The Meaning of the Polkey Reduction - Essay Example

The meaning of the 'polkey reduction' The concept of Polkey reduction became a part of employment law after the House of Lords decision in Polkey vAE Dayton Services Ltd1. In this case there was a reduction in the compensatory award made to an employee in a successful claim for unfair dismissal to reflect the probability that there would have been an unfair dismissal in any event. Polkey reduction may either be expressed as a percentage reduction (sometimes it has been a 100%) or as a cap on recovery for future loss. 2 Therefore my advice to the employer would be that even if certain procedural steps are not taken by an employer, there might still be a compensation reduction in the employee's award if it can be shown that the presence or non presence of those mandatory procedural steps would not have made a difference to the decision to dismiss. Although the case originally concerned procedural unfairness ,it has also been used recently in cases of substantial unfairness, for example, if dismissal for a different (fair) reason would have occurred anyway at a later date 3 . 2. The effect of the Employment Act 2002 (Dispute Resolution) Regulations 2004 on the 'polkey reduction' Part 3 of the Employment Act 2002 established a framework for promoting the resolution of employment disputes in the workplace and the detail of how the procedures would operate in practice was set out in the Employment Act 2002 (Dispute Resolution) Regulations 2004 which were made on 12th March 2004. Both the remaining provisions of Part 3 of the Act and the Regulations came into force in October 2004. 4This Act was responsible for producing a certain statutory procedure to be followed in the circumstances set out in the Regulations. These two pieces of recent legislation will affect the way that unfair dismissal cases are judged in that is there will be a sort of a "Polkey reversal" .The law as it stood in the previous Act for a dismissal to be fair, the employer had to show that it there was a potentially fair reason for dismissal5 .For this law to apply the dismissal itself had to be reasonable given the circumstances.6 The Polkey decision seemed to cause employment tribunals to put undue weight on procedure rather than the substance of the decisions and this was a very fair criticism given the case law that was generated.However section 34 of the new Act inserts 98A into the Employment Rights Act 1996. The effect of this will be that if an employer dismisses an employee without the correct dismissal and disciplinary procedure this would amount to an unfair dismissal totally. Also now the aggrieved employee would receive a minimum of four weeks' pay as compensation where he or she was found to have been unfairly dismissed and the relevant procedure has not been followed. It should also be noted that that the tribunals do not have to take into account the failures by employers to take procedural actions outside the framework of the relevant dismissal and disciplinary procedure, provided that following such additional procedural actions would have no effect on the decision to dismiss. Also the dismissal may at times still be found unfair under this legislation even if the employer strictly followed the dismissal procedure and yet the reason for dismissal is not potentially fair. 3. The effect of case law since the Dispute Regulations (above) on the 'polkey reduction'. There has been a lot of case law since these regulations and there was particular confusion as to the meaning of the "procedures". The very recent case in the Employment Appeal Tribunal (EAT) in the case of Kelly-Madden v Manor Surgery 7 has ended the confusion following these regulations under section 98A(2) of the Employment Rights Act (hereafter section 98A(2)) which has also been dubbed as a 'Polkey 2 reversal' and was very controversial when it came out in 2002. In the cases of Alexander v Bridgen Enterprisesand Mason v Governing Body of Ward End Primary School (see below)8 EAT adopted two conflicting approaches to the construction of 98 A(2) ). The Kelly-Madden case follows the judgment in Alexander v Bridgen Enterprises where there was an interpretation of 'a procedure' given and this definition could be still be of use even if the statutory dispute resolution procedures implemented by the 2004 Dispute Resolution Regulations wont be here for long .The facts of this recent decision are briefly that "Mrs Kelly-Madden worked as the practice manager of a general medical practice. Her job, which was to oversee the administration of the practice, involved a significant amount of discretion. In addition to a number of other complaints about her performance, the partners discovered that Mrs Kelly-Madden had been paying herself overtime without authorisation... After holding an investigatory meeting, she was suspended. There followed