The ACAS Code of Practice on Disciplinary and Grievance Procedures (the ACAS Code) states that it applies to disciplinary situations including misconduct and/or poor performance. Whilst the ACAS Code specifically states that it does not apply to dismissals for redundancy or on the non-renewal of fixed term contracts, it does not mention other issues, such as ill-health or a dismissal where there has been a breakdown in working relationships.
When an Employment Tribunal makes a finding of unfair dismissal in cases where the ACAS Code applies but the employer has not been compliant, it can increase any award made by up to 25%.
Does this apply to dismissals based on ill-health or a breakdown in working relationships? The Employment Appeal Tribunal suggested not in two recent cases.
Holmes v Qinetiq Limited
Mr Holmes worked as a security guard for Qinetiq from 1996 until he was dismissed in April 2014. He is disabled for the purposes of the Equality Act 2010 and had a number of extended absences. This led to him being dismissed on the grounds of ill-health on the basis that he was no longer capable of doing his job.
Qinetiq conceded that his dismissal was unfair because it had failed to obtain an up-to-date medical report about his ability to attend work. Having accepted liability, there was a hearing to determine the amount of compensation that Mr Holmes should be awarded. At the hearing, Mr Holmes argued (amongst other things) that there should be an uplift to his compensation on the basis that Qinetiq had failed to follow the ACAS Code when dismissing him. Qinetiq disputed this. The Employment Tribunal found that the ACAS Code does not apply to ill-health dismissals as there is no element of culpability when dealing with genuine matters of medical incapacity.
Mr Holmes appealed.
Phoenix House Ltd v Stockman and another
In this case, Ms Stockman was a Financial Accountant at Phoenix House. As part of a restructure she was overlooked for various roles, eventually being given the more junior role of Payroll Controller. She raised a grievance and confronted the Finance Director about her treatment whilst he was engaged in a meeting, the latter leading to disciplinary action being taken against her and a 12 month written warning. Her grievance was not upheld.
Following mediation (which didn’t work) and whilst on sick leave, Ms Stockman was invited to a meeting to consider whether the working relationship had irretrievably broken down. Whilst she was adamant that she could return to work and would be able to work with the Finance Director moving forwards, her employment was terminated due to the relationship breakdown, which the employer said amounted to ‘some other substantial reason’.
The Employment Tribunal found that the dismissal was procedurally unfair and that the employer should have followed the ACAS Code. The Tribunal also found that the employer’s view that the relationship had irretrievably broken down was outside the range of reasonable responses of a reasonable employer in those circumstances.
Employment Appeal Tribunal (EAT)
In Mr Holmes’ case, the EAT dismissed the appeal. The Judge said that when an employee breaks rules or codes of behaviour, then that is described as misconduct and gives rise to disciplinary action. Equally, an employer may have expectations about the way in which a job is to be performed and the minimum standards to be maintained in terms of performance. Again, a breach of these standards will give rise to disciplinary action. The ACAS Code is only intended to apply to a situation where an employee faces a complaint or allegation that may lead to disciplinary action. Disciplinary action is only to be invoked where there is some sort of culpable conduct on the part of the employee. Where poor performance is a consequence of a genuine illness or injury, it is difficult to see how any culpability would be involved or any disciplinary action justified, and therefore the ACAS Code will not apply.
In Ms Stockman’s case, the EAT again found that the ACAS Code did not apply, and also upheld the finding of unfair dismissal. In cases involving a breakdown in relationships, the correct approach is to consider whether matters have become so bad that the employee can’t be reincorporated back into the workforce without undue disruption. Whilst parts of the ACAS Code may be relevant and helpful as far as what an employer should do in these circumstances, it was not intended by Parliament that the 25% uplift should apply if an employer fails to do so.
These decisions confirm that the uplift in compensation should not be applied where employers who dismiss for genuine ill-health reasons or for some other substantial reason fail to follow the ACAS Code.
There has previously been confusion over whether the ACAS Code applies to dismissals for some other substantial reason. Whilst the Stockman case supports the argument that it doesn’t, there may be situations where an employee has done something culpable that would otherwise lead to disciplinary action. In those cases, the ACAS Code and any uplift for failing to follow it could still apply.
If you have any queries in relation to absence management, disciplinary matters or if you have any other HR queries please contact Joanne Holborn, Tom Scaife or Caroline Rayner on 01228 552600 or 01524 549494.