When doesn’t the ACAS Code apply?

Under the provisions of the Employment Rights Act 1996, where an employer fails to follow the ACAS Code in a disciplinary hearing, the employee will be able to claim an uplift of up to 25% on any compensation awarded by an Employment Tribunal in any subsequent claim for unfair dismissal. Clearly, in order to obtain any compensation at all, the employee has to win their case, but if the employer has not followed the ACAS Code then it is likely that any subsequent dismissal will be found to be unfair.

Similarly, in any claim by the employee for unfair constructive dismissal, a failure on the employee’s part to follow the ACAS Code, such as failing to raise a grievance before resigning, will potentially lead to a reduction in any compensation awarded of up to 25%.

In the recent case of Holmes v Qinetiq Limited (2016), the Employment Appeal Tribunal (EAT) had to consider the scope of the ACAS Code and whether it applied to dismissals due to ill health. Mr Holmes was employed as a security guard and was unable to perform his role due to ill health. He was dismissed, and the employer admitted that the dismissal was unfair as they had failed to obtain medical evidence as to Mr Holmes’ condition and prognosis. Mr Holmes had been awarded compensation, but the Employment Tribunal had refused to give any uplift because of the employer’s alleged failure to follow the ACAS Code. It was this point which was considered by the EAT.

The EAT reviewed the ACAS Code and the relevant statutory provisions, and concluded that the ACAS Code did not apply to dismissals for ill health. Such dismissals were not akin to disciplinary dismissals, and as such were outside the scope of the ACAS Code.

In another case, Phoenix House Limited v Stockman and others (2016), a differently constituted EAT had to consider whether the ACAS Code applied to dismissal for some other reason justifying dismissal (SOSR). SOSR is a one of the five potentially fair reasons for dismissal and is a “catch-all” – i.e. where a situation does not fit into one of the other four reasons (capability, conduct, redundancy, or breach of a statutory provision) but where there is still a substantial reason which will justify the dismissal of an employee. This will depend on the facts of the case but in this case the dismissals were due to a breakdown in the working relationship, which can amount to a fair dismissal for SOSR. The employer again failed to follow a proper procedure and the dismissals were therefore found to be unfair. The Employment Tribunal refused to apply any uplift to the employee’s compensation, and again the EAT confirmed that this was the correct approach.

These two cases, together with previous cases which have made it clear that the ACAS Code does not apply to dismissals due to redundancy, are welcome clarification that the ACAS Code does only apply to disciplinary and grievance cases. However, in both these cases it seems that the employers could have dismissed fairly if only they had followed a fair procedure! It is so much better (and cheaper) to seek advice on a potential dismissal before going through the process, than seeking advice after the event which, in practice, is likely to be a fire fighting exercise.

If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).

Please note that this update is not intended to be exhaustive or be a substitute for legal advice. The application of the law in this area will often depend upon the specific facts and you are advised to seek specific advice on any given scenario.