a disciplinary hearing from which the decision was taken to dismiss Mrs Kelly-Madden on grounds of dishonesty. She exercised her right to appeal, unsuccessfully. Mrs Kelly-Madden subsequently claimed that her dismissal had been unfair. She highlighted the partners' failure fully to investigate. She maintained that one of the partners (Dr Edmunds) had checked the salary payments, and that her predecessor (Mr Hellyer) had told her that she should receive overtime. But the partners failed to make proper inquiries of either Dr Edmunds or Mr Hellyer either during the disciplinary investigation or at the appeal stage. Equally it was significant that the partner who heard the appeal had also been involved in the decision to dismiss her. Her argument was that these procedural defects were sufficient to render her dismissal unfair."9 It was subsequently decided in this case that Mrs Kelly-Madden's dismissal was fair and it was held that although the employers had failed to carry out the proper procedure before dismissing the claimant for her alleged dishonesty, the dismissal was not unfair because she would have been dismissed even if the correct procedure had been followed. This sounds more like a revival of the original Polkey reduction.Infact it has gone on to refuse to class the dismissal as completely fair.In this case there was some confusion as to whether the 'no-difference' rule had been satisfied.The EAT did not want to interfere with the tribunals finding and "Elias J thought that he had to uphold the tribunal's finding that the dismissal was fair, although the 'reasoning was somewhat less than satisfactory.'10 In this case however EAT did not sustain the tribunal's finding of 100% reduction of compensation because in this case the employer's conduct was also blameworthy. In short the new statutory minimum disciplinary and grievance procedures have been deeply criticised as reducing the procedural protection at present afforded to many employees. According to many critics the Act imposes sanctions on employers and employees for not following minimum procedures thus "reviving the rule that dismissals in breach of procedure are not unfair if fair procedure would have made 'no difference', widening the circumstances in which costs may be awarded and restricting the duty of ACAS to conciliate to a fixed period, impose unjustified barriers on access to justice particularly for the most vulnerable workers." 11 An alternative remedy to all the confusion created by the regulations would be to promote alternative dispute resolution with in the system with independent conciliation, mediation and arbitration. 4. Possible changes to the 'polkey reduction' as a result of 'Resolving Disputes in the Workplace-a consultation' published March 2007 and your view on the desirability or otherwise of retaining the 'polkey reduction'. Introduction The Dispute Resolution Review consultation 2007 proposes the repeal of the statutory dispute resolution procedures and this would affect the current statutory provisions pertaining to procedural fairness in unfair dismissal cases.12 The consultation has explored two options i.e. to either revert to the original position or "to review the law relating to procedural fairness in unfair dismissal in order to assess whether it should be restated entirely."13 I am of the opinion that there should be a review of the law in this area which is the latter option. The original position of this area was that there was the "no difference rule" 14which depicted that "where there was a procedural irregularity in an otherwise fair dismissal but it could be shown that carrying out the proper procedure would have made no difference to the outcome, then the dismissal was fair."15 The Polkey case overturned the position laying the rule that procedural failings were able to make a dismissal unfair unless there were other circumstances but that the compensation awarded could be reduced, or eliminated entirely, if the claimant would have been dismissed anyways despite following the correct procedures. This allowed the tribunal to take into account the procedural failings on the claimant in a punitive way. The new law involves statutory provisions on procedural fairness in relation to unfair dismissal (new section 98A of the Employment Rights Act 1996) which were introduced by the Employment Act 2002 alongside the new dispute resolution procedures which came into force in 2004.16 Under the new law dismissal because of a failure to follow other procedural steps will not affect the fairness of the dismissal, if the employer can show that he would still have dismissed that employee even if he had followed those steps correctly. 