Comparing Statutory Protections for Unfair Dismissals: US vs UK, Study notes of Law

Download Comparing Statutory Protections for Unfair Dismissals: US vs UK and more Study notes Law in PDF only on Docsity! Legislating Against Unfair Dismissal: Implications from British Experience Leonard Ricot The debate over wrongful discharge legislation in the United States has caused many observers to look at the experience under Great Britain's wrongful discharge statutes. The author reviews the history of the British system, noting its effect on the formalization of dismissal procedures. He offers insight into the current operation of this system through both statisti- cal data and a survey of employers. The author compares this statutory system to collectively bargained grievance arbitration, and discusses the implications of the adoption of similar statutes in the United States. INTRODUCTION British eiperience with statutory protections against unfair dismis- sals merits serious consideration in the United States.I The inferences to be drawn from such an analysis are particularly relevant since no prob- lem in human resource management has attracted more recent interest than the issue of unfair dismissals. There has also been an outpouring of both academic and practitioner views on a related topic: judicial deci- sions modifying the long-standing common law doctrine of employment- at-will. Legal scholars have called for enactment of legislation designed to protect employees in the United States against unfair dismissals. In Britain, as in the United States, a variety of methods exist for structuring organizational due process. Among those alternative forms, the most significant are individual grievance procedures in unionized workplaces, complaint procedures in nonunion employment, and dismis- sal review processes under professional, public employee, and other codes of conduct. This study examines both the provision of direct legislative protections and the effects of such protections on private procedures. The purpose of this analysis is to explore the implications of the British experience as a method of evaluating the various proposals made to pro- t Associate Professor of Industrial Relations and Management, Department of Management, The Wharton School, University of Pennsylvania; B.S., Rutgers University, 1952; M.A., University of Illinois, 1955; Ph.D., Massachusetts Institute of Technology, 1961. 1. British statutory protections against unfair dismissals refer to an evaluation of the circum- stances involving the loss of a job for causes related to an employee's capacity or conduct, or to the manner of selection for redundancy, i.e., layoff. INDUSTRIAL RELATIONS LAW JOURNAL vide due process, especially legislative attempts to provide relief for un- fair dismissals in the United States. One such proposal was made by Professor Theodore J. St. Antoine at the thirty-fourth annual meeting of the National Academy of Arbitra- tors in 1981. His view was cogently summarized in "Protection Against Unjust Discipline: An Idea Whose Time Has Long Since Come."2 Two years later in his presidential address to the thirty-sixth annual meeting of the Industrial Relations Research Association, Professor Jack Stieber called for the passage of legislation to do away with the employment-at- will doctrine.' And Professor Clyde W. Summers, a steadfast advocate for employment rights, has consistently argued for statutory "just cause" protections to safeguard employees from arbitrary dismissals.4 What are the likely results of such protective legislation in the United States? This study provides some answers to that question by analyzing the British experience under five topical headings. The first section discusses elements of the British approach: the nature of private dispute settlement procedures, the evolution of the statutory framework, and the role of key public agencies entrusted with implementation of the legal mandate. The second section examines the major statutory impact through published sources describing the procedural changes and degree of protection provided against unfair dismissal. The third section sum- marizes the results of two surveys regarding the implications of unfair dismissal legislation for seven selected firms and for the unionized electri- cal contracting industry. The fourth section presents a brief review of interested party views. The fifth section provides a summary of findings and their implications. I THE SETTING A. Industrial Procedures The British industrial relations system uses three dispute settlement procedures to resolve employer-employee conflicts. These procedures are not in practice mutually exclusive since great emphasis is placed on flexi- bility under the highly voluntary character of the system. The particular procedure selected for a specific dispute is likely to depend on the parties' 2. St. Antoine, Protection Against Unjust Discipline: An Idea Whose Time Has Long Since Come, in ARBITRATION ISSUES FOR THE 1980'S: PROCEEDINGS OF THE THIRTY-FOURTH NA- TIONAL ACADEMY OF ARBITRATORS 43-62 (J. Stem & B. Dennis eds. 1982). 3. Stieber, Employment-at- Will: An Issue for the 1980s, in PROCEEDINGS OF THE THIRTY- SIXTH ANNUAL MEETING OF THE INDUSTRIAL RELATIONS RESEARCH ASSOCIATION I (B. Dennis ed. 1983). 4. Summers, Arbitration of Unjust Dismissal: A Preliminary Proposal, in THE FUTURE OF LABOR ARBITRATION IN AMERICA 159 (B. Aaron ed. 1976). [Vol. 8:547 UNFAIR DISMISSAL IN BRITAIN 2. Legislative Response The Industrial Relations Act of 197113 included unfair dismissal prohibitions and a revised industrial tribunal system for adjudication of employee claims. The 1971 Act was amended and re-enacted in the Trade Union and Labour Relations Act of 1974;14 further amended and consolidated in the Employment Protection Act of 1975;15 and amended by the Employment Act of 198016 and the Employment Act of 1982.17 Under the statutory protections: The employer is obliged to show the principal reason for dismissal and that it is a reason related to the employee's capacity, or his conduct, or that the employee was redundant, or that there was some other substan- tial reason of a kind such as to justify the dismissal of an employee hold- ing the job in question. The employer must also satisfy an industrial tribunal that in all the circumstances (having regard to equity and the substantial merits of the case) [it] acted reasonably in treating this as a sufficient reason for dismissal. Since 1 June 1976, the primary remedy for unfair dismissal which the employee may claim is reinstatement or re- engagement, but in practice most employees are still awarded compensa- tion rather than being put back on the job.18 Between 1970 and 1979, Parliament enacted thirty general acts reg- ulating employment and establishing numerous individual legal rights, including the right not to be unfairly dismissed. 