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A history of UK employment law

It has been a forty years since the first legislation that protected workers from arbitrary/ unfair dismissal was first established. Even then the first steps to protect the employee from such arbitrary acts were tentative to say the least and were in fact found within the common law system. The case of Australian Blue Metal v Hughes (1963)[1] introduced the principle of ‘reasonable notice’ for the termination of an employee’s contract. At the core of the search for an adequate legislative framework for the protection of employees was the principle of fairness, more eloquently defined as “the notion of real though limited worker-protective constraints or controls upon the formation, management and termination of employment relations by employing enterprises”[2]. Between 1963 and 1971 the British Government introduced three major legislative frameworks that sought to protect employee’s rights with the principle of fairness as its foundation. Firstly in 1963, the Contract of Employment Act (1963)[3] was passed on the back of the decision in the Hughes Case (1963). The Act introduced an obligation upon employers and employees alike to give a minimum period of notice before terminating their employment. This was followed closely by the Redundancy Payment Act (1965)[4]; this introduced a new and revolutionary system of compensation for employees in the event of job loss, as long as their employment was terminated for one of the prescribed reasons. Finally and most significantly was the introduction of the Industrial Relations Act (1971)[5] which established employee protection in the case of unfair dismissal. This was as significant as it allowed employees to appeal to a tribunal in relation to the termination of their employment, to ensure that it was done in a fair, reasonable and legal manner. To this day the Industrial Relations Act remains a vital component in employment law, some commentators suggesting “Although in various ways pushed and pulled about both by the courts and the legislature that profoundly important new set of institutional arrangements has existed continuously since that time”.[6] This positive trend towards employee rights and their protection however, was met with a derailing obstacle with the decision of the House of Lords in Johnson v Unisys Ltd. (2001)[7] and the decision of the British Government to formulate the Employment Act (2002)[8], in which the procedure to forward a claim of unfair dismissal has been bureaucratised and distorted into a complex and lengthy procedure that supports internal dispute resolution rather than judicial intervention. Freedland believes that these two events have lead to a situation where there exists “direct and indirect ways of regulating employment contracting for fairness, that is because it seems to me that, in this ‘post-modern’ environment which I have depicted, the inter-relating of employment contract law with fairness has become a complex business indeed, no longer especially concentrated on the support or supplementation of the law of unfair dismissal in any immediate sense”[9]

As Freedland has previously suggested the fairness principle entails a mutual relationship of trust between both employee and employer that neither will act in an arbitrary way during the course of employment. In the case of employers it has been suggested that an employers duties within this trust agreement fall into three distinct categories; (i) the newer implied terms which have quite recently been implied into the employment contract; (ii) the obligations regarding the provision of work and (iii) the obligations regarding remuneration.[10] Most importantly in this case would be area (i), which would include the terms around termination etc. and the procedures that must be followed in order to terminate a contract of employment both fairly and legally.

Boyle suggests that “There is some evidence that the trust duty is being seen by the courts as overarching employees' duties, in the context of the common law and the statutory remedy of unfair dismissal Regarding the common law, the trust duty has been used to define the type of conduct by an employee, which justifies his or her summary dismissal”[11] As Boyle suggested this has been outlined quite frequently in case law. In the case of Neary v Dean of Westminster (1999)[12], Lord Jauncey directly referenced the trust agreement when stating “gross misconduct justifying dismissal must so undermine the trust and confidence which is inherent in the particular contract of employment that the master should no longer be required to retain the servant in his employment”, this not only reinforced the fact that a trust agreement underlined contracts of employment but also the reasonableness/ fairness principle that underlined an employer’s treatment of an employee re the termination of employment. Boyle further reinforces this reading of the decision by suggesting “The trust duty has been used to define an employee's obligations, in the context of the unfair dismissal remedy, in two ways. The first way is the recognition by tribunals that a breach of the trust duty can be 'some other substantial reason', and so one of the potentially fair reasons for dismissing an employee. The second way is that, in some cases, the reasonableness of an employer's decision to dismiss an employee has been held to depend on whether the employee was in breach of the trust duty.”[13] Both grounds have been highlighted in case law, Ground 1 was highlighted in the case of Higgins v Mecril Semiconductor (2004)[14] , while Ground 2 was perfectly exemplified by the case of Gough v Beechwood Music (1998)[15].

