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Standing Committee F
Tuesday 18 December 2001
[Mr. Joe Benton in the Chair]
Procedural fairness in unfair dismissal
Amendment proposed [this day]: No. 78, in page 38, line 1, leave out from '(1),' to 'shows' in line 4 and insert
'failure by an employer to follow a procedure in relation to the dismissal of an employee shall not be regarded for the purposes of section 98(4)(a) as by itself making the employer's action unreasonable if he'.[Mr. Marris.]
Question again proposed, That the amendment be made.
The Minister for Employment and the Regions (Alan Johnson): I was in the middle of my rather feeble peroration. Just to recap, we were talking about the effects of Polkey and I explained how the new regime will strengthen that judgment. Most cases that we examined, which fell under the Polkey judgment, applied to breaches in procedure that are now covered by the minimum standardsthe three-steps procedure. I also explained that, crucially, there remains a requirement for the dismissal to be fair, which is what new section 98A addresses. However, there was some perceived ambiguity so I explained that, having checked amendment No. 78 with parliamentary counsel and having had it confirmed that it achieved the desired effect, we were prepared to accept it. We were not prepared to accept amendment No. 27 because it does not have the required effect, so I urged hon. Members not to press it.
Mr. Philip Hammond (Runnymede and Weybridge): It comes from the wrong party.
Alan Johnson: That is true, but that is not why I asked hon. Members not to press it. A number of examples were given to show the way in which the Polkey judgment has worked and why the restoration of the no-difference test would, in my hon. Friend's view, be damaging. I explained that those examples would still have been unfair dismissals because they would not have met the basic need to be fair in all other respects.
I gave another important example of the way in which the current procedures do not work adequately. An employer who dismissed a number of employees for racially harassing their colleagues lost his case solely because of a procedural error, even though the tribunal acknowledged that it would have made no difference to the outcome. It applied the only measure that it is allowed to apply, which was an award of no
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compensation to the employeesthe worst of all possible worlds. Although the case was classified as unfair dismissal, there was no compensation and no one felt satisfied with the outcome. The background to the case was that the manager who had been charged with hearing the initial appeal decided to double check the complainants' point of view. Because the dismissed employees did not see transcripts of those second interviews with the complainantsthey had had full opportunity to consider and comment on the original witness statementsthe tribunal found that dismissal was unfair on procedural grounds. Under the new proposals, the tribunal would have discounted the procedural error since it made no difference to dismissals that were fair in every other way.
The Bill meets the requirement to ensure that dismissals are fair in every other respect. Amendment No. 78 seeks a spelling out of the fact that a no-difference line of defence where a procedure has not been followed does not, by itself, mean that the employer has acted reasonably. The drafting is fine and we are prepared to accept the amendment, but hope that amendment No. 27 is not pressed.
Mr. Hammond: I apologise if this was covered when I was not in Committee before lunch, but can the Minister explain what will be the practical impact of the opening phrase of new subsection (2), ''Subject to subsection (1)''? I can understand how things might work if subsection (1) said,
''An employee who is dismissed shall''
subject to subsection (2),
''be regarded for the purposes of this Part as unfairly dismissed''.
However, I cannot understand what ''subject to subsection (1)'' at the beginning of subsection (2) means. It appears to me that it could undermine the entire purpose of the subsection.
Alan Johnson: I do not think that that is the case. It reinforces subsection (1), making it absolutely clear that the fact that a procedure has not been followed does not by itself mean that the employer has acted unreasonably. Amendment No. 27 was designed to do that, but failed, for the reasons that I gave this morning. Of course, the whole point of Polkey is whether the procedural error, in procedures over and above the minimum standards, would have made any difference to the decision to dismiss. That is the acid test that has to be passed. With that clarification, I urge that amendment No. 78 be accepted, and that amendment No. 27 should not be pressed.
Mr. Hammond: The Minister, in his closing remarks, referred to procedures ''over and above'' the minimum standards. Are we to understand that subsection (2) applies only to procedures over and above the minimum statutory procedures? Is that what the Minister is trying to explain?
Alan Johnson: Yes. That is what I explained at some length this morning. I understand that the hon. Gentleman could not be here.
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Mr. Tony Lloyd (Manchester, Central): I have listened carefully to the Minister's explanation. Much of the argument turns on points that are difficult to interpret in such an exchange. In the end, it will be decided on what tribunals do and do not do in practice. The difference between the position of those concerned about the abolition of the Polkey test and that of the Minister is that he says that the tribunal will inevitably have to have regard to fairness anyway, even if subsection (2) is used. In other words, even if the employer can demonstrate that unfair dismissal is not automatic because of procedural failure, he will still have a duty to demonstrate that the dismissal is fair. That is not necessarily the view of all those who have looked at the position.