19 The impact of these statutes cannot be appreciated without an understanding of the nature and extent of voluntary dismissal procedures in place when the statutes were enacted. 3. Voluntary Procedures S.D. Anderman generalized the characteristics of dismissals proce- dures at the time the Industrial Relations Act of 1971 was enacted. 0 Using survey data from secondary sources and his own investigations, Anderman concluded that only a small minority of private firms had for- malized internal discipline and dismissal procedures. Moreover, not all those procedures provided comprehensive protection. Union participa- 13. Industrial Relations Act, 1971, ch. 72. 14. Trade Union and Labour Relations Act, 1974, ch. 52. The Labour Government repealed all but the unfair dismissal portions of the original legislation. 15. Employment Protection Act, 1975, ch. 71. 16. Employment Act, 1980, ch. 42. 17. Employment Act, 1982, ch. 46. 18. Hepple, Great Britain, in INTERNATIONAL ENCYCLOPAEDIA FOR LABOUR LAW AND IN- DUSTRIAL RELATIONS 115 (R. Blanpain ed. 1980) (an unfair dismissal claim may be made where an employee alleges that her selection for layoff violates a contract provision or customary practice). 19. Hepple, Individual Labour Law, in INDUSTRIAL RELATIONS IN BRITAIN 393 (G.S. Bain ed. 1983). 20. See Anderman, Voluntary Dismissals Procedure and the Industrial Relations Act, 38 POL. & ECON. PLAN. Broadsheet 538, at 20-54 (1972). 1986] INDUSTRIAL RELATIONS LAW JOURNAL tion in internal procedures varied widely, but there was a trend toward joint procedures. The type of internal appeals also varied widely, but appeal to higher management was most common. Anderman found, when it came to external, typically industry-wide, dismissal procedures, most industries used their general dispute proce- dures to handle challenged dismissals. This system was used in union- ized industries where the union must process the complaint and represent the grievant. External procedures handled dismissal appeals only rarely, but reinstatement or re-engagement was the most prevalent remedy. Most external procedures provided for joint adjudication, most often conciliation, and on occasion, voluntary arbitration. In contrast to the private sector, Anderman found that dismissal procedures in the public sector offered protection to employees similar to the safeguards eventually provided by the Industrial Relations Act of 1971. These voluntary procedures provided the only protections against unfair dismissals in 1971. Civil servants, employees in large progres- sively managed firms, and members of unions had some protection against unfair dismissal. However, a majority of workers in secondary and tertiary labor market21 jobs enjoyed no effective common law protec- tions against unfair dismissal. This situation changed dramatically in February 1972 when the In- dustrial Relations Act of 1971 took effect. At that time, governmental agencies set about to implement a prohibition against unfair dismissals. C. The Role of Public Agencies 1. Industrial Tribunals22 Quasi-judicial tribunals were originally set up under the Industrial Training Act of 196423 to handle disputes over levies which funded train- ing boards in various industries. When the Redundancy Payments Act of 196524 was passed, these same tribunals were given the authority to resolve disputes over redundancy pay entitlements. The tribunal was empowered to adjudicate individual claims of unfair dismissal. In 1968 the Donovan Commission had recommended that tribunals 21. The "secondary" and "tertiary" markets, as opposed to the "primary" labor market, con- sist of short-term, low-skill, low-paid jobs with little chance of promotion. See L. REYNOLDS, LA- BOR ECONOMICS AND LABOR RELATIONS 118-19 (7th ed. 1978). 22. The Industrial Relations Research Unit at the University of Warwick, England has conducted extensive research on unfair dismissals. For an excellent portrayal of the legal background, the set-up, operation and impact of industrial tribunals, see Dickens, Hart, Jones & Weekes, The British Experience Under a Statute Prohibiting Unfair Dismissal, 37 INDUS. & LAB. REL. REV. 497 (1984) [hereinafter cited as Dickens]. 23. Industrial Training Act, 1964, ch. 16. 24. Redundancy Payments Act, 1965, ch. 62. [Vol. 8:547 UNFAIR DISMISSAL IN BRITAIN be given the authority to hear all individual employment disputes. The Commission's enthusiasm for tribunals was based on the view that they provided "a procedure which is easily accessible, informal, speedy and inexpensive and which gives employers and employees the best possible opportunities for arriving at an amicable settlement of their differences."25 Three people sit on a tribunal. The chairperson must be a barrister or solicitor of at least seven years experience and is appointed on a full- or part-time basis by the Lord Chancellor. The two lay members are appointed by the Secretary of State for Employment from panels recom- mended by employer associations and employee organizations (primarily the Trades Union Congress26). The tribunal members receive fees on an ad hoc basis. Each member has an equal vote, and the lay members are not expected to be partisan representatives. The voting pattern is in- structive: about ninety-five percent of the decisions are unanimous, the remainder are two-to-one decisions-a few with the chairperson in the minority. Tribunal decisions may be appealed to the Employment Appeal Tri- bunal ("EAT") only on a point of law. The composition of the EAT is similar to the lower tribunals except that the chairperson is a High Court judge and the lay members are more senior. The decisions of the EAT are binding on the tribunals but are appealable to the Court of Appeal and, finally, to the House of Lords. Several dismissal cases under closed shop arrangements, however, have been appealed to the European Eco- nomic Community's Court of Justice. Cases which are appealed are par- ticularly significant since they become binding precedent. Tribunal orders calling for monetary compensation are legally en- forceable through the civil courts. Orders to reinstate or re-engage the complainant, however, are not directly enforceable, but if an employer ignores such an order, the tribunal will award extra compensation. 2. Advisory, Conciliation & Arbitration Service The Advisory, Conciliation, and Arbitration Service ("ACAS") has extremely important roles and functions in unfair dismissal cases. 7 ACAS is an independent and impartial government agency dedicated to improving industrial relations. It encourages the parties to voluntarily 25. HMSO, ROYAL COMMISSION, supra note 11. 26. The Trades Union Congress is an alliance of independent organizations similar to the AFL-CIO in the United States. 27. Unless otherwise noted, the following summary of ACAS roles and functions are taken from several excellent pamphlets distributed by the agency. THIS iS ACAS (rev. November 1983); CONCILIATION BY ACAS IN COMPLAINTS BY INDIVIDUALS TO INDUSTRIAL TRIBUNALS (1984) [hereinafter cited as CONCILIATION BY ACAS]; IMPROVING INDUSTRIAL RELATIONS: JOINT RE- SPONSIBILITY (1984). 