The ACAS Code of Practice: when does it apply?

When dealing with disciplinary matters, it is always important to bear in mind the principles of fairness and reasonableness. Failure to follow a fair procedure could result in a finding of unfair dismissal even if the original reason for dismissal was sound.

The ACAS Code of Practice on Disciplinary and Grievance Procedures (the Code) sets out the key elements of a fair procedure and its aim is to help employers, employees and their representatives manage disciplinary and grievance situations at work. In relation to “disciplinary situations” these expressly include conduct and/or poor performance. The Code explicitly states that it does not apply to redundancy dismissals or to the non-renewal of fixed term contracts.

However, the issue of whether the Code applies to dismissals for some other substantial reason (SOSR) or ill-health has, until now, been uncertain. Two recent Employment Appeal Tribunal (EAT) decisions, arising out of such dismissals have clarified the circumstances when the Code applies.

Although the Code is not legally binding in itself, Employment Tribunals will take the Code into account and can adjust awards by up to 25% if either party unreasonably fails to comply with it.

By way of a reminder, the Code provides for the following:

• employers and employees should raise and deal with issues promptly and should not unreasonably delay meetings, decisions or confirmation of those decisions;
• employers and employees should act consistently;
• employers should carry out any necessary investigations to establish the facts of the case;
• employers should inform employees of the basis of the problem and give them an opportunity to put their case in response before any decisions are made;
• employers should allow employees to be accompanied at any formal disciplinary or grievance meeting;
• employers should allow an employee to appeal against any formal decision made.

Phoenix House Ltd v Stockman

In Phoenix House Ltd v Stockman, the EAT upheld the Employment Tribunal’s decision that the dismissal for SOSR was unfair. However, it did not agree that the Code applied to SOSR dismissals for the breakdown of a working relationship. As a result, the EAT held that the Employment Tribunal would not be permitted to award an uplift for breach of the Code at the remedy hearing.

Ms Stockman was dismissed for SOSR and the reason for dismissal was stated to be an irretrievable breakdown in the working relationship. This action was taken after Ms Stockman brought an unsuccessful grievance against a fellow employee and was given a 12 month written warning for misconduct when she confronted that employee. Ms Stockman unsuccessfully appealed the grievance finding and the disciplinary sanction and a subsequent mediation failed resulting in Ms Stockman’s dismissal. Following her dismissal, she brought an unfair dismissal claim.

The Employment Tribunal held that the dismissal was procedurally and substantively unfair and outside the range of reasonable responses. The Employment Tribunal also highlighted that the procedure adopted by Phoenix House failed to comply with the Code and therefore any compensation awarded could be increased by up to 25%.

The EAT agreed with the Employment Tribunal in that Ms Stockman (who had been off sick when she had been dismissed) had not been afforded the opportunity to return to work and prove the relationship with Phoenix House had not broken-down beyond an irretrievable state. However, it rejected the Employment Tribunal’s conclusion that the Code, and potentially the 25% uplift for non-compliance, should apply. In the EAT’s view, it is common sense that a dismissal is unfair where the facts have not been fully “vented” between the decision maker and the employee. However, “clear words are required in the Code” to give effect to the sanction of the uplift. The Code does not expressly state that it applies to SOSR dismissals and to impose a sanction for failure to comply with the letter of the Code would go beyond Parliament’s intentions.

Contrast this literal interpretation of the Code in Stockman with the 2013 decision in Lund v St Edmund’s School Canterbury where the EAT held that the Code did apply to an SOSR dismissal, where the disciplinary procedure has been, or ought to have been, invoked. The reference in the Code to “disciplinary situations” should, said the EAT, be construed broadly. “The important thing is that it is not the ultimate outcome of the process which determines whether the Code applies. It is the initiation of the process which matters. The Code applies where disciplinary proceedings are, or ought to be, invoked against an employee.” If this approach had been taken in Stockman the outcome may have been very different.

Holmes v Qinetiq Ltd

In Holmes v Qiniteq Ltd, Mr Holmes, a security guard, had been employed since 1996 until his dismissal in April 2014. He had a number of protracted periods of absence from work and was eventually dismissed on the grounds of ill-health on the basis he was no longer capable of doing his job. Qinetiq conceded that the dismissal was unfair because it failed to obtain an up to date occupational health report dealing with Mr Holmes’ ability to reliably attend work after an operation in April 2014.

At the remedy hearing, the Employment Tribunal awarded compensation for unfair dismissal and unlawful discrimination. It held that there should be no uplift under the Code because the Code did not apply to ill- health dismissals. This was a capability dismissal relating to genuine ill-health which had no disciplinary component. No disciplinary proceedings were commenced by Qinetiq because apart from the absences, there was no culpability on the part of Mr Holmes in either his conduct or performance. Mr Holmes appealed.

The EAT dismissed the appeal and held that there needs to be “culpable conduct” for the Code to apply. “A disciplinary situation is a situation where breaches of rules or codes of behaviour or discipline are corrected or punished.” This was not a disciplinary case, since Mr Holmes’ behaviour was not culpable. Where poor performance is a consequence of genuine illness or injury it is difficult to see how culpability would be involved. In such circumstances, Qinetiq had not been required to follow the Code.

Distinctions should be drawn where disciplinary action is instigated as a result of a failure to comply with sickness absence procedures, or to deal with an allegation that the ill-health is not genuine or where there is malingering by the employee. Misconduct cases relating to ill-health will give rise to a disciplinary situation and involve culpability.

Implications of the EAT decisions

The decisions in Stockman and Holmes offer a degree of clarity for employers. The Code will not apply to SOSR dismissals for the breakdown of the working relationship or to ill-health dismissals where there is no culpable conduct. Consequently, if the Code does not apply there cannot be an uplift of compensation for breach of it.

In reality though, as mentioned above, it is crucial to follow a fair procedure to avoid a finding of unfair dismissal. The Code provides a very useful framework for best practice and much of it will still be relevant regardless of the reason for dismissal.

Finally, it is worth remembering that the Code itself is supplemented by comprehensive Guidance to provide further assistance to employers, employees and their representatives.