17 The definition of what procedure could mean has generated much uncertainty (whether it should be written or oral etc). The Consultation has weighed its various options i.e. whether the repeal of Section 98A would be fruitful if the Dispute Resolution Regulations are repealed or not. If there is a reversion to the Pre-2004 procedures then the repeal of Section 98A would reinstate the Polkey decision in a way that procedural omissions will still render a dismissal unfair, but the awards can still be reduced in proportion to the shortcomings in the claimants own behaviour. The advantage of this will be that this was a rather well understood part of the law pre-2004 and it was liked by both the employers and employees.However this position often left both sides empty handed especially where the employer was found to be in infringement and the employee did not get full compensation. "Polkey" reductions thus created uncertainty in the law. On the other hand there is an option of repealing section 98A in full however this would involve a provision for " alternative findings reflecting the balance of procedural and substantive unfairness in the dismissal."18In essence this would allow tribunals to make the nature of the finding clearer by distinguishing between procedural and substantive dismissals. Thus the ratio of procedural and substantive unfairness would be imposed imposed according to a scale with a low or high cap. " Costs could also, as at present, be awarded against an employer who was wilfully obstructive during the tribunal process."19 The positive side to this is that this will provide "greater clarity in the finding, justifying the low level of compensation in cases where the unfairness is purely procedural; employees with a finding of purely procedural unfairness in their favour will receive nominal compensation (unlikely to encourage claims on procedural points only); even a low compensation payment and the possibility of costs awards against them should act as an incentive on employers to follow due process in future." 20 The downside to all this is that there will be an increase in the litigation and the number of appeals etc.Another option under this consultation would be to reverse the Polkey decision in full and revert to the "no difference" rule which would make it possible to retain 98A.21 The good side to this would be that there would be lesser dissatisfaction of a reduced award amongst the parties but this would also cause complete reversal of the pre-2004 status quo. This would no doubt benefit the employees . I believe that in the light of this consultation it would be correct to say the pre-2004 position would facilitate a greater move towards a system which not only distinguishes between substantive and procedural unfairness but also provides for factual findings which will treat each case according to its merits.22. Bibliography 1. Current issues in redundancy law: Part 2,Citation:IDS Emp. L. Brief 2005, 785, 10-17 2. Unfair dismissal: "difficult" employee dismissed for potentially fair reason,IDS Emp. L. Brief 2005, 793, 6-8 3. The unorganised worker: the decline in collectivism and new hurdles to individual employment rights,I.L.J. 2005, 34(3), 217-238 4. Unfair dismissal: dismissal on grounds of personality is fair despite technical competence,I.R.L.B. 2005, 773, 11-13 5. Compensation: conduct at disciplinary hearing may justify 100 per cent reduction,I.R.L.B. 2005, 761, 6-8 6. Unfair dismissal by reason of redundancy in Germany,Citation:I.C.C.L.R. 2005, 16(11), 431-444 7. Unfair dismissal: dismissal on grounds of personality is fair despite technical competence,IRS Emp. Law 2005, 836, 57-59 8. Compensation: conduct at disciplinary hearing may justify 100 per cent reduction, 9. Unfair dismissal,P.L.C. 2005, 16(11), 68 10. Unfairness and Polkey reductions,Emp. L. & L. 2004, 9(2), 38-39 11. Compensation for the manner of dismissal (Case Comment),Citation:I.L.J. 2004, 33(2), 152-158 12. Compensation: refusing alternative employment leads to Polkey reduction,Citation:I.R.L.B. 2004, 747, 9-11 13. Compensation: refusing alternative employment leads to Polkey reduction,Citation:IRS Emp. Law 2004, 810, 57-59 14. Polkey deductions,Emp. L. & L. 2003, 7(10), 42 15. Unfair dismissal: compensation - "Polkey" reduction,IDS Brief 2003, 725, 8-9 16. Employment law (February),L.S.G. 2003, 100(5), 28 17. Reducing awards and completing Polkey's logic,Citation:S.L.T. 2003, 12, 105-107 18. The future of unfair dismissal,Citation:S.L.T. 2003, 4, 31-34 19. The Employment Act 2002 (continued): Part 2,Emp. L.B. 2002, 52(Dec), 2-5 20. The Employment Act 2002 and the crisis of individual employment rights 21. Redundancy - "Polkey" reductions,Emp. Lit. 1999, 4(1), 21 22. Compensation for unfair dismissal: procedural unfairness - "Polkey" reductions,Citation:IDS Brief 1999, 629, 15-17 23. DTI Consultation on Resolving Disputes in the Workplace: Supplementary review of options for the law relating to procedural fairness in unfair dismissal 2007 ________________________________________________________________ Read More