1986] INDUSTRIAL RELATIONS LAW JOURNAL II SYSTEMIC IMPACTS Probably the most significant impact of the statutory protection against unfair dismissal under the tribunal system has been the revision and extension of discipline and dismissal procedures. A. Procedural Changes Dismissal procedures typically take one of three forms: joint proce- dures negotiated by employers and unions, unilaterally formalized em- ployer procedures, and informal "procedures" based on shop custom. In the 1960's, there was very little reliable information available in Great Britain on the existence of formal discipline and dismissal proce- dures. The National Joint Advisory Council ("NJAC") Committee re- port, based on limited and nonrepresentative data from three samples, concluded that probably no more than twenty percent of the private- sector firms had formal procedures.33 The NJAC concluded that: It appears, therefore, that procedures are comparatively rare among firms employing under 1,000-the vast majority-but exist in quite a lot of firms employing over 1,000, and further analysis showed that they are found in many of those employing over 2,000. Indeed, it may be that they exist in a majority of those firms employing over 1,000 which pay attention to good personnel practices. 34 In a later and more comprehensive report, the Government Social Survey found that of 1,100 establishments with over twenty-five employ- ees, only 8% had formal dismissal procedures. Another 24% had lim- ited informal procedures. Finally, a majority 54% had no systematic way at all to process dismissal or disciplinary action appeals.35 A 1976 study of grievance procedures in thirty-five plants in the car- pet, chemical, and food industries is noteworthy. Overall, twenty-two plants (67%) possessed internal grievance procedures, while thirteen plants (37%) had no procedure. The great majority of the official written grievance procedures in the survey had been developed in the 1969-1972 period.36 Thus, the Donovan Report's recommendations,3 7 the consultative process preceding the passage of the Industrial Relations Act of 1971, and the Act's implementation the following year, apparently had a perva- sive positive influence on British management's view of establishing dis- missal procedures. 33. NJAC REPORT ON DISMISSAL PROCEDURES, supra note 8, at 7. 34. Id. 35. See Anderman, supra note 20, at 22. 36. See A. THOMPSON & V. MURRAY, GRIEVANCE PROCEDURES 56-59 (1976). 37. See supra text accompanying notes 10-11. [Vol. 8:547 UNFAIR DISMISSAL IN BRITAIN In fact, Daniel and Stilgoe,38 in a survey of the impact of the em- ployment protection laws, document the impact of the 1971 legislation on dismissal procedures. The study, which involved telephone interviews with 301 establishments and follow-up interviews at thirty-six plants, concluded that: The aspect of employment protection legislation to have had the most widespread impact upon employers was unfair dismissal require- ments. Their chief effect has been to encourage the reform or formaliza- tion of procedures adopted in taking disciplinary action and in executing dismissals.39 The Institute of Personnel Management ("IPM") conducted a major survey of disciplinary procedures and practice in 1978. ° The IPM wished to determine how companies had responded to unfair dismissal legislation, the decisions of industrial tribunals, and Government Codes of Practice. The report was based upon mailed questionnaires returned by 273 organizations representing various industry groups. In addition, 206 company handbooks and procedures submitted by the surveyed firms were analyzed. Finally, IPM conducted a comprehensive literature 41review. IPM found that most public and private companies in the survey had responded to external pressure to formalize their disciplinary procedures. 4 2 Nearly all the participating companies (98%) have written discipli- nary procedures for blue collar workers and 93% have such procedures for white collar workers. Over three quarters (77%) have the same or identical procedures for blue and white collar workers. This marks a significant change in the proportion of companies with formal discipli- nary procedures compared with ten years ago.43 The survey attributed this remarkable change of affairs to the laws on unfair dismissal, the decisions of industrial tribunals, the recommen- dations in the Codes of Practice, and pressure from trades unions and staff associations." The relatively high percentage of British employees represented by trades unions or staff associations in the surveyed firms is worthy of note. The proportion of companies with trade unions for "op- 38. See Daniel & Stilgoe, The Impact of Employment Protection Laws, 44 POL. STUD. INST. No. 577 (1978). 39. Id. at 74. 40. Disciplinary Procedures and Practices, 28 IPM INFO. REP. 1 (1979). 41. Id. at 1-3. 42. The IPM defined disciplinary procedure as "a formal procedure for dealing fairly and con- sistently with disciplinary matters through a system of progressively severe sanctions administered by successive levels of management." Id. at 7. 43. Id. at 73. 44. Id. at 7. The report noted the particularly important influence of a provision under the Employment Protection Act of 1975 requiring that all applicable disciplinary rules must be written down and either given or made readily accessible to the employee. 1986] INDUSTRIAL RELATIONS LAW JOURNAL eratives" (blue collar workers) was 79%, for supervisory and technical, 64%, for clerical staff, 54%, and for managerial staff, 28%. 4 ' The pro- portion of companies which recognized staff associations ranged from a low of 5% for operatives to 16% for clerical staff.46 Trade union partici- pation in disciplinary matters increased with the size of the company. Participation was also greater in disciplinary procedures than in the es- tablishment of rules.47 The final survey reported here4 ' is the most extensive investigation of British workplace industrial relations since the Donovan Commission study in 1966. The Daniel and Millward survey covered the manufactur- ing and service sectors, both public and private, on a wide range of Brit- ish industrial relations practices. The design of the survey had three key features. First, the establish- ment (workplaces) was made the unit of analysis. Secondly, interviews were carried out with both management and worker representatives in establishments. Thirdly, the coverage was more comprehensive than that of any previous survey of its type.49 Interviews were conducted at 2,041 establishments with 2,439 worker representatives and 2,205 managers from May to August 1980.50 The Daniel and Millward survey documented the further growth and continuing formalization of discipline and