses directly, merely that they be allowed to "call" them. This may give the employer some control over the conduct of the hearing. However, the employee should be permitted to "raise points about" a witness's testimony.

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

While it was previously considered best practice to allow employees a right of appeal against a warning, the statutory DDPs did not apply to warnings and therefore there were no further consequences if an appeal hearing was denied. Under the new regime, 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.

Only claims by employees are affected

A tribunal may only adjust compensation in cases involving employees (section 207A(1), TULRCA). Where the claim involves a right which is available to a wider category of individual, such as whistleblower protection (which is available to workers), or protection from discrimination (which is also available to self-employed individuals), this may lead to satellite litigation over employment status in cases where this would not usually be an issue.

There will be uncertainty over compensation

One potential problem 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, and may make it difficult to advise on appropriate figures for settlement of claims.

Practical steps

For employers

Involve employees and/or their representatives in developing any new 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.
Keep written records, including minutes of meetings.
Communicate decisions effectively and promptly, setting out reasons.

For employees

Make every effort to attend meetings and consider bringing a companion.
Submit a written appeal if not satisfied with the outcome and set out the reasons why not.
Be aware of the time limit for bringing a claim if the appeal is not successful or if the employer does not deal with it promptly.

Contact

Judith Ellery Head of Employment

David Baynton Solicitor

Related Issues

This article summarises the law on issues which we believe may be of interest to your business. It is not a comprehensive review of the subjects and accordingly is published without responsibility for loss occasioned to any person(s) acting or refraining from action as a result of information published. This document is provided for information only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.