When deciding whether or not a dismissal is fair or not a Tribunal is charged with the task of deciding whether or not an employer has acted reasonably or unreasonably in their treatment of the employee re the termination of their employment. The reasonableness standard that is expected to be applied by such tribunals has been outlined in numerous cases. In Iceland Frozen Foods v Jones (1982)[16] it was held that a tribunal must only analyse whether the employers conduct was reasonable and not if whether the employee’s dismissal was fair. In his judgement Browne Wilkinson, J. stated; “the function of the industrial tribunal, as an industrial jury, is to determine whether in the particular circumstances of each case the decision to dismiss the employee fell within the band of reasonable responses which a reasonable employer might have adopted. If the dismissal falls within the band, the dismissal is fair; if the dismissal falls outside the band it is unfair.”[17] As a result of this ruling it would be fair to suggest that in relation to unfair dismissal, the tribunal's task is to consider the reasonableness of an employer's response by assessing whether it falls within a range open to a reasonable employer. Its function is limited to review of that question of fact. Davies believes “Freedland argues persuasively that the nature of tribunal adjudication in unfair dismissal cases mirrors that of judicial review. By 'thinking themselves into the shoes' of employers, tribunals inevitably inject their subjective experiences of the industrial workplace into an apparently objective test of reasonableness.”[18]

So if an employer is found to have acted unreasonably and a ruling of unfair dismissal is reached, can the employee claim for damages as a result. The law surrounding this is quite unclear? As previously outlined at the foundation of an employment contract lays a mutual trust agreement with fairness at its core thus “If the courts had accepted that a wrongful dismissal could be a breach of the trust duty, then the classical wrongful dismissal remedy, dominated by the notice rule, could have been replaced by a relational trust duty-based remedy for unfair dismissal. Under this remedy, damages would be available for the pecuniary loss caused by a dismissal, limited only by the contractual principles of remoteness, causation and mitigation. But in Johnson v Unisys Ltd an attempt to change the law in this way was rejected by the House of Lords”[19] The Johnson decision however, received criticism for commentators due to its muddled message and criteria. Some questioned how employers would be able to distinguish between the two situations which the decision addressed. Johnson and the preceding case law all made unfair dismissal and actionable offence where there was a breach of the trust duty during the pre-dismissal disciplinary procedures, and the non actionable breach that was part of the dismissal itself? This lacuna was consequently addressed in the case of Eastwood v Magnox Electric plc and McCabe v Cornwall County Council (2004).[20] In his judgement Nicholls, L.J. stated “In the ordinary course, suspension apart, an employer's failure to act fairly in the steps leading to dismissal does not of itself cause the employee financial loss ... exceptionally this does occur where an employee suffers financial loss from psychiatric or other illness cause by the pre-dismissal treatment'. His Lordship continued. An employee's remedy for unfair dismissal, whether actual or constructive, is the remedy provided by statute. If before his dismissal, whether actual or constructive, an employee has acquired a cause of action at law, for breach of contract or otherwise, that cause of action remains unimpaired by his subsequent unfair dismissal and the statutory rights flowing there from”[21] As such it would be fair to suggest that it would seem that the trust duty is not entirely excluded, at common law, from the procedural fairness of a dismissal. The only aspect of a dismissal from which the trust duty remains excluded is its substantive fairness. Consequently, the trust duty has had a significant impact on the notice rule, even in the context of dismissal. A procedurally unfair dismissal can be a breach of the trust duty, and the notice rule would not limit the damages actionable. Davies suggests the decision ensures unfair dismissal law remains “both broader and more limited. It is intended to promote a general principle of fairness within the employer-employee relationship, but is limited to dismissals, a single aspect of it. It acts directly on the relationship between an employer and all employees”[22]