dismissal procedures noted in the previous studies cited.5 Management reported that disci- pline and dismissal procedures existed in 83% of all establishments. The probability that an establishment had formal procedures was strongly correlated with size, the existence of recognized trade unions, the extent of union membership, and location in the public sector. Of establish- ments following formal procedures, 91% had such procedures in writing. The small, independent private sector establishment was the least likely to have a written procedure; where such establishments followed formal procedures, only 73% had those procedures in writing. The authors concluded that the legislative developments of the 1970's were undoubtedly an important stimulus to the growth of formal- ized dismissal procedures. "However, it remained the case that establish- 45. Id. at 13. The contrast with the percentage of workers who are unionized in the United States is considerable: in 1984 the U.S. Department of Labor, Bureau of Labor Statistics unofficially estimated that only 20.9% of the work force was union-represented. A. SLOANE & F. WHITNEY, LABOR RELATIONS 4 (5th ed. 1985). 46. Disciplinary Procedures and Practices, supra note 40, at 15. "Staff associations," in British parlance, are in-house employee organizations which might be likened to "company unions" in the United States. 47. Id. at 73. 48. W. DANIEL & N. MILLWARD, WORKPLACE INDUSTRIAL RELATIONS IN BRITAIN (1983). 49. Millward, Workplace Industrial Relations: Results of a New Survey of Industrial Relations Practices, 91 EMPLOYMENT GAZETrE 280 (1983). 50. Id. at 281. 51. See W. DANIEL & N. MILLWARD, supra note 48, at 159-75. [Vol. 8:547 UNFAIR DISMISSAL IN BRITAIN in recruiting and "shedding" labor. It may legitimize "the existing struc- ture of authoritarian control and inequality of reward in industry." Fi- nally, it provides a "floor of rights" upon which collective bargaining may improve.59 At least some of the apparent confusion probably results from the overlapping meanings given to "concepts," "purposes," and"functions," especially when the purposes are also related to the outcomes of the legis- lation. Paul Lewis, however, is adamant in claiming that "the primary remedy for unfairly dismissed employees has always been 're-employ- ment.' ,6 In fact, successive legislative amendments since 1971 have emphasized re-employment, thus increasing pressure on industrial tribu- nals to employ it as the preferred redress for unfair dismissals. 6l R.W. Rideout analyzed the historical record of re-employment as a remedy and speculated that its infrequent use disappointed proponents such as Lewis. 62 Rideout succinctly summarized statutory changes and their implementation by the tribunals. The 1971 legislation, accordingly, provided only that an industrial tribu- nal might make a recommendation for re-engagement .... The differ- ence between reinstatement and re-engagement is that the former involves the employer treating the employee in all respects as if he had not been dismissed, whereas the latter involves return to employment by the former employer on such terms as the tribunal shall decide. The 1978 Act, in confirming the power of an industrial tribunal to make an order as distinct from a recommendation (Section 69), obviously seeks to suggest that this should be regarded as the primary remedy wherever it is practical for the employer to comply. As well as this ele- ment of practicality, the Act states in deciding whether to make such an order the tribunal shall take into account whether the complainant wishes to be reinstated, wherever the complainant caused or contributed to his own dismissal, whether it would be just to order reinstatement.... There is no machinery for enforcement of orders for reinstatement or re- engagement. Should such an order not be complied with an "additional award" of compensation may be made. 63 Tribunal operating statistics reinforce Rideout's observations and provide an empirical basis for evaluating the system's effectiveness. 3. Recent Tribunal Statistics The number of registered applications to tribunals has varied widely since 1972. The number increased threefold from 1972 to 1976 and then 59. Id. at 409-12. 60. Lewis, An Analysis of Why Legislation Has Failed to Provide Protection for Unfairly Dis- missed Employees, 19 BRIT. J. INDUS. REL. 316 (1981) (citation omitted). 61. Id. at 324 n.. 62. R. RIDEOUT, INDUSTRIAL TRIBUNAL LAW 113 (1980). 63. Id. 1986] INDUSTRIAL RELATIONS LAW JOURNAL decreased steadily (except for 1981 and 1982) through 1983.&t A prelim- inary unpublished estimate from ACAS projects a decline of 200 applica- tions for 1984.65 The variation in registered applications was due to such factors as expanding tribunal jurisdiction, changing eligibility standards, rising unemployment, and the increasing use of lawyers by claimants. In 1983, almost 75% of all applications consisted of claims for unfair dismissal.66 Table 1, "Unfair Dismissal Cases: 1983," summarizes the most re- cently published data on tribunal operations. Roughly one-third of the 30,076 cases were withdrawn, one-third were resolved through agreed settlements, and one third were eventually heard by tribunals. Of that third of the cases receiving a full hearing, 31.8% were upheld and 62.2% were dismissed. As a proportion of all registered applications, 11.0% of tribunal cases were upheld and 33.4% resulted in agreed settlements, leading to an overall applicant success rate of 44.5%. An analysis of the outcomes of tribunal proceedings provides a valu- able but limited gauge by which to evaluate the level of protection af- forded totally or partially successful applicants. Only 1.3% of all claimants were re-employed, 1.0% through voluntary agreements and 0.3% by tribunal awards. Compensation was the primary method of re- dress, as it was awarded in 38.2% of all claims made and 16.9% of all tribunal awards. A noteworthy recent development has been the ten- dency of tribunals to authorize the parties themselves to determine the appropriate remedy for unfair dismissal. The size of monetary awards can be used to evaluate systemic effec- tiveness. Tribunal compensation orders are determined as follows: There are two separate parts of an order for compensation for unfair dismissal, namely a basic award and a compensatory award. To the sum of these may be added an additional, and primarily punitive, award if an employer declines to comply with an order for reinstatement or re-en- gagement-supposing such an order to have been made in the face of an indication by the employer that he would not comply. 67 Table 2, "Compensation Remedies," presents a percentage break- down of levels of compensation awarded through conciliated agreements and tribunal awards for 1981-1983. The reader is cautioned that the data are not totally comparable because of relatively minor definitional changes and, of course, because of the influences of differing labor mar- ket conditions and inflation rates. The general picture is nevertheless quite clear. 