Polkey Rule in Employment Law

Introduction

According to statute law in the UK “An employee has the right not to be unfairly dismissed by his employer.” This right not to be unfairly dismissed, and the corresponding right to complain of an unfair dismissal, is only applicable to those who possess the relevant employment right”.

A raft of new measures that came into force after 6th April 2003 will attempt to overhaul the arguably exposed nature of many individual workers previously overlooked in a corporate dominated environment

One of the major themes of the new Employment Act is that it enhances maternity, paternity and adoption leave and pay rights for individual employees. Increased rights of mothers to enforce pay and maternity leave is a dominant theme. It is in the area of dispute resolution however that arguably the law takes a step backward from an employees point of view. Before addressing this area it is prudent to look at the law of unfair dismissal as it currently stands.

Unfair Dismissal – The Background

Before addressing the issue of fairness it will help to put the reasons for dismissal in context. Here there is a dual test; firstly did the employers decision to dismiss fall with a ‘band of reasonable responses’ and secondly whether or not the employer has adopted a fair procedure in relation to the employees dismissal. Unlike the burden of proof being on the employee to show that an ambiguously worded “dismissal” was not a resignation, under s98 (1) (b) and s98 (2) ERA the employer must prove that an employee was dismissed for a potentially fair reason. It is submitted that as always with such a subjective concept that there ail be anything but uniformity of application, yet parameters have been set to attempt to curtail this They relate to capability or qualifications of the employee; the conduct of the employee, if the employee was made redundant, that the employee could not further work in his position without a statute or an enactment being contravened, or for some other substantial reason.

It is possible to identify four main principles of fair procedure. Lock v Cardiff Railway Company Ltd IRLR provides precedent that it is an error of law to fail to have regard to these. Furthermore, s207 Trade Union Labour Relations (Consolidation) Act 1992 states that the Code is admissible evidence in front of a tribunal.

These principles will now be looked at to provide us with a general background. In the case of British Home Stores v Burchell. it was held that if an employer held a belief of guilt of an employee, this must be based on reasonable grounds and subject to the employer having carried out as reasonable and practicable investigation into the matter as was possible in the circumstances. Again perhaps amore subjective test would be difficult to find. In the case of Whitbread v Thomas it was held that the reasonableness of the employers conduct in the dismissal process required compliance with both a pre-dismissal procedure and the appeals process. In the case of West Midlands Cooperative Society Ltd v Tipton it was judged that the appeals procedure was a vital part of deciding the question of fair procedure and that the reasonableness of employer’s actions must be considered “in accordance with equity and the substantial merits of the case”. Finally, upon the finding of guilt at a hearing, except in cases of gross misconduct, a correct warning procedure should be implemented, comprising of an oral warning, a first and second written warning, any alternatives to dismissal and finally dismissal.

As we shall see the highly subjective nature of the doctrine has meant that problems have arisen as courts have adopted a less than uniform approach to the process of ascertaining whether, and by what parameters the four steps are implemented, varying from a purposive approach to a far more textual and some may say even pedantic stance.

At the outset, it must be stated that the right to unfair dismissal only covers those employees who have been continuously employed for a period of not less than one year ending with the effective date of termination. A statutory notice of one week can be added under s97 ERA 96. Flexibility is provided however as there are exceptions to this exclusion. This is when dismissal has been for an ‘inadmissible reason’ which include, a Trade union reason, Pregnancy and maternity, Health and safety, asserting a statutory right, Sunday working, and ‘Whistle blowing’, (which could be for example, Informing on serious malpractice in the place of work).

In addtion, following the enactment of the Employment Rights (Dispute Resolution) Act 1998, a viable and welcomed alternative to employment tribunals was established, coming into force from May 2001. Yet the new arbitration procedure is voluntary and may only be used if both parties agree to its use. By doing so, the parties waive certain employment rights that would have been dealt with at an employment tribunal, and hence it is submitted that s the process will not always be of benefit to both parties it may not be readily be taken up. Having said this, where it is used the new process is designed to be “speedy, informal, confidential and non-legalistic.” The main features of this process are hearings are conducted by an independent arbitrator, chosen by the Advisory, Conciliation, and Arbitration Service (ACAS). So, specifically the process avoids the complex issues of law that have routinely become part of the Employment Tribunal process, and ultimately it is hoped will reduce the number of cases that proceed to determination at the employment tribunal, and increase those that come to enforce their rights that may have otherwise been put off by the possibility of lengthier and more complex proceedings.