So what does the future hold for the fairness principle and test for reasonableness within the law of unfair dismissal? Consultation on the draft code for the revision of the Employment Bill ended on the 25th July 2008, and will come into force in April 2009. The new code for revision seeks to clarify the muddled areas that the previous legislation and subsequent case law has been unable to do. For example the Code states “Where an employment tribunal finds that a fair procedure has not been followed, the dismissal will be unfair but the tribunal will have a discretion when determining the compensatory award to make a reduction, possibly to nil if it considers that following a fair procedure would have made no difference (known as the "Polkey" reduction). Unlike the current statutory dispute resolution procedure, a failure to follow the revised Code will not give rise to an automatically unfair dismissal. However, it is proposed that tribunals will be able to adjust compensation awards by up to 25% for unreasonable failure to comply with any provision of the revised Code.”[23] In this instance the code not only clarifies the muddled actionable claims criteria outlined in Johnson but also the trust agreement, as well as outlining the powers that the tribunals would now have, a reinforcement of the Governments position re it’s promotion of internal dispute resolution.

One of the main benefits of the revised code is that it holds as its foundation the ‘fairness principle’ and reasonableness as its foundation. The code outlines the steps that must be followed when grievances or disciplinary procedures are undertaken within a company;

“(i) Make appropriate investigations to ensure the facts of the case have been established.

(ii) Inform the employee of the complaint against him, and provide the employee with an opportunity to state his case before decisions are reached.

(iii) Use procedures primarily to help and encourage employees to improve.

(iv) Allow employees to be accompanied at disciplinary, grievance and appeal meetings.

(v) Any grievance or disciplinary meeting should, as far as possible, be conducted by a manager who was not involved in the matter giving rise to the dispute.

(vi) Any written warnings for misconduct or unsatisfactory performance should set out the nature of the misconduct/poor performance and the improvement/change required.

(vii) Do not dismiss an employee for a first disciplinary offence unless it is a case of gross misconduct.

(viii) Give the employee an opportunity to appeal.

(ix) Deal with issues as promptly as possible.

  1. (x) Act consistently and ensure that like cases are treated alike.” [24]

The suggested reforms not only provide a clear and accessible means of dispute resolution, they also enshrine the principles of fairness and reasonableness within a statute and thus these principles will now be universally applied in situations of disciplinary proceedings as well as unfair dismissal tribunals.

That is not to say however, that the recommendations contained within the draft code do not have their critics. Clayton suggests the recommendations are fundamentally flawed as “Part of the problem could be that two key recommendations of the report were arguably contradictory. The first was that the SDGP should be replaced by clear, simple, non-prescriptive guidelines on grievances, discipline and dismissal in the workplace, for employers and employees (which could have fitted into the 'ordinary' unfair dismissal approach). The second was that Parliament should ensure there are incentives to comply with the new guidelines, by maintaining and expanding employment tribunals' discretion to take into account reasonableness of behaviour and procedure when making awards and cost orders. While on first blush this sounds eminently sensible, it has to be considered that if a party is to be penalised for not following a set process, it is hard to see how that process could be simple and also seen as non-prescriptive.”[25] Clayton’s criticisms are flimsy at best; the revised code has provided much needed clarity in a area that has become overly complex and bureaucratic in recent years. In outlining the procedures in this way the government has ensured that the fundamental principles of fairness and reasonableness will be at the heart of employer/employee relations.

In conclusion, the ‘fairness principle’ and everything that it entails when dealing with employer/employee relations has been at the core of British Employment law for the last forty years. It has gone through many examinations and face lifts in that time and as a result became highly complex and bureaucratic. As such the principles that provided it foundation, such as the ‘fairness principle’ were distorted and proceduralised beyond all recognition. With the draft code for the revision of the Employment Bill the ‘fairness principle’ and all its benefits reasonableness etc., have again come to the forefront of employment law where they are now more accessible and structured. This will allow for a more efficient, fairer system of grievance resolution meaning that the trust agreement between employers and employees will remain a fundamental part of contracts of employment. This will be governed by a legislative framework that will uphold the ‘fairness principle’ as well as procedural fairness to ensure a level playing field in employer/employee relations and employment law and grievance resolution as a whole.