The suggestion is that once the Bill becomes law, the tribunal will be guided by a different test, that which is in the Bill. Nowhere is there a duty on the tribunal to examine the question of fairness. More to the point, nor is there the opportunity for it to use the test of fairness. Much will turn on the decision made about that. The Minister is right to argue, with regard to the tribunal's judgment in, for example, cases of racial harassment, that it is unfortunate if matters proceed simply because of non-relevant procedural detail. I do not think that anyone is arguing for that. However, it is not such an unsatisfactory judgment if the tribunal rules that technically the dismissal is unfair but, in practice, no award is made because it is a hollow victory, of a kind that the courts more generally are used to giving. At best, a hollow victory is an indictment of those who took the case forward.
I hope that the Minister can reflect on the serious points that have been raised, although I do not think that he will change his mind this afternoon. This is not, as I said this morning, a question of people digging themselves into trenches and trying to defend the indefensible. It is a concern generated by real cases that have been through the tribunals and have been found to be unfair. There is a strong fear that there will now be no basis for tribunals to deliver the judgments that were delivered in such cases.
We have time before Report, and certainly before the Bill goes to another place, to consider such matters. I hope that Ministers will continue to listen to the debate. It is an important one that is causing anxiety outside.
Brian Cotter (Weston-super-Mare): I shall not press amendment No. 27.
Amendment agreed to.
Brian Cotter: I beg to move amendment No. 49, in page 38, line 12, leave out 'Chapter 1 of'.
Clause 34(2) states that a tribunal will find that there has an unfair dismissal where the employer has, by their own fault, failed to follow the ''relevant statutory procedure''. That is achieved by amending the Employments Rights Act 1996. Schedule 2 sets out the relevant statutory procedure, which is known as the standard dismissal and disciplinary procedure. However, clause 34 fails to make an explicit reference to the modified procedure found in chapter 2 of part 1 of schedule 2. The modified procedure is therefore
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outside the remit of clause 34. That means that if the employer uses the modified procedure, which may be appropriate to his circumstances, he can still be judged to have unfairly dismissed the employee even if all steps have been taken correctly to adhere to the modified procedure.
That has important implications, as according to the Library notes accompanying the Bill the modified standard is intended for use in cases of gross misconduct where summary dismissal is justified without notice. So, for example, I as an employer may have decided automatically to dismiss an employee because he has assaulted another employee. In doing so, I have ensured that I have conducted the dismissal in an appropriate manner by following the modified procedure set out in schedule 2. However, because clause 34 does not cover that modified procedure, I can still be deemed to have unfairly dismissed my employee.
The amendment would ensure that if an employer dismisses an employee for gross misconduct, the modified procedure, correctly followed, will protect him from claims that he has unfairly dismissed them.
Alan Johnson: Well spotted, as someone might recently have said at Athens airport.
I am grateful for the amendment, which highlights a significant oversight in the drafting of clause 34 relating to protection against unfair dismissal where the modified dismissal and disciplinary procedures set out in chapter 2 of part 1 of schedule 2 have not been followed.
Clause 34 inserts new section 98A into the Employment Rights Act 1996, making it unfair to dismiss an employee without completing the new statutory procedures. That means that employers will have to carry out the standard three-step procedure when dismissing an employee in order to avoid liability under new section 98A(1). Therefore, if an employer complies only with the modified two-step procedure set out in chapter 2 of part 1 of schedule 2, he will always automatically be found to have dismissed unfairly, as the hon. Member for Weston-super-Mare (Brian Cotter) said.
We intend to make regulations under clause 31 to provide for the modified procedure to apply where an employee has been summarily dismissedin other words, dismissed without notice on the grounds of gross misconduct. It is important that in such circumstances employers should not be required to complete the full standard procedure.
However, much as I welcome the amendment because it draws attention to the problem, it would not achieve the desired end. The matter is more complex, in that further revision of the clause is needed to ensure that under new section 98A(1) there will be a finding of unfair dismissal in cases of summary dismissal only when the modified procedure has not been completed and that any question about the application, completion or failure to comply with either procedure is judged by the same criteria that will be used for the purposes of clause 31. That is best achieved by ensuring that the regulatory powers in clause 31, which deals with mitigation, apply equally to clause 34 so
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that there is complete consistency. That will be essential if employers and employees are to have a clear understanding of when the modified two-step procedure, rather than the full three-step procedure, needs to be followed. I therefore intend to table an amendment on Third Reading and invite the hon. Gentleman to withdraw the amendment.