(13 years, 5 months ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts
Mr Christopher Chope (Christchurch) (Con)
I beg to move, That the Bill be now read a Second time.
This is a short Bill that would set a limit on compensation for awards for unfair or wrongful dismissal or discrimination arising out of employment and provides that that maximum limit should be £50,000. I propose this partly because I know that the Government are considering the matter, although they announced their review in May whereas my Bill was presented as long ago as 5 July 2010.
At the moment, there are strict limits on the awards that a tribunal can give in respect of claims for unfair dismissal arising from ordinary employment law. When the claim for unfair dismissal is based on discrimination, however, an unlimited amount of damages can be awarded. That is now leading to all sorts of farcical situations. The situation has been recognised by a group described by Mr Mark Leftly in The Independent on Sunday on 5 June as “an influential group” in the City,
“led by Sir Michael Snyder”
who have
“told ministers that employment law must be overhauled, with tribunal awards for discrimination cases capped at £50,000”—
the exact figure proposed in my Bill. The article goes on to say that
“an employee who successfully sues for discrimination, be it racial, sexual orientation or gender, can get unlimited awards. There is a growing belief that this has led to employees without genuine grievances making discrimination claims.”
People are making or threatening to make claims when they are faced with dismissal, saying that they will not go for the ordinary unfair dismissal but will base their claim on the fact that their dismissal has been on the grounds of racial discrimination or discrimination based on sex, gender or something similar. We are getting a two-tier system in which people threaten to sue in a tribunal for the much larger, open-ended awards that are available and my Bill would place a cap of £50,000 on all that.
Mr David Hamilton (Midlothian) (Lab)
In the interests of clarity, can the hon. Gentleman tell us how many such claims have been unsuccessful? That would give weight to the argument that people are claiming just for a chance of getting some money.
Mr Chope
I have the figures somewhere, but I do not have them to hand this instant because I have a lot of papers. I hope the hon. Gentleman will forgive me for not answering his question, but the figures that I saw show that many claims are unsuccessful or not pursued, quite often because they are the subject of a settlement. Quite often the settlement is between unequal parties. The claimant has nothing to lose by taking the case to a tribunal but the employer is faced with substantial legal costs, plus disruption to his business, in defending his position. Those claims can end up being settled out of court, as it is called. They would probably be regarded by the hon. Gentleman as unsuccessful claims, but they might have been taken to the tribunal had it not been for the imbalance of power between the applicant and the employer.
Mr David Nuttall (Bury North) (Con)
May I help my hon. Friend on that point? I suspect that no accurate figures are available because many of these claims are resolved before the application is put to the industrial tribunal. Although figures will be available for those withdrawn or settled after the industrial tribunal proceedings began, I suspect there will be many thousands of other cases that the public do not know about.
Mr Chope
To put the issue in context, I will quote briefly from some newspapers. On 24 October 2008, the MailOnline had the headline “Asian bank worker gets record £2.8m race discrimination payout”. On 10 September 2009, another headline read: “Sacked council manager wins £1 million age discrimination payout”,
and a report has come out in the past few days saying:
“Discrimination compensation payouts hit an all time high.
A recent annual survey of compensation awards in the Equal Opportunities Review has revealed that the amount being paid out by employers in discrimination cases has more than doubled in two years.”
Mr Brian Binley (Northampton South) (Con)
Does my hon. Friend recognise that there is a level below a claim which employers are quite concerned about? They are being threatened with being taken to a tribunal as a way of extracting money from them. Many employers are advised at local level to give in and not allow the case to go to a tribunal. In that respect, there is a certain element of the blackmailers charter about all this. I wondered whether my hon. Friend had thought about that and why he had not included it in his Bill.
Mr Chope
I am sure that I could have included it in the Bill, but it is implicit that having a lower maximum figure in the case of unfair dismissal and an absolute maximum figure—there is no maximum figure at present—in the case of discrimination cases will reduce the bargaining power in a situation such as that my hon. Friend outlined. He described it as blackmail. We know that companies can sometimes be threatened with being taken to a tribunal and subject to all sorts of allegations it will find difficult to answer, so they pay up to an aggrieved ex-employee.
Diana Johnson (Kingston upon Hull North) (Lab)
I wonder whether the hon. Gentleman has had an opportunity to look at the employment tribunal annual reports for 2007-08 to 2009-10. They set out the median compensation awarded in race, sex and disability discrimination cases. In 2009-10, the median for race discrimination was £5,392 and for sex discrimination it was £6,275, which are well short of the millions referred to in MailOnline.