BIBLIOGRAPHY

Textbooks

Bower, J. (ed) ‘Blackstone’s Employment Law Practice’ Oxford University Press, Oxford (2008)

Tucker, K. (ed.) ‘Discrimination in Employment’ Sweet and Maxwell, London (2004)

Journals

Bennett,M ‘Interpreting Unfair Dismissal and Redundancy Payments Law: The Judicial Reluctance to Disprove Employer Decisions to Dismiss’ Statute Law Review (2002)

Boyle, M. ‘The Relational Principle of Trust and Confidence’ 27 Journal of Oxford Legal Studies (2007)

Bonino, R. ‘ACAS Code on Discipline and Grievances’ 32 Company Secretary’s Review 5

Christie, D. ‘The Future of Unfair Dismissal’ Scots Law Times (2003)

Clayton, D. ‘Legal Update: Employment Law’ 21 Law Society Gazzette (2008)

Davies, J. ‘A Cuckoo in the Nest? A Range of ‘Reasonableness Responses’, Justification and the Disability Discrimination Act 1995’ 32 Industrial Law Journal (2003)

Doggett-Paxton, K ‘Employment Equal before the Law’ 24 Law Society Gazette 10 (2008)

Duggan, M. ‘Unfair Dismissal’ 11 Employment Law and Litigation 6 (2007)

Freedland, M. ‘Constructing Fairness in Employment Contracts’ Industrial Law Journal (2007) at pg. 136

Sanders, A. ‘Expanding the ‘No-Difference’ Rule in Unfair Dismissal ’ Industrial Law Review (2007)

Cases

Australian Blue Metal v Hughes (1963) AC 74 99 HL

Eastwood v Magnox Electric plc and McCabe v Cornwall County Council (2004) 76 BMLR 201

Gough v Beechwood Music (1998) EAT/813/98

Higgins v Mecril Semiconductor (2004) All ER (d) 2007

Iceland Frozen Foods v Jones (1982) IRLR 439

Johnson v Unisys Ltd. (2001) UKHL 13

Neary v Dean of Westminster (1999) IRLR 288

Statute

Contract of Employment Act (1963)

Redundancy Payment Act (1965)

Industrial Relations Act (1971)

Employment Act (2002)

1


Footnotes

[1] Australian Blue Metal v Hughes (1963) AC 74 99 HL

[2] Freedland, M. ‘Constructing Fairness in Employment Contracts’ Industrial Law Journal (2007) at pg. 136

[3] Contract of Employment Act (1963) full text available at www.opsi.gov.uk/ACTS/ acts1963/ ukpga_19630038_en_7 - 49k

[4] Redundancy Payment Act (1965) full text available at www.swarb.co.uk/acts/ 1965Redundancy PaymentsAct.shtml

[5] Industrial Relations Act (1971) full text available at www.oup.co.uk/pdf/0-19-927374-X.pdf

[6] Freedland, M. supra note 2 at pg. 137

[7] Johnson v Unisys Ltd. (2001) UKHL 13

[8] Employment Act (2002) full text available at www.opsi.gov.uk/Acts/acts2002/ukpga_ 2002 0022_en_1 - 45k

[9] Freedland, M. supra note 2 at pg. 137

[10] Boyle, M. ‘The Relational Principle of Trust and Confidence’ 27 Journal of Oxford Legal Studies (2007) at pg. 637

[11] Ibid. at pg 138

[12] Neary v Dean of Westminster (1999) IRLR 288

[13] Boyle, M. supra note 10 at pg. 640

[14] Higgins v Mecril Semiconductor (2004) All ER (d) 2007

[15] Gough v Beechwood Music (1998) EAT/813/98

[16] Iceland Frozen Foods v Jones (1982) IRLR 439

[17] Ibid at para. 15

[18] Davies, J. ‘A Cuckoo in the Nest? A Range of ‘Reasonableness Responses’, Justification and the Disability Discrimination Act 1995’ 32 Industrial Law Journal (2003) at pg 171

[19] Boyle, M. supra note 10 at pg. 645

[20] Eastwood v Magnox Electric plc and McCabe v Cornwall County Council (2004) 76 BMLR 201

[21] Ibid. at para. 15

[22] Davies, J. supra note 18 at pg. 173

[23] Bonino, R. ‘ACAS Code on Discipline and Grievances’ 32 Company Secretary’s Review 5 at pg. 40

[24] Ibid at pg.41

[25] Clayton, D. ‘Legal Update: Employment Law’ 21 Law Society Gazzette (2008) at pg.29


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