Employment Act 2002 (Dispute Resolution) Regulations 2004

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Introduction and Contents:

In this dissertation I shall perform a rigorous analysis of the impact that the Employment Act 2002 and its 2004 Dispute Resolution Regulations has had on all parties involved in the Employment Tribunal and pre-Tribunal process.

In order to do this it will be necessary to first examine the nature of the system as it was prior to the introduction of these reforms, for only through comparison can the full effect of the impact be understood; i.e. if the new reforms have not significantly changed the legal position of each party involved, then it goes without saying that the impact will likewise be insignificant. I shall therefore dedicate a section of this essay to the study of the law pre-2004, which will necessarily include an exposition into the nature and function of Employment Tribunals more generally.

In order to assess the nature of the impact, it will also be necessary to understand and engage with the rationale behind these reforms, and it is for this reason that I shall also dedicate a section of this essay to the study of the policy paper which preceded the 2002 Act [‘Routes to Resolution’ 2001]. In this section I shall also engage with the question of why it has been deemed necessary by the Government to improve legislation to afford greater protection to individual employees. This latter discussion will prove very useful in our later discussion of the effects the 2002 Act and its 2004 Regulations have had on the non-legal union representatives of employee claimants.

I shall then discuss the content of the new legislation in some detail, examining the Regulations themselves, and attempting to understand how each regulation fits in with the rationale of the Act, and how on a practical level each Regulation purports to realise this aim.

Having completed all the aforementioned tasks I shall then be in a position to engage directly with the question at hand, and attempt to evaluate the impact that the Employment Act 2002 (dispute Resolution) Regulations 2004 have had on Tribunals, the higher courts, Respondents, Claimants and the Representatives of Respondents and Claimants. I shall structure this section of the essay in this order, addressing the issues involved for each of these parties in turn.

I shall also dedicate a section of this essay to a discussion of ACAS, and the role that this statutory body has played in the Tribunal process in reducing some of the aforementioned negative impacts on all the parties involved, particularly individual claimants.

Having done this, I shall then be in a position to assess to what extent I believe the 2002 Act has had a positive or negative impact on our Employment Law system as a whole, and be able to make some assertions as to future measures which will be necessary if these Regulations are to work successfully in practice without jeopardising the interests of any parties concerned.

I shall conclude by summarising the main findings of the dissertation and providing some of my own original insights into the issues of the ever changing Employment Law landscape.

The structure of this dissertation shall therefore take the following form:

    1. The law and procedural requirements prior to the 2002 Act.
    2. The nature and function of the Employment Tribunal
    3. Routes to Resolution
    4. The downfall of the Unions and the greater need for individual employee protection.
    5. The Employment Act 2002 (Dispute Resolution) Regulations 2004
    6. The impact that the Employment Act 2002 (dispute Resolution) Regulations 2004 have had on:
      1. Tribunals
      1. Higher courts
      1. Respondents
      1. Claimants
      1. Representatives of Respondents and Claimants
  1. The role of ACAS and how, if at all, it has managed to effect the above identified impacts.
  2. To what extent has the 2002 Act had a positive or negative impact on our Employment Law system as a whole?
  3. What future reforms might be necessary to ensure the aims of the 2002 Act are realised without jeopardising the rights of any parties involved in the Employment Law dispute process.
  4. Summary, conclusions and original insights into the issues and complexities involved.

1] The law and procedural requirements prior to the 2002 Act:

The law prior to the Employment Act 2002 and its 2004 Dispute Resolution Regulations was not too dissimilar. The law was governed by the Employment Act 1996, and this act did impose certain procedural requirements, but not of the standard and obligatory kind which we are about to discuss. At this stage I would like to leave my discussion of the law prior to 2002 here, but I shall address this issue at great length in the forthcoming sections of this dissertation where I discuss the evolution of the Employment Tribunal Service since its inception.

