Dismissals and the ACAS Code of Practice

In cases of unfair dismissal, an award for compensation can be increased or decreased depending on whether the employer or employee has followed the ACAS Code of Practice on Disciplinary and Grievance Procedures. It is therefore important that employers are aware of when and how this code is applied in order to avoid the risk of having to pay up to 25% extra in compensation.

The Code applies to all disciplinary cases including poor performance and misconduct dismissals, however excludes redundancy dismissals and non-renewal of fixed term contracts on their expiry. The situations which have remained a grey area are dismissals for ill health or ‘some other substantial reason’. Two recent cases provide clarity for employers in how to tackle this area.

Phoenix House v Stockman involved an unfair dismissal resulting from a breakdown in working relationships. In that case the Employment Appeal Tribunal held that ACAS code did not apply (although held the dismissal had been procedurally unfair for other reasons). The EAT reasoned that certain code provisions did not readily apply to SOSR dismissals (e.g. the requirement for an investigation) and that it was not the intention of Parliament that the ACAS code should apply.

In a second recent case, Holmes v QinetiQ, a security guard was dismissed on the grounds of ill health such that he was no longer capable of fulfilling his role. The dismissal was found to be unfair but, again, it was determined that ACAS code did not apply to dismissals related to ill health. It was held that key factor in deciding whether the codes applied was the existence of culpable conduct and that there was a clear distinction, as established in the Employment Rights Act 1996, between poor performance and medical incapacity.

That said it remains sensible for employers to have the general principles of the code in mind, even in cases of ill health or SOSR, as it remains a touchstone for fairness.

Dominic Bonham