Unfair Dismissal – The Test – Polkey

It is essential to first consider the reason for dismissal before moving on to the concept of fairness. Different considerations apply to these different reasons. If an employer fails to make his reasons clear he will lose his case in the Employment Tribunal as he is unlikely to be able to show that it was potentially fair. Alan Neal remarks that there has been a concerted effort by the Executive to haul back the gains made by individual employees under the so called ‘Polkey rule’ The recent consultation period following the publication of the ‘Routes to Resolution’ the Government flew a political kite to test the air with regards to legislative intervention in this area. In the document, the Government concluded that “…it is unfair to penalize an employer for a shortcoming which made no difference to the outcome of a dismissal. It has therefore decided to act to ensure that tribunals disregard procedural mistakes, beyond minimal procedural standards if following full procedures would have made no difference to the outcome…”

In general a dismissal is likely to be unfair where the procedure used does not involve an element of consultation with the effected worker. This is relevant whatever the situation, but the nature of any discussion or consultation will vary, depending on the facts of each case and the circumstances. The significance of Polkey is that it gives guidance on the crucial factor of fairness and consultation. Most cases will require extensive consultation with the ACAS Code of Practice on disciplinary and grievance procedures. The sorts of factors that are taken into account include capability and qualifications. In Alidair Ltd v Taylor it was held that an employer should show honest belief in the employee’s lack of capability and that belief was reasonable, in addition, If this is related to health, it should be shown that medical advice was sought.

As regards conduct the case law in this area proliferates. The Court of Appeal in Foley v The Post Office recently reaffirmed that tribunals should apply the words of the statute. The Court of Appeal suggested that the idea of applying ‘a band of reasonable responses’ might help as stated in the case of British Home Stores v Burchell In short the employment tribunal should firstly decide why the employee was dismissed. If the dismissal was related to the conduct of the employee, then the important factors to consider are, whether there had been a fair investigation with a fair procedure. The tribunal then should consider if the employer acted fairly or not.

In considering the above, it is necessary to consider Polkey at all times. In Polkey the House of Lords held that it is no defence to a claim of unfair dismissal if the employer claims that the unfairness made no difference to the final outcome (the no difference rule). That is to say that even if the employer has used all fair procedures, then the employee would have been sacked anyway. Polkey is relevant to the issue of compensation however, when a Tribunal has to consider the ‘no difference’ argument. If it is an extreme example, the Tribunal may decide to make no award of compensation at all. It may mean that a Tribunal decides that even if a fair procedure had been used, it would only have extended the Claimant ex-employee’s employment for a period of say, one month. In such a case the Tribunal may simply award one month’s loss of earnings. Alternatively the Tribunal may make a percentage reduction to take into account that the employee would in any case have been dismissed .

A warnings procedure will be inappropriate however in cases of gross-misconduct. Otherwise the Tribunal must follow the House of Lords in Polkey which clearly states that whether or not a dismissal is fair should be judged by what the employer did not on what the employer might have done. This over-ruled the previous law set out in British Labour Pump v Byrne what became known as the British Labour Pump Principle was described by (then) Browne-Wilkinson J in Sillifant v Powell Duffryn Timber Ltd”…Even if, judged in the light of the circumstances known at the time of dismissal, the employers decision was not reasonable because of some failure to follow a fair procedure yet the dismissal still can be held fair if, on the facts proved before the Industrial Tribunal, the Industrial Tribunal comes to the conclusion that the employer could reasonably have decided to dismiss if he had followed a fair procedure…”

By dismissing an employee for redundancy in Polkey, without regard to the then Industrial Relations Code of Practice, the House of Lords held that the British Labour Pump precedent in disregarding the claim for unfair dismissal because it would not ultimately have made any difference was wrong in principle, because the Tribunal should look at the reasonableness of the behaviour or the conduct of the employer’s conduct in deciding neither to consult or warn. If the employee has suffered an injustice, this should only be relevant at the later stage of the case, when it was time to assess compensation. In this respect, if the dismissal was unfair as a result of a defect in procedure, compensation would be reduced accordingly, representing the chance that the employee would have lost his job in any case.

With regard to Foley and Polkey it can be seen that the ambiguity that raised its head in the British Labour Pump Case has been forcefully quelled. Foley lays to rest any judicial ambivalence that an employer’s response to a dismissal situation must fall within a range of reasonable responses. Likewise, Polkey quells the sacrilege tantamount in British Labour Pump that a technical defect in procedure can mean that a dismissal is not unfair. Procedural fairness will almost always result in a finding of unfairness. This aspect of procedural fairness is thus crucial to whether the employer’s response fell within a band of reasonable responses. This was expanded recently by the Court of Appeal in Whitbread v Hall The test include the method by which an employer uses a procedural process to arrive at a decision to dismiss, even where an employer has admitted misconduct.