2] The nature and function of the Employment Tribunal:

Employment Tribunals were originally established as a mechanism by which employment disputes could be resolved with as little legal intervention as possible. I was believed that by supporting parties to resolve their disputes in an arena which would allow each party scope to discuss their differences, better work place practice could be encouraged.

In light of the fact that it is within the workplace where these disputes arise, the government decided to introduce reforms which would encourage resolution to take place in the workplace too. In this way disputes may be settled before they escalate into arguments so acrimonious that amicable resolution would be impossible. By avoiding the need to depend upon legal mechanisms it was believed that such workplace settlement would be encouraged, and this rationale is more prevalent and important in today’s modern legal climate as it was when the Tribunal Service was first introduced and implemented. Whilst I do not wish to discuss the role of ACAS at this stage, it is important to note that this statutory body was set up alongside the Tribunal Service to develop an individual conciliation and alternative dispute resolution culture which would aid the Tribunal Service to achieve its aim of shifting the focus from legal resolution to something more akin to workplace mediation.

It might be argued that the role of the employment Tribunal in its modern for has not significantly changed since its post-Donovan Commission inception in 1968, and some might argue even before. The Donovan commission was instructed to conduct a full investigation into the state of UK employment relations, with particular focus on the role Trade Unions were playing in protecting the rights of individual and collective employee rights. From their investigation the Donovan Committee concluded that collective bargaining, or the kind promoted by the strong Trade Unions of the day, was not the most suitable way of ensuring good working practice and swift dispute resolution in the workplace. It was based on these recommendations that the government of the day decided to modify the role of the Tribunal to one where dispute resolution would feature as a priority. In this way individual rights could be allowed to prevail, and individual disputes could be dealt with in a way which would be ‘accessible, speedy, informal and inexpensive.’ Whilst the Redundancy Payments Act 1965 and the introduction of statute to protect against unfair dismissal in 1971 provided the legal framework to introduce this change, it was certainly to findings of the Donovan Committee Report which should really be held responsible for turning the Tribunal into the adversarial system which it is today.

Employment Tribunals are therefore simply courts presided over by three ‘tribunal officers’ one of which, The Chair, is a legally qualified practitioner, one being someone who is biased towards the protection of the rights of employees [such as a trade union representative], and the other for the side of the employers.

With this in mind, let us now conduct a thorough analysis of the Employment Act 2002 (Dispute Resolution) Regulations 2004, and a full discussion of the social and legal circumstances surrounding the introduction of these procedural regulations.

3] Routes to Resolution and the rationale behind the new reforms.

The Employment Act 2002 (Dispute Resolution) Regulations came into force on the 1st October 2004. These regulations were the final stages in the Labour government’s carefully considered plan to create a new, improved employment dispute resolution procedure here in the UK. The framework for this new dispute resolution procedure was conceptualised in 2000, drafted in 2001 in a policy paper entitled ‘Routes to Resolution,’ and published officially in 2002 as the Employment Act which received Royal Assent on 8 July 2002. Two years later, the regulations required to effect this framework were published as the Employment Act 2002 (Dispute Resolution) Regulations 2004.

The framework of the 2002 Act was created in direct response to the worrying statistics published in 2001 [Roads to Resolution] pertaining to the growing inefficiency of the Employment Tribunals Service [number of claims had trebled over a period of ten years], and the growing backlog of cases yet to be heard [in 2001, up to 9,000 cases]. It was therefore decided that much of this legal action could be avoided if aggrieved employees were encouraged to resolve their employment law issues through internal mediation with their employers, rather than through legal action in the Employment Tribunal. In this way it was envisaged that many of the less acrimonious disputes could be settled out of court, reserving the expertise of the Employment Tribunals service for hard cases where such mediation would be either impossible or unsuitable. By avoiding legal action wherever possible, it was envisaged that vast amounts of money and time would be saved by all parties concerned, especially for employers, who usually are forced to pay their own costs in such litigation procedures, reducing the burden on the Employment Tribunal Service, and allowing to function more efficiently and more effectively in those cases where judicial intervention is necessary. In order to achieve this, they realised that it would therefore be necessary to impose minimum procedural requirements upon all employers in order to ensure that employees had access to such internal grievance/mediation processes, and as such would not need to instantly resort to action in the Employment Tribunals. The 2004 regulations were designed to be just that.

Let us now spend some time discussing the original Policy paper which paved the way for the 2002 Act and its 2004 Regulations entitled ‘Road to Resolution.’

This document was published by the government in 2001, to outline the new reforms which has been drafted so that certain representatives from different industry sectors could provide their feedback on whether the government was on the right track or not. Centre to the ideals contained within the proposed reforms was ‘the fundamental principles of access to justice, fair and efficient tribunals and a modern, user-friendly public service.’ The threefold rise of disputes in the workplace over the previous ten years provided the justification and the momentum for these reform suggestions, along with a strong belief that lots of these disputes could have been nipped in the bud and resolved at an earlier stage if workplace discussions and grievance procedures were established and promoted.

The cost saving was also of central importance; Tribunals are expensive to operate, and the growing number of claims each year was making the burden of this service an intolerable one on the public funds. Routes for resolution envisaged that under a new system of dispute resolution at work, less claims would reach the tribunal which would not only have the effect of saving businesses money, but would also relieve some of the financial burden which had previously been weighing down on the State.

Routes to Resolution also discussed what we now commonly refer to as ‘ADR’s’, Alternative Dispute Resolution. The consultation document suggested that ADR’s could be strengthened if financial incentives were offered to encourage out of Tribunal settlement. In effect, what this meant was not providing positive incentives, but negative ones for non-compliance. In 2004 when the Regulations came into force, fixed periods of conciliation were established, and this was envisioned by the Consultation document to be yet another way by which ADR’s could be strengthened without making the process too legalized in its form.

4] The need for greater protection of individual employment rights?

As discussed in passing earlier in this essay, in order to fully understand where the 2002 Act has come from, and where it is going to, it is important to examine its surrounding legal and social landscape. In this section of the essay I would like to discuss the changing nature of the Trade Union, and the need for greater protection of individual employment rights over and above the need to maintain collective protection.

This movement has become known as the individual rights agenda, and it was recognised as important even as far back as the Donovan Commission. It was realised that whilst Trade Unions did protect the interests of a large number of employees throughout the UK, there were also a very substantial number of employees who were not members of such collective unions and therefore whose rights remained unprotected in the UK employment sector.

It was not envisaged that collective rights would be abolished, for in fact such a task would prove near impossible in light of the difficulty of separating the two from one another in practice, but it was deemed that more weight and focus should be paid to the individual rights and also to resolution mechanisms which could operate between such an individual and his or her employer. In this way negotiations could be taken away from the hands of the Unions and given to the individual employers, whether they be union members or not. The difficulty to separate the individual from the collective can be witnessed by the fact that certain jurisdictions of the employment tribunal still continue to permit trade unions to assert collective rights [e.g. consultation on redundancy schemes].

The importance of the individual rights agenda became even greater under Thatcher’s government, for as the Trade Unions became weakened, it was important to ensure that a system of protection was in place for those workers who no longer found themselves under the umbrella of collective bargaining protection. In many ways I can see these changes as facilitating the weakening of the Unions; previously there was no choice but to join a Union if one felt aggrieved, as the law refused to get involved over anything other than purely contractual disputes. Also, by joining a Union one could shape the future of ones employment rights within the profession at hand. The very fact that our current labour [‘socialist’] government have not amended any of the legislation that Thatcher introduced to remove the power of the Unions is a testament to our society’s commitment to encourage individual right protection and dispute resolution.

Less than one third of the workforce is covered by collective bargaining, and only 20% of private sector employees are members of trade unions and with this in mind it seems more obvious than ever that attention must be paid to individual protection. This ever growing focus on the protection of the rights of individuals in the workplace has been effected not only through the commitment to it by almost every government since Thatcher, but also through European influence, where legislation has always been far more focussed on the individual than the collective. This obviously has a huge impact on government policy, and it is with this agenda in mind with which we should analyse and understand the nature of the Employment Act 2002 (dispute Resolution) Regulations 2004 and its underlying rationale. In many respects however, by encouraging protection of individual rights, one is also encouraging individuals to assert those rights, and therefore one the one hand while the 2002 Act is trying to protect such rights, it is also encouraging more claims potentially, which is counter to the other aim of the 2002 Act which is to reduce the burden on the Tribunal Service. This contradiction can only be offset by dispute resolution procedures- allow individuals to have more rights, but ensure that in the majority of cases of breach, these disputes will never reach the Tribunal as they shall be resolved at the earlier stages through statutory minimum procedure

With these important policy considerations in mind, let us now examine the content of the 2004 regulations in detail, with particular reference to the grievance procedures referred to within and how these purport to counter balance the inherent contradiction between burden reduction and the promotion of the individual rights agenda.

5] The Employment Act 2002 (Dispute Resolution) Regulations 2004:

Regulation 4 of the Employment Act 2002 (Dispute Resolution) Regulations 2004 provides that where an employer is considering the dismissal of one of their employees, or is contemplating disciplinary action against them, it is the standard three stage dismissal/disciplinary procedure which should be followed. Official warnings, either written or oral, or suspension on full pay do not come within the definition of ‘dismissal’ or ‘disciplinary action’ for the purposes of this regulation, and when one considers that these actions have rarely ever formed the basis of a successful claim in the Employment Tribunal, these exclusions seem somewhat intuitive.

The three-stage dismissal/disciplinary procedure:

The first step of this procedural requirement is for the employer to put down into writing the nature of the employees misconduct, lack of capability or other reason for dismissal/discipline. The employee must be then notified of the complaint in question, and be provided with a copy of the above written statement.

Secondly, the employer must arrange a ‘hearing;’ a meeting with the employee to discuss the issues contained in the written statement. Obviously, such a hearing must be held at a reasonable location and at a reasonable time. The employee will then await a decision from the employer and shall be offered a chance to appeal against it, should he/she wish to do so.

Thirdly, should appeal be requested, a subsequent hearing must be arranged with a more senior member of staff, should this prove practicable. The employee will then await the final decision.

Where the case in question involves a dismissal for gross misconduct, a modified two-stage procedure should be adopted as per Regulation 4. This modified test should be applied even where an employee has been instantly dismissed, with no prior investigation of conduct. It should be noted that the Regulations preserve the pre-existing position of the law in relation to dismissals for gross misconduct; an instant dismissal without prior investigation will generally be deemed to be unfair, although where such prior investigation would not have effected the employers decision to dismiss, a successful claim may be mounted, although such instant dismissal must still be accompanied, or followed by the modified two stage disciplinary/dismissal test, or such a dismissal will be deemed unfair automatically, regardless of the circumstances surrounding the dismissal. This procedural requirement has been viewed by some commentators [Mr. Gerry Sutcliffe] as being a tightening of the law of gross misconduct dismissals, which flies in the face of pre-2004 predictions that the new Regulations would in fact have the opposite effect in this area of employment law.

The Modified two-stage dismissal procedure:

The first step in this statutory procedure provides that the employer must put down into writing the decision of dismissal, the nature of the misconduct that the employer believes has been engaged in by the employee and has lead to such dismissal, providing evidence for this belief. The right to appeal will be explained and offered to the employee.

Should the employee with to appeal, then a hearing must be arranged, again at a reasonable time and location, and subsequent to this meeting, a final decision will be made.

Situations do exist in which rigid adherence to these procedural requirements for dismissal and disciplinary action will not be required. Such situations are provided for within regulation 4 and include certain types of collective dismissals, the ones which already have their own set of procedural requirements, such as strike dismissals or collective redundancies. Likewise, where an employer is forced to cease trade as a result of an unforeseen event, the procedural requirements contained in the Regulations will be waived.

It should be noted also that Regulation 5 provides that in some cases, an employer will be deemed as having complied with the above procedures even where it is not clear that in fact they have e.g. where an interim relief application has been lodged with the Tribunal prematurely, i.e. before the appeal stage of the appropriate procedure has been reached.

Likewise with the above procedural requirements, where an employee has a grievance against his employer, of the kind that could theoretically form the basis of a tribunal claim [as per Schedule 3 and 4 of the Employment Act 2002], he/she too must accord to the appropriate statutory procedure. As with the above procedural requirements on employers, the grievance procedures, as they are termed, also take the form of a standard three-stage process and a modified two-stage protocol. Failure to do so will, in the majority of cases, preclude the aggrieved employee from taking action in the Tribunal, although this latter procedure is only applicable where the employment of the employee has actually been terminated and all parties consent to the use of such.

The standard three-stage grievance procedure:

Stage one of the standard three stage grievance procedure provides that the employee must put into writing the grievance which he/she believes he/she has against the employer in question, and provide the employer with a copy of this written statement.

The employer is then under a duty to arrange a hearing to discuss the content of this statement, at a reasonable time and location. The employer will make a decision after the hearing, and the employee will be given the right to appeal this decision should he/she wish to do so, i.e. should the employee believe the grievance to have been unresolved by the decision which has been made.

Thirdly, should appeal be requested, a further hearing should be arranged, again at a reasonable time and location, and if possible with a more senior member of staff. Subsequent to this hearing, a final decision will be made, and shall be communicated to the employee in writing.

The modified two-stage grievance procedure:

Step one of the modified two-stage grievance procedure obligates the aggrieved employee to set out in a written statement the nature of the grievance which he/she believes she/he has suffered as a result of the employers conduct. A copy of this statement should be given to the employer for his/her consideration.

The employer is then under a duty to communicate a written response to the employee. This is the second and last stage of this modified two-stage procedure.

As noted previously, this modified procedure will be deemed applicable where 1] the employer was unaware of the alleged grievance prior to termination of employment; 2] the standard grievance procedure was not initiated prior to termination of employment; 3] where both parties have agreed to follow the modified procedure rather than the standard three stage one; or 4] where it would otherwise be wholly impractical to expect either party to engage in the standard protocol.

Likewise with our above discussion of Regulation 5, and the presumption of procedural correctness, Regulations 7, 8, 9 and 10 provide for certain circumstances where it will be deemed that an employee has followed the appropriate statutory requirements even where, in fact, they have not. I do not wish to discuss these situations in any great length at this stage in the dissertation, but it should be briefly noted that such situations include where the dispute in question is part of some other on-going dispute, and the correct procedure has been observed throughout that other dispute [Regulation 7], where no procedural cooperation has been offered to the employee by the employer [Regulation 7], where the dismissal in question was not based upon considerations of capability or conduct [Regulation 7], although this exception does not apply where the employee believes that the actual reason behind the dismissal was other than was actually declared to them by the employer or where he/she believes that the dismissal is wholly unlawful due to discrimination, in which case there is a onus on the aggrieved employee to raise their concerns in writing with their ex-employer. An exemption from these grievance procedures also exists where it would be wholly impractical to expect the procedure to have been followed in the particular case in question [Regulation 8], i.e. inability to attend the appropriate meetings. Such exemption also exists for collective grievance applications by, for example, a Trade Union [Regulation 9], or where such Unions have already agreed an acceptable grievance procedure that is different to the standard ones above, but have been followed by all parties concerned [Regulation 10].

Regulation 11 provides that where the aggrieved reasonably believes that adherence to the statutory requirements would result in intimidation, mental or physical, by the other parties concerned, then again, the statutory requirements may be waived.

Should one party fail to comply with the appropriate procedures for any reason other than those contained in the above list of exceptions, then the other party is no longer bound to insist upon continued compliance. This is provided for by Regulation 12 of the Employment Act 2002 (Dispute Resolution) Regulations 2004.

Regulation 13 of the Employment Act 2002 (Dispute Resolution) Regulations 2004 provides that where an arranged meeting has had to be cancelled to reasons of impracticality, or because the permitted accompanier of the aggrieved cannot attend, then an obligation to rearrange the meeting will be levied upon the employer. However, should this subsequent meeting require cancellation, all such burden will cease to operate.

6] The impact that the Employment Act 2002 (dispute Resolution) Regulations 2004 have had on:

(a) Tribunals

(b) Higher courts

(c) Respondents

(d) Claimants

(e) Representatives of Respondents and Claimants

Having discussed the nature and content of the new regulations in detail, and understood to some extent the rationale behind these new procedural requirements, let us now proceed to examine the impact that these regulations have had on claims presented to Employment Tribunals affecting Tribunals, the higher courts, Respondents, Claimants and the Representatives of Respondents and Claimants.

(a) The impact of the Employment Act 2002 (Dispute Resolution) Regulations 2004 on the Employment Tribunal Service:

One of the secondary aims of the new regulations was to reduce the burden on the Employment Tribunals service, which existed prior to their introduction. The reason for this burden, as mentioned previously, was in part that too many cases were reaching the Tribunal involving disputes which had not been first explored through any internal workplace grievance procedures, many of which could have probably been diffused at a very early stage had the parties simply communicated with one another rather than proceeding straight to legal action. The 1998 Survey of Employment Tribunal Applications showed that in about 37% of cases that went to Employment Tribunal there was no meeting between the parties, no use of a written procedure and no other attempt made to resolve the dispute prior to engaging in full blown legal action.

The impact on the Employment Tribunal service of these new statutory-imposed procedures is therefore nothing less than intuitive; if aggrieved employees and/ or employers are forced to engage in internal dispute resolution procedures prior to seeking redress through the courts, then many of these disputes will be resolved without need for the Tribunal Service. In this way, the number of claims reaching the Tribunal Service should theoretically decrease, and the seriousness of such claims should therefore increase.

In the Department of Trade and Industries 2004 Full Regulatory Impact Assessment on the Statutory Dispute Resolution Procedures, it was predicted that the average number of claims made at the Employment Tribunal would reduce from the current estimate of 110, 000 claims per year, to between 73,000 and 76,000 claims per year; a total decrease in claims reaching the Tribunal of between 31-34%. These reductions however were not expected immediately. It was predicted that it would take some years for Regulatory compliance to reach 100%, and assuming an initial compliance of 60% for the first year while the procedures are being fully implemented across the UK, the DTI predicted that it would take five years for the reductions as predicted above to be fully realised.

In reality however there has been a rise in the number of Employment Tribunal claims by employees against employers over the last year. The Annual Report of the Employment Tribunal Service identified a rise in claims from 86,181 in 2004 to 115,039 in 2005/06, although a large part of this rise is attributable to a noticeable increase in ‘multiple claims’- where employees have more than one grievance against their employers or ex-employers. The Annual Report calculated that there is now an average of 1.8 complaints per case.

Of those claims that only involve a single complaint, a decrease had previously been observed, with the number of such claims decreasing by approximately 3000 from 2004 to 2005. More recent observations however suggest that even this decrease seems to be on the reverse, with such claims rising again.

More worryingly, the number of cases being withdrawn or settled out of court seems to also have decreased, falling by 7% [from 67% to 60%] over this same period.

Whilst these statistics do suggest that the Regulations have had an opposite effect as was predicted prior to their inception, the sheer number of cases reaching the Tribunal Service is not the only indicator available to judge the success of the Regulations in their aim to increase the efficiency of the Employment Tribunal Service.

More important is the nature of the claims that are being heard; as expected the Annual Employment Tribunal Service Report identified that those claims that are being heard have increased in complexity since the introduction of the Employment Act 2002 (Dispute Resolution) Regulations 2004 into UK Employment Law. This was certainly a phenomenon to be expected- if the procedures contained within the Regulations and the Employment Act 2002 are working successfully, then the simpler claims should be less likely to reach the Tribunal, having been resolved internall

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