64. Industrial Tribunals and the Employment Appeal Tribunal, 92 EMPLOYMENT GAZETTE 488 (1984). 65. Personal Interview (February 4, 1985). 66. See supra note 64, at 487. 67. R. RIDEOUT, supra note 46, at 114. [Vol. 8:547 UNFAIR DISMISSAL IN BRITAIN n I n W q 09 - !-00 -J- U g 0 z 7, r\ C- 00 = . r 0 , D . o , 11 1- -t -- a, G 00 1.0 CD It 0 ~C~00 00 00 In en'0 sr U 0 .*~ U U >~ C- 0 U) '0 U U 0 0 - C- Or U ~ 0. :0 ~ E ~'- 2~< UEE ~ -- ~ C, U '0 U '0 - • 0 1986] INDUSTRIAL RELATIONS LAW JOURNAL c. Occupation The largest proportion of applications came from the professional and management employees (17.5%) and then, in descending order, the processing employees (14.5%), transport operating employees (12.9%), food service employees (10.1%), clerical employees (10.0%), and retail employees (9.7%). The remaining 25.3% of applications was appor- tioned among the remaining twelve occupational groups. d. Age Almost three-quarters of all applicants were between twenty and fifty years of age, 7.1% were under twenty years old, and 15.6% fell in the fifty to fifty-nine age bracket. In comparison with past years, age groups under forty comprised a greater proportion of the total, while the share of employees over fifty declined. e. Length of Service The seniority distributions for different years are not comparable be- cause of changes in statutory qualifying periods. However, the data for 1976 indicate that nearly three-quarters of all applicants had less than five years seniority and less than a tenth had worked ten or more years for this employer. f. Sex and Wage One-fourth of all applications were filed by women, a significant in- crease from 1975. Basic weekly wages in 1974-1976 varied significantly because of inflation and changing labor market conditions. The data for 1976 reveal that almost two-thirds of male applicants earned less than £50 per week while over four-fifths of female applicants earned less than £40 per week. Only 11.4% of males and 1.6% of females achieved or exceeded earnings of at least £70 per week. In summary, Professor Hepple concluded from his analysis of roughly comparable data: that the industries which are overrepresented in unfair dismissal applica- tions are generally those in which the density of union membership is relatively low and collective bargaining is relatively weak, and where there is a concentration of small employers and low-paid, short-service employees. These industries include agriculture, construction, distribu- tive trades, and miscellaneous services. Industries which are under- represented tend to be those where density of union membership is high and where there are large employers, such as mining, quarrying, gas, electricity, water, and public administration.72 72. Hepple, The British Experience with Unfair Dismissals Legislation, in ARBITRATION ISSUES [Vol. 8:547 UNFAIR DISMISSAL IN BRITAIN III FIELD STUDIES This section summaries the implications of unfair dismissal statu- tory protections on seven selected firms and on the unionized electrical contracting industry. The seven firms were selected because they spanned a variety of sizes and because of the author's personal contacts with their manage- ments, which greatly facilitated cooperation.73 Unfortunately five of the seven firms are non-British owned which may limit the ability to genera- lize from this sample of management practices. However, the examina- tion of the experience of these firms is intended only to supplement the earlier data with more recent data. This objective should not be affected by the nature of the firms' ownership. The unionized electrical contracting industry, on the other hand, was selected because of the unique manner in which it adjudicates unfair dismissal appeals. The industry's internal appeal procedure is the only one exempted from industrial tribunal jurisdiction. Finally, the indus- try's alternative procedure and experience with appeals is not widely known and permits interesting comparisons to be drawn with the indus- trial tribunal and other systems. A. Seven-Firm Survey The firms are discussed in order of size as measured by the number of employees. The analyses focus on a description of each firm and its dismissal procedure and experience. 1. Firm "A " 74 This firm is a branch office of a large foreign financial organization. It employs thirty people who sign a standard employment contract which is designed for young, unmarried females hired into clerk posi- tions. The branch's "Terms and Conditions of Employment" document is given to each employee at the time the contract is signed. Section 6 of the Terms and Conditions of Employment deals with termination of employment. It is a brief statement specifying the length of notice required from either party which varies with the length of ser- vice. Serious employee misconduct, however, will result in immediate termination without notice. There are no formal dismissal procedures or FOR THE 1980's: PROCEEDINGS OF THE THIRTY-FOURTH NATIONAL ACADEMY OF ARBITRATORS 30 (J. Stern & B. Dennis eds. 1982). 73. The persons contacted were assured confidentiality and thus the names of the firms and individuals cannot be provided here. 74. The information for this firm was obtained from a sample employment contract, a telephone interview, and a letter dated January 31, 1985. 1986] INDUSTRIAL RELATIONS LAW JOURNAL appeal mechanisms. Managers could not remember anyone being dis- missed who either appealed internally or to an industrial tribunal. 2. Firm "B" 75 This organization is a medium-sized manufacturer owned by a for- eign company which employs 230 hourly personnel, who are represented by four unions. The handbook containing the organization's "Terms of Employment, Plant Rules and Procedure Agreement" is ten years old, and management has recently proposed various changes to the unions. Section 8 of the company handbook outlines a disciplinary proce- dure calling for maximum involvement of managers, employees, and union officials to develop disciplinary rules and procedures consistent with concepts of social justice. The procedure is progressive, increasing from verbal warnings for minor offenses to instant dismissal for gross industrial misconduct. Employees can appeal discipline and dismissal decisions under Sec- tion 7 which outlines a seven-stage grievance procedure culminating in "a form of Arbitration jointly agreed, the decision of which shall be bind- ing on both parties." Management has suggested eliminating the final appeal provisions for mutually agreed arbitration and substituting instead appeal to the Managing Directors Conference. However, all recent disputes have been settled internally except for a single 1984 arbitration under ACAS aus- pices, which involved interpretation of the agreement. 