Unfair Dismissal – Post Polkey – The Employment Act 2002

The Polkey approach to procedure has however been superseded by the Employment Act 2002 which received royal assent in July 2002. The Act will introduce a new s.98A concerned with statutory dismissal and disciplinary procedures which will introduce a minimum standard of statutory procedural entitlement that will be implied into all contracts of employment. The ethos central to the new Act is the central theme of Alternative Dispute Resolution ADR. This reflects the spirit of the Woolf Reforms and its emphasis on litigation avoidance in civil matters. The Act aims to avoid confrontational litigation by encouraging resolution of disputes in the work place by encouraging the marginalization of internal disciplinary procedural committees and grievance measures.

There will be less incentive for employees to resort to the Tribunal by allowing extension of times for disputes to be resolved, thus potentially by-passing the door of the Tribunal. Greater use of written statement of terms will be encourages in an effort to make the employment relationship more mutually understandable and enforceable. In a clear challenge to the Polkey doctrine, if a dismissal is fair but for procedural irregularities, then the dismissal will no longer be deemed to be unfair. Thus, the writing appears to be on the wall for Polkey and its innate liberal leaning toward the employee. The employer will under the terms of the new procedures merely have to show that he acted fairly.

Whilst substantive progress appears to be being made in the ‘coalface’ of industrial relations relating to unfair dismissal, it appears that the new tribunal procedures in the Act are designed to roll back the individual protection relating to procedural propriety made in Polkey. The new law relating to dispute resolution however is arguably another step backwards.

1. ERA 96, s. 94(1)
2. Employment Rights Act 2002
3. Joanna Chatterton & Anne West ‘New Employment Rights’ New Law Journal 21March 2003, 442.
4. Supra at 5
5. see as well as the Employment Act 2002 the Maternity and Parental Leave (Amendment Regulations) 2002
6. See Post Office v Foly; HSBC Bank v Madden [2000]
7. section 139 ERA
8. Byrne v Kinematograph Renters Society Ltd [1958] 2 All ER 579
9. (1998) 358 EAT
10. These principles are elucidated in the ACAS Code of Practice on Disciplinary and Grievance Procedure (2000)
11. [1980] ICR 303
12. IRLR 43. EAT
13. [1986] IRLR 112
14. However, following a relaxation in the EAT’s stance towards such procedure in Charles Letts & Co v Howard [1976], and the CA less than enthusiastic attitude in Hollister v NFU [1979] which viewed procedural matters as merely one of a number of background factors, British Labour Pump Co v Byrne [1979] marked a major shift in the judicial stance towards procedural fairness by adopting what became known as the ‘no difference rule.’
15. Section 108 ERA 96.
16. A year is 365 days, so EDT the day before the anniversary of the first day gives a year’s continuous employment.
17. Section 152 & 154 TULRCA 1992
18. See ss 99 & 108 ERA
19. s 100 ERA
20. s. 104 ERA
21. ss 101 – 108 ERA
22. See Alan C Neal ‘Recent Developments in Unfair Dismissal’ New Law Journal 7th December 2001 1801.
23. Polkey v AE Dayton Services Ltd [1987] IRLR 503 HL
24. [1978] ICR 445
25. East Lyndsey District Council v Daubney [1977] ICR 566.
26. [200] ICR 1283
27. [1980] ICR 303
28. www.employmentappeals.gov.uk
29. [1979] IRLR 94.
30. [1983] IRLR 91
31. www.3paper.co.uk/employment/employment-update.htm
32. [2001] IRLR 274
33. www.tssa.org.uk/advice/emp/emp33.htm

Bibliography

Ian Brodie, the Industrial Law Journal March 2001

Hugh Collins, ‘Regulating the Employment Relation for Competitiveness’, Industrial Law Journal Vol 30 No1 March 2000, 17

Joanna Chatterton & Anne West ‘New Employment Rights’ New Law Journal 21 March 2003, 442

Linda Clarke, ‘Mutuality of Obligations & the Contract of Employment: Carmichael & Another v National Power’. Modern Law Review Vol 63, 2000, 757, 763

European Industrial Relations Observatory On-Line – http://www.eiro.eurofound.ie/2001/09/Feature/UK0109101F.html

www.3paper.co.uk/employment/employment-update.htm

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The Inns of Court School of Law. ‘Employment Law in Practice’ 5th Edition, Oxford University Press 2001.

Alan Neal, ‘Recent Developments in Unfair Dismissal’, New Law Journal, 7th December 2001 p 1801.

The Guardian ‘Flexitime for parents’ John Carvel Monday April 7, 2003

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www.tssa.org.uk/advice/emp/emp33.htm