Determining unfair dismissal cases by arbitration

In May 2001, a new arbitration procedure became operational in the UK, providing a voluntary, fast-track alternative to an employment tribunal hearing for resolving claims of unfair dismissal.

Since 21 May 2001, a voluntary arbitration procedure in unfair dismissal cases has been available to employers and employees in England and Wales as an alternative to the traditional way of resolving such cases via employment tribunals.

Compared with a public hearing in front of a three-member employment tribunal with a legally qualified chairperson, involving the cross-examination of witnesses and, in the vast majority of cases, the involvement of legal representatives, the new arbitration scheme, administered by the Advisory, Conciliation and Arbitration Service (ACAS), is intended to be 'speedy, informal, confidential [and] non-legalistic'.

Following the introduction of the Employment Rights (Dispute Resolution) Act 1998, ACAS issued a consultative draft of the scheme and submitted revised proposals to the Department of Trade and Industry for approval in the autumn of 1998. Initially scheduled to come into operation early in 2000, the introduction of the scheme was delayed, reportedly due to the heavy programme of other employment legislation and the need to square its provisions with those of the Human Rights Act 1998 (UK0011199F).

Key features of the scheme

There are significant differences between the new arbitration scheme and the conventional employment tribunal process. The key features of the ACAS arbitration scheme are as follows.

• The scheme is entirely voluntary and is available only in respect of unfair dismissal claims. It can be used only where both parties agree to opt for it and waive certain rights they would have at an employment tribunal. The scheme is not intended to deal with complex legal issues.

• Hearings will be held in private in such places as an ACAS office or a hotel and will normally be completed within half a day. The parties will be invited to submit a written statement of their case in advance of the hearing.

• The case will be heard by an experienced arbitrator, chosen by ACAS, not the parties themselves. Legal representatives may be used by the parties but will be given no special status.

• There is no set format for the hearing. Arbitrators have a general duty to act fairly and impartially between the parties, giving each party a reasonable opportunity of putting his or her case and responding to that of the other party. The process is intended to be 'inquisitorial' or 'investigative' rather than the adversarial approach in tribunal hearings - the arbitrator will question the parties and witnesses informally but there will be no cross-examination.

• Each party meets their own costs in attending the hearing. However, if a dismissal is found to be unfair, the arbitrator can include in the calculation of any compensation a sum to cover the costs incurred by the employee in attending the hearing.

• Arbitrators are required to apply EC law and the Human Rights Acts 1998 (on which a legal adviser may be appointed to provide guidance), but otherwise, instead of applying strict legal tests and case law, the arbitrator's decision will have regard to 'general principles of fairness and good conduct in employment relations' (including those set out in the ACAS code of practice on disciplinary and grievance procedures and the ACAS handbook on discipline at work).

• As with unfair dismissal cases determined by an employment tribunal, reinstatement, re-engagement and compensation are the available remedies if the dismissal is not upheld. Unlike tribunal cases, however, the award is confidential to ACAS and the parties and the arbitrator's decision will be final and binding. The award itself will state the reasons for the dismissal and whether it was fair or unfair, and will refer to the main considerations taken into account.

• There is only very limited scope for appealing (on questions of EC law and the Human Rights Act 1998) or challenging the arbitrator's award (including on grounds of 'serious irregularity').

Commentary

The potential benefits of arbitration as an alternative to employment tribunal hearings have been under consideration since the early 1990s. The Conservative Party government at that time favoured introducing arbitration in the context of growing employment tribunal caseloads. The subsequent Labour Party government adopted the idea and assisted the Employment Rights (Dispute Resolution) Act 1998 onto the statute book. The arbitration alternative has been supported by both the Confederation of British Industry- as a means of reducing the number of tribunal cases - and the Trades Union Congress- as a way of tackling undue 'legalism' in unfair dismissal cases. The new scheme is part of an ongoing programme of reforms to stem the growth in employment tribunal cases (UK0012102N and UK0108142N).

It remains to be seen what impact the new arrangements will have. As yet, there is no indication available of either the volume or outcome of cases dealt with under the arbitration scheme during its first few months of operation. ACAS initially estimated that around 1,000 cases will be dealt with under the scheme in its first year. This represents only a fraction of the current level of unfair dismissal cases (over 50,000 in 1999-2000, of which almost 10,000 went on to an employment tribunal hearing).

Lawyers and other commentators are uncertain as to the merits and likely attractiveness of the new scheme. Some have expressed concern that, because the criteria for arbitrators' decisions ('general principles of fairness and good conduct in employment relations') differ from the statutory tests applied by the tribunals, a 'two-tier' system of justice may develop. It has also been suggested that the arbitration scheme offers employers and employees less certainty of outcome, and that the confidentiality of awards may mask variable standards within the arbitration scheme.

Some lawyers think that the confidentiality of proceedings under the arbitration scheme may be a significant attraction to employers anxious to avoid the damaging publicity sometimes associated with tribunal cases. Conversely, however, some lawyers predict that the fact that the process is private may be a disincentive to dismissed employees to agree to the arbitration route, arguing that to do so would forgo the 'embarrassment value' of the prospect of public tribunal hearings which may lead to favourable out-of-court settlements for dismissed employees. The limited grounds for appealing against an arbitrator's decision are seen as particularly unattractive to employers.

The irony of the new arbitration scheme is that employment tribunals were themselves intended as an 'easily accessible, informal, speedy and inexpensive' alternative to the ordinary courts for dealing with individual employment disputes when the UK's unfair dismissals legislation was first introduced 30 years ago. (Mark Hall, IRRU)