The Employment Appeal Tribunal (EAT) has recently given two rulings which clarify the scope of the Acas Code of Practice on Disciplinary and Grievance Procedures (the Code).
In Phoenix House v Stockman the EAT ruled that the 25% uplift for non-compliance with the Code does not apply to dismissals for some other substantial reason (SOSR) where there is an irretrievable breakdown in the working relationship.
Similarly, in Holmes v Qinetiq Limited the EAT ruled that the Code only applied in cases where there was 'culpable conduct' on the part of the employee which requires correction or punishment. In this case it did not apply where poor performance was the consequence of genuine illness.
The Code is a statutory code of practice which sets out principles for handling disciplinary and grievance situations in the workplace and provides a benchmark for best practice for employers, employees and their advisers.
While failure to comply with the Code does not, by itself result in any penalty, an employment tribunal will take into account the recommendations of the Code when deciding whether or not a dismissal was unfair.
An unreasonable failure to follow recommend practice can result in a tribunal increasing any awards of compensation by up to 25%, if the tribunal considers it is just and equitable to do so. The Code only applies to 'disciplinary situations' which includes misconduct and poor performance, but explicitly excludes dismissals for redundancy and non-renewal of a fixed term contract. There has been confusion over whether the Code applies to SOSR dismissals.
In Phoenix House v Stockman, Ms Stockman worked for the respondent from 2007 until November 2013 when she was dismissed following a breakdown in the working relationship. Relations began to deteriorate following a clash of personalities, an unsuccessful grievance and Ms Stockman being issued with a written warning for misconduct. On her dismissal the respondent stated that the breakdown in the working relationship was irreparable and it therefore fell into the category of a SOSR dismissal.
The employment tribunal upheld her claim of unfair dismissal, finding that no reasonable employer would have held that the breakdown in the working relationship was irreparable. The tribunal held that the procedure adopted in carrying out the dismissal was not compliant with the Code.
The EAT decisions
On appeal the EAT upheld the tribunal's finding that the dismissal was unfair but rejected the finding that the Code and the 25% uplift applied.
The EAT reasoned that while elements of the Code can, and should, be applied to an SOSR dismissal, many of the provisions such as investigations are not always appropriate. To impose a punishment for not complying with the letter of the Code in SOSR dismissals would be going beyond what Parliament intended when they created this power for tribunals.
The EAT's decision in this case differed from that in the 2013 case of Lund v St Edmund's School which found that the Code did apply to a SOSR dismissal where the disciplinary procedure had been invoked, even if the ultimate reason for dismissal was not misconduct. The reasoning there was that the Code should apply where disciplinary proceedings have been, or ought to have been invoked, and that employers should assume that tribunals will apply the Code where it could be said that the dismissal is connected to a disciplinary or conduct issue.
It appears that the current trend is for narrowing the scope of the Code as there was a further EAT decision recently, Holmes v Qinetiq, which held that the Code only applies to a dismissal where there is 'culpable conduct' in either the form of misconduct or poor performance. Therefore the Code will not usually apply where the poor performance is the result of genuine illness.
What does this mean for employers?
These cases should not be seen as an invitation to employers to rip up their copies of the Code. The safest course is still to observe the relevant best practice recommendations for SOSR dismissals. Employers should consider whether any SOSR dismissal is in fact part of a factual matrix which includes performance or disciplinary issues; if so the Code will still apply.
It is helpful that the EAT has confirmed that the Code has no application in cases involving genuine illness as many of its provisions sit uneasily with such cases where an employer will wish to adopt a more sympathetic approach to the process. However, it is still important to follow an identifiable procedure in such cases and this is likely to take a considerable amount of time. The Code will still apply in cases where an employee is being dismissed for an illness which is suspected not to be genuine.