3. Firm "C"76 This is a branch of a foreign company which employs 1,400 in the food industry. The company prides itself on being a low-visibility firm and its more than sixty years of operation in the U.K. has been charac- terized by good employee relations. The employees have a high sense of loyalty; the average worker has served for over ten years. Plant and de- pot managers exercise authority in a decentralized system of control, ne- gotiating twelve labor contracts and a "custom and practice" arrangement. 77 Each employee receives a copy of the contract when hired, but there is no handbook available spelling out the terms and conditions of em- ployment. Company discipline and dismissal procedures are contained 75. The information for this firm was taken from company documents and a letter dated April 23, 1985. 76. This description is based on an interview with the Personnel Director on February 20, 1985. 77. In Great Britain, written labor agreements are brief, non-legally binding contracts. The parties, therefore, rely heavily on "custom and practice" arrangements to govern their relationships. [Vol. 8:547 UNFAIR DISMISSAL IN BRITAIN discrimination was upheld, and management refused to arbitrate a dis- missal which may yet result in an industrial tribunal hearing. In addi- tion, one recent tribunal case resulted in reinstatement of the applicant. In 1982 the unions requested several procedural changes in the 1980 agreement, and the parties finalized the modifications in March 1985. The unions had requested that work rules be negotiated, that a shop steward be present at all stages of the disciplinary process, that past disci- plinary actions be disregarded after a shorter time, and that unilaterally triggered arbitration by either party be substituted for mutually agreed arbitration. Management agreed to allow a union official to accompany an em- ployee at every stage of the formal procedure "unless the employee de- cides otherwise," and to disregard disciplinary suspensions after eighteen months rather than only after two years. Significantly, the unions' re- quest for unilateral arbitration was denied. One management argument for the denial was that "in cases of dismissal of course the ultimate deci- sion of an industrial tribunal is a backstop." In other words, with arbi- tration unavailable, an employee could still take his case before the industrial tribunal. 6. Firm "F"581 This firm, also owned by a foreign company, employs about 17,000 in more than forty plant and service locations. There are no trade unions recognized by firm "F," which is widely known for its progressive and effective human resources management program. The personnel policies emphasize respect for the individual, and company officials claim to "lean over backward" to provide a level of protection against unfair treatment equal to or better than a union shop would provide. The employment offer letter spells out a few terms such as salary and refers the employee to the company handbook for additional terms and conditions of employment. The employee handbook is not exhaus- tive; the new employee therefore is instructed to ask her manager for any information not provided. Termination of employment contracts require varying notice periods geared to the employee's length of service except for dismissals based on major misconduct by either party which do not require notice. The firm employs a constructive policy and progressive procedure in handling unsatisfactory performance or conduct situations. Suspensions with pay are utilized by management during investigations, and every dismissed employee has the right to request a written statement of the 81. The information for this firm is based on company documents, internal publications and communications, and an interview with the Employee Relations Advisor on February 2, 1985. 1986] INDUSTRIAL RELATIONS LAW JOURNAL reasons for discharge. At every stage of the discipline or dismissal pro- cess, the employee may appeal her treatment. The appeals mechanism is an elaborate "open door" policy which is an integral part of the management system. Appeals progress up the management hierarchy to the chairman of the board of the corporation for final adjudication. The open door policy is a flexible one allowing the individual em- ployee to decide how to use it. Higher level managers tend to appeal directly to the executive levels, skipping their immediate supervisors and intermediate steps. Lower level employees, on the other hand, tend to go through the appeal levels outlined in the handbook. The employee typi- cally represents herself, but is permitted-to use a "soldier's friend" if de- sired. Senior executives who are asked to rule on appeals may appoint independent "ombudspersons" or investigators to gather the facts :and make recommendations to executive decision makers. The executive level receives approximately thirty open-door appeals annually. About one in four applicants is successful. In the period 1982- 1984, ten employees appealed their dismissals, about 10% of the annual appeals total. Even after exhausting internal procedures, an employee may still re- quest an external review of her dismissal by filing a claim of unfair dis- missal under the industrial tribunal system. Four such claims were made by dismissed employees: one each in 1976 and 1984, both unsuccessful; plus two others which underwent pre-hearing assessments but never re- ceived a formal tribunal hearing. Firm "F" continually monitors its internal dismissal procedures try- ing to improve their effectiveness. Management believes, implementation problems notwithstanding, that the system is working well. 7. Firm "GIP'8 2 This organization is a large, prosperous firm which employs more than 100,000 employees in eleven companies. The firm has made a major effort to decentralize operations, cut costs, and reduce employment at all levels of the firm. One of its companies cut back from 18,000 to 11,000 employees in less than three years. The firm's approach is to deal with its employees in a fair way, often going beyond the basic standards of natural justice mandated by law. Thus, dismissal conflicts are typically bought-out by generous agree- ments which exceed the requirements of state schemes. Industrial tribu- 82. The data reported for this firm was obtained from company documents, internal procedures, and interviews with a Managing Director on February 22, 1985, and the Manager of the Employee Relations Division on February 22 and on March 12, 1985. Two Personnel Officers were also present at the March 12th meeting. [Vol. 8:547 UNFAIR DISMISSAL IN BRITAIN nal awards provide a minimum floor of protection which this firm deems quite reasonable. This firm gets involved in tribunal proceedings only when a case involves a flagrant danger to corporate interests, such as stealing, drug abuse, and insubordination. The staged decentralization