The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)

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I am, as always, extremely grateful to noble Lords for this debate. Before we begin, I direct Members of the House to my register of interests, although I do not believe there is any conflict relating to the Bill today. I am very grateful to the noble Lord, Lord Woodley, for bringing this Private Member’s Bill to this House. It affords us an extremely helpful debate, and I will go through some of the points shared by so many Members of this House who are rightly concerned that the primary function of a strong economy is a fair workplace regulatory framework.

I absolutely agree with the noble and wise comments of the noble Lord, Lord Leong, at the end of his address, that we should have strong relationships between the people who work in our industry and the people who employ them—with the shareholders, investors and consumers, and in fact with our entire habitat and environment. That is exactly the sort of harmony that this Government are trying to deploy.

I will talk about some of the technical elements around the Bill and dispel some misconceptions. The first misconception to dispel, if noble Lords will allow me, is that the P&O situation was a dismissal and re-engagement process. It was not. If I may, I will correct noble Lords who have conflated that situation—which in my view was absolutely abhorrent behaviour by an organisation with such lineage as P&O towards its staff, who had such loyalty to the company. It was strongly condemned at the time by the Government and is continually condemned by the Government today, and by me personally. I am aware that there is an inquiry by the Insolvency Service into P&O, on which it would be inappropriate for me to comment, but at no point should noble Lords conflate what P&O did with the concept of dismissal and re-engagement.

I will also touch on the principles around the proclivity of companies to use this practice to control their workforce. There is a great deal of anecdotal evidence, but there is not a great deal of specific evidence to suggest that this is as widespread as noble Lords may recommend. In fact, some of the high-profile cases—they tend to be so because they are relatively unique; this is important—often resulted in better outcomes for the employees post the relationship renewal with the unions. It is important to understand how big a situation we are dealing with here; it is not as significant as people suggest. The statistics vary significantly—from one in 10 to 3%, whatever that may be—which causes me concern. I am delighted to make a commitment to continue to do more work on how significant a so-called problem this is.

I will make two very important points about the principle of dismissal and re-engagement. First, for me, it is an extremely useful and powerful mechanism to allow employers to engage effectively with their workforce to create and establish new terms and conditions that may be appropriate for the modern age or for the needs of the company at the time. It is very important that we retain those flexibilities. The concept of dismissal and re-engagement is also very valuable in resetting and clarifying employment terms; I am sure that I am surrounded by people with far greater legal expertise on that than me. As I said, it is not simply a question of using this as a mechanism to bully staff; it is a very important legal process for the contractual relationship between the employer and the workforce.

My next point is something I think we are all agreed on. While I have great respect for the Bill of the noble Lord, Lord Woodley, and indeed for the noble Lord himself, we must have the flexibility to enable companies to manage their workforce in times of crisis. I am sure that, when we are faced with these situations ourselves, either as employers or workers, and we need to come together to respond to an economic crisis such as Covid, it is absolutely right that we have mechanisms to enable us to protect the workforce. This is about fairness, protecting workers and allowing us to have a flexible workforce. It will allow me and my friends, associates and children, and the rest of our citizens, to have the opportunity to work in a flexible environment that has not become too rigid or ossified to respond to economic volatility.

However, very importantly, this should never be used to bully the workforce. The code is very strong on this; it is extremely clear that it is not to be used inappropriately to try to force unacceptable terms on a workforce. Instead, what the code does is clarify the obligations of the employer to ensure that they have to consult with their workforce. For the first time, they have to—this is very important, when you look at the other reasons for dismissal and re-engagement—look at alternatives, not just to the overall plan but to how the individual workers themselves are treated.

There is the 25% uplift, and I take noble Lords’ comments, including those of the noble Lord, Lord Browne, on the tribunal service; I am very sensitive to that. I will come back to the noble Lord on his comments on the workability of that process, because it must be an easy-to-use process that is accessible; that is absolutely at the core of protecting workers’ rights. But we do have the 25% automatic uplift that can be fed into the process. There is an obligation—I believe the code advises it in every case—to consult ACAS when it comes to using dismissal and re-engagement. These are actually quite significant.

Clarity is very important. As we know from statutory codes—again, I defer to noble Lords who have greater legal experience than me—they are central in ensuring that we have a strong framework for navigating employment law and giving protections to workers, and, very importantly, also giving obligations to employers. Having been on both sides, and certainly as an employer, the more clarity I can have about how I can work with my workforce, the better. It is very clear from the tone of the document and this Government that it is the expectation that this is a last resort, that there is a significant degree of consultation and that every other option is exhausted before it is appropriate to use dismissal and re-engagement.

Lord Johnson of Lainston (Con)

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I am very grateful for that challenge. I will now turn to the Bill. As I said, many elements of its sentiment are wholly welcome, but its practical application would result in less fairness, wealth and job security than the noble Lord might wish. There are several reasons for that. First, the increased consultation becomes extremely onerous on companies. Often you have a very limited period of time to react to a significant economic circumstance. As I said, this is dismissal and re-engagement, rather than simply some type of long-term planning for a business. We must be extremely careful about the onerous conditions that we are placing on companies. I have looked through the Bill, and they are substantial and, I am afraid, heavily tilted towards union practices—maybe because every Member of the House who has spoken so far, apart from the Front-Bench spokesman opposite, is a member of a union. In many instances, not all companies have union bodies represented within them and not all workers are members of unions, so it is possible to conflate those two consultation processes, which is inappropriate.

It is also very difficult. While I have a great deal of sympathy with the principle of a so-called bankruptcy clause, it is not a position that those running a business want to be in that they can do something only if they are about to go bankrupt. The reality, as I think Hemingway said, is that you go bankrupt:

“Two ways. Gradually, then suddenly”.


You have limited time to act and have to be precipitous. You must try to prevent the point at which you go bankrupt, because otherwise all your staff will lose their jobs.

The principle of what we are discussing is how to protect as many workers as possible, in a difficult situation. The code does, but I am afraid that the Bill that the noble Lord, Lord Woodley, has put forward would put at risk the security of more workers than it would protect. Importantly, it removes the breadth and range of principles around which dismissal and re-engagement can be used. That is difficult, because businesses require flexibility and it should not be up to politicians to decide this on a case-by-case basis. That would cause enormous problems, reduce flexibility, make it far harder for businesses to operate appropriately, and reduce employment in this country and security for workers.

However—and I personally will be pleased to engage in this—before the code comes into force in the summer, there will be a full debate in both Houses. I have been very clear with my officials in the department and to my colleagues that we will keep this under review. It is right that we understand exactly how many companies are using this practice and to assess that more appropriately. As I said, I will look into the comments from the noble Lord, Lord Browne, around tribunals.

As the noble Lord, Lord Woodley, knows, I continue to be extremely desirous of continuing to engage with him on this important subject. Nothing is more relevant to this Government than strong relationships between investors, companies, the people who work in those companies, consumers, the broader citizenry and the environment to create the sort of harmony that gives us growth and security for the future.