Mr Chope
Obviously I cannot quarrel with the statistics that the hon. Lady quotes, but the issue is causing the coalition Government concern. That is why on 11 May the Department for Business, Innovation and Skills announced that the Government would look in detail at the case for reforming compensation for discrimination:
“Compensation levels for cases of discrimination are unlimited and employers worry that high awards may encourage people to take weak, speculative or vexatious cases in the hope of a large payout. This can lead to employers settling such cases before they reach a Tribunal.”
The Government therefore seem to think that there is a problem.
I see my hon. Friend the Minister for Immigration on the Front Bench—we could have done with his wisdom on asylum cases in the previous debate. I hope he will be able to bring some of that wisdom to bear on this subject in particular, as I had the opportunity to talk to an official from his Department who said that the Government were carrying out a review of the subject. The point that I made to my hon. Friend’s official was that that is all very well, but how will it deal with the rulings in the European Court of Justice. In the ECJ case Marshall v. Southampton and South-West Hampshire Area Health Authority (No.2) (1993) IRLR 445, the court decided that the cap that had previously been put on discrimination compensation did not provide an adequate remedy under European Community law.
The Minister for Immigration (Damian Green)
I am grateful to my hon. Friend for giving way so that I can confirm to him now, should the debate run out of time before I have chance to reply in full, which I very much look forward to doing, that the Government will be launching a public consultation on this specific matter later in the year. As he has already said, this is a matter that the Government are considering and receiving recommendations on, and we want the widest possible input into the public discussion of this important matter.
Mr Chope
I am grateful to my hon. Friend, but I thought that in the announcement on 11 May his colleague with responsibility for employment relations had announced the extension of the Government’s review of employment law into this area. The question I was trying to get an answer to was how compatible the Government’s aspiration to introduce a limit on compensatory awards was with the ECJ case to which I have just referred. The issue was drawn to my attention by staff in the House of Commons Library who wondered whether my Bill would cut across EU law, and that is why I have included clause 2, which states:
“This Act shall have effect and shall be construed by the courts of the United Kingdom as having effect notwithstanding the European Communities Act 1972”,
thereby reasserting the sovereignty of this Parliament to decide on such issues and not be subject to rulings from the ECJ interpreting European Union law.
Some firms of solicitors are already on to this point. I have a report from Lee Rogers, an associate at Weightmans solicitors, who says that the Government may face obstacles if they decide to impose such a cap. I really wanted to find out from my hon. Friend whether the Government recognised that this was a problem and, if so, how they would overcome it. There is no point in going out for consultation on something where the Government’s ability to manoeuvre is restricted by European Union law, unless the Government are saying that they will override that law. The fact that my hon. Friend does not seek to intervene again suggests to me that either the message that went through his office was misinterpreted, or that when he sought information from the responsible Minister he did not get a clear answer, so he has done the best that he can in his inimitable way from the Front Bench today with the problems that the Government obviously have on this issue. The public do not believe that compensation for discrimination should be in the hundreds of thousands of pounds; they think that is unreasonable.
People talk colloquially about something costing an arm and a leg, and I would not want to make this issue seem anything other than serious, but if somebody were to lose one leg below the knee, under the criminal injuries compensation scheme they would be entitled to £33,000. If they were to lose one arm and one leg, they would be entitled to far less compensation than is paid to people who bring successful claims for discrimination before an employment tribunal. We value the damage of hurt feelings from discrimination cases far more than the criminal injuries compensation scheme values the actual loss of a leg or an arm and that is absolutely ridiculous, so if the Government were able to bring in some amending legislation that would be very useful.
I also cannot understand why, if the Government are concerned about the level of compensation and tribunal awards, they allowed the ceiling for such awards to be raised in line with inflation in a recent statutory instrument. If they felt that the awards were already too high, why did they not rein them back and not increase their maximum level in line with inflation?
This is a simple, straightforward Bill, and I hope that it receives hon. Members’ support so that it can be discussed in Committee, and so that the Minister can be asked probing questions and answer those I have put to the House this afternoon.
Tony Lloyd (Manchester Central) (Lab)
I will be brief, because my hon. Friend the Member for Kingston upon Hull North (Diana Johnson) on the Front Bench also wants to say a few words.
Many of us share the sense of astonishment of the hon. Member for Christchurch (Mr Chope) at the extraordinary £2 million-plus claims that have occasionally gone through, but it is important that we make it clear, as my hon. Friend already has, that the median payout by tribunals for sex discrimination and for