process, termed "devolution," allows personnel policies and practices to vary not only among the eleven com- pany profit centers, but among plant and departmental levels. Each de- partment at the corporate headquarters, for example, has some form of "works council" allowing for employee input, but no central council ex- ists for consultation. While the dismissal procedure is generalized for all companies, it is applied flexibly in each department.8 3 Each employee signs both an employment contract stipulating vari- ous conditions of employment and an attached "Statement of Main Terms and Conditions of Employment." The latter document includes a generalized statement of the appeals and disciplinary procedures. If an employee wants more detailed information, he is instructed to talk to his manager or personnel officer or to ask to see the"Guide to Personnel Policies" kept in each department. There is no handbook because of the great diversity among the companies and departments. Final appeals are usually made to the department head or his superior. The dismissal experience of one department of 600 employees at cor- porate headquarters is instructive. There were only four or five appeals over the last three years, one of which went to a tribunal hearing. Many "problems" never reach the conflict stage. Management makes a thorough investigation of the facts and as- sumes a high cost commitment to "ease out" non-performing employees by offering settlements which exceed tribunal awards for unfair dismissal. Redundancies are minimized through effective planning to protect em- ployee interests, and a major effort is made to find alternative jobs or provide compensation beyond legal requirements. Finally, an internal "resettlement advisor" helps displaced employees to locate outside job opportunities. B. The Joint Industry Board Experience The Electrical Contractors' Association ("ECA") and Electrical, Electronic, Telecommunications, and Plumbing Union ("EETPU") be- lieve that they revolutionized industry dispute settlement procedures when they created the Joint Industry Board ("JIB") in the fall of 1967.84 83. The 11 companies of firm "G" are heavily unionized and accordingly have had formalized dismissals and appeals procedures since the 1960's. The statutory requirements of unfair dismissal, however, resulted in an elaboration and formalization of procedures for the totally nonunion head- quarters staff of 6,000. 84. The data in this section were obtained through interviews conducted with industry and union representatives and from various JIB documents. 1986] INDUSTRIAL RELATIONS LAW JOURNAL missal Cases."'8 7 The data, based on a five-year average, indicate that: * Most appeals are adjudicated at the lower steps of the procedure with very few cases going to arbitration. " Relatively few claims of unfair dismissal are heard under the formal procedure-only 0.06 (0.08)88 percent of graded operatives. " A relatively high proportion of appeals are at best partially success- ful-58.5 (75.4) percent. * A relatively high proportion of the total number of appeals result in re-employment-9.4 (12.3) percent. Re-employment is also a rela- tively frequent outcome in unfair dismissal cases-16.0 (21.0) percent. Table 4, "Cases Upheld" compares JIB and industrial tribunal find- ings of unfair dismissals for 1983. Clearly, it is not feasible to attempt a detailed comparative evaluation of industrial tribunal and JIB proce- dures based on the severely limited data in Table 4. However, the magni- tude of the differences merits at least guarded inferences. The JIB appeal procedure was more responsive to applicants' claims of unfair dismissal. Even if adjustments are made for conciliated agree- ments under the tribunal system,89 the JIB procedure still provided the applicant a greater chance that the unfair dismissal claim would be up- held, and that he would be re-employed or receive a monetary award. The JIB monetary awards, however, were apparently smaller than those given by the industrial tribunal. Notwithstanding the statistical limita- tions in comparing the two appeals procedures, the data suggest signifi- cant differences not only in their mechanisms but in their outcomes as well. IV SELECTIVE VIEWS AND REACTIONS What do those most directly involved have to say about the British system of statutory protections against unfair dismissals? A. Employers There is no unanimity of opinion among employers on unfair dis- missal protections. The Institute of Directors still maintains that the em- ployment contract is the privatized and preferred means to provide protection to both parties.90 The Confederation of British Industry, on 87. The following analysis does not consider or include ACAS or JIB conciliated agreements. 88. The figure in the parentheses reflects the number of operatives involved, which is greater than the number of cases filed because a claim may be filed on a group basis. 89. See supra Table 1. 90. Hoskyns, No Recovery Until the Tyrants are Tamed, THE TIMEs (London), Feb. 13, 1985, at 12. Hoskyns is the Director General of the Institute of Directors ("IOD"). The IOD provides a voice for conservative business and reputedly carries great weight in conservative party policy deliberations. (Vol. 8:547 1986] UNFAIR DISMISSAL IN BRITAIN 577 00 z 0 P 0 ,u ch n 00 0. oU -l 0 = u- C o zj 00. 0. wC w 1:4 Q tt UU INDUSTRIAL RELATIONS LAW JOURNAL the other hand, has come to accept employee protection legislation, and aside from advocating that specific provisions be repealed or added, sim- ply advocates that administrative and financial burdens be lightened.9" The strongest criticism from employers has come from relatively small businesses, and it is to this group that the Thatcher government has been most responsive in changing the statutory requirements. For example, employees in firms with twenty or fewer workers must be con- tinuously employed for at least two years before they can file a complaint of unfair dismissal. The qualifying period previously had been one year, and still is for employees of larger firms. Also, the test of whether a dismissal was fair or unfair was amended to take account of "the size and administrative resources" of the firm.92 The Institute of Personnel Management's National Committee of Employee Relations released the preliminary results of its survey on the industrial tribunal system. 93 The Institute's respondents were generally supportive of the system, while making some constructive suggestions for change. Only one issue apparently divided the membership: the positive and negative views of the growth of legalism in industrial tribunal proceedings. B. Trade Unions Trade union views are more critical and focused than those of their management counterparts. The Labour Research Department ("LRD"), an "independent, trade-union-based research organization," maintains that since the Conservative Party came to power in 1979 it has systemati- cally weakened employment protections. "Individual employment rights are whittled away while employers are given new legal loopholes which make it easier for them to escape their statutory obligations." 94 The LRD, "which exists to provide unionists with information they need," advised its clients that the Employment Act of 1980 removed the burden of proving that a dismissal was "fair" from the employer, eliminated the minimum basic award of two weeks' wages for all unfairly dismissed em- ployees, and added the two advantages for small employers mentioned earlier: the extension of the applicant's qualifying period and the re- quirement that tribunals consider firm size and administrative sophistica- 91. CONFEDERATION OF BRITISH INDUSTRY ("CHI"), SCRUTINY OF ADMINISTRATIVE AND LEGISLATIVE BURDENS (1984). The CBI is an independent non-party political body financed by contributions from industrial and commercial firms. 92. For a discussion of the Thatcher government's attempt to boost economic growth and job creation by favoring the small business sector, see Small Firms Get Boost, THE SUNDAY TIMES (London), Mar. 24, 1985, at 57. 93. IPM Members Find ITs "Like the Curate's Egg," IPM DIGEST, Mar. 14, 1985, at 5. 94. LABOUR RESEARCH DEPARTMENT PUBLICATIONS, LRD GUIDE TO THE EMPLOYMENT ACT 3 (1980). [Vol. 8:547 UNFAIR DISMISSAL IN BRITAIN tion. In some highly union-concentrated industries and progressive non- union firms, the key elements of mandated standards of behavior were basically in place even before the statute came into existence. The great majority of firms, moreover, created or revised their standards to meet or exceed the new statutory requirements. However, the industrial tribu- nals and Codes of Practice provided a degree of protection where it was most needed, that is, generally in labor-intensive, low-wage industries, and particularly in small firms. About a quarter of a million unfair dismissal applications have been processed from 1972 to early 1985, with 130,000 resulting in some type of remedy for dismissed employees. For 1983, roughly one-third of the applications were resolved by agreed settlements and about one-third went to formal tribunal hearings. Of the latter one-third, roughly one- third of the claims were upheld. Thus, 11% of all registered applications were upheld by tribunals and 33.4% led to agreed settlements. There- fore, nearly forty-five percent of all applications resulted in some form of remedy for the applicant. However, only a miniscule 1.3% of all claim- ants were re-employed and median compensation awards were relatively low. 101 Unfortunately, data on applicant characteristics are severely limited and not timely. Nevertheless, it is not surprising that what data exists suggest that most appeals came from industries which were not highly unionized and where unions were comparatively weak advocates. In ad- dition, small firms paying low wages and employing short-service em- ployees were fertile sources for claims of unfair dismissal. 102 The seven-firm survey revealed several approaches to handling em- ployee discipline and dismissal matters in the British setting. All but the smallest organization had formalized their dismissal procedures, while two used impartial arbitration in the final stage of their appeal processes. Moreover, very few appeals were heard by tribunals, with firm "D" being the notable exception. Lastly, several of the firms commonly made com- petitive offers to buy out employee job rights in order to obviate the need for tribunal hearings, maintain the morale of remaining employees or forestall unionization. As one manager put it, "We try to assure dis- missed employees that they have more to gain by agreeing to a settlement than seeking redress by appealing to a tribunal." Negotiated settlements, however, were more customary for long-service managerial and profes- sional employees than for rank-and-file employees. 103 The JIB dismissal procedure, the only one granted an exemption to date under the statutory option, offers several noteworthy contrasts with 101. See supra notes 58-62 and accompanying text. 102. See supra notes 63-66 and accompanying text. 103. See supra notes 68-77 and accompanying text. 1986] INDUSTRIAL RELATIONS LAW JOURNAL the tribunal system. Its protective coverage is more inclusive. Further, the hearings are less formal and legalistic, and the applicant is more likely to get his job back. Finally, most appeals are settled locally with recourse to arbitration relatively rare." The strongest criticism of the statutory protections afforded employ- ees comes from the small employers through their associations. The Thatcher government has responded by lowering threshold coverage and behavior standards for small firms. However, calls for statutory repeal from the Right and substitution of an arbitration procedure for the tribu- nal system from the Left are not likely to be answered in the near future. Rather, the attempts of public officials to incrementally improve the functioning of the present system will in all likelihood continue. What conclusions can be drawn from the British situation that bear on the current debate in the United States regarding needed changes in our own system of protections against unfair dismissal? The passage of legislation against unfair dismissals in the United States is likely to have only a moderate impact on private sector proce- dures already in place: * It is almost fifteen years since the enactment of the British statute, and much of the extensive formalization and elaboration of voluntary dismissal procedures that resulted from that legislation's introduction in Britain has already occurred in the United States. * Voluntary complaint procedures implemented by progressive firms motivated by enlightened self-interest would not require drastic revi- sions to meet any newly legislated standards except, perhaps, the in- clusion of an external neutral, third-party final review of internal dismissal decisions. " The current grievance arbitration procedure, like the JIB system, pro- vides the most comprehensive and effective mechanism to ensure against unfair dismissals and would in all likelihood also be exempted from any alternative procedure set up by legislation. The major potential impact of enacting federal or state unfair dis- missal legislation would probably be similar to the primary effect exper- ienced in Britain today: * Statutory requirements would establish minimum standards of pro- tection which all employers are expected to meet. * The provision of a "floor" of legally mandated employer behavior would yield the greatest positive impact on unfair dismissal practices now concentrated in low-wage, competitive industries, the service sector, and small firms, especially those with fluctuating employment needs. 104. See supra notes 78-82 and accompanying text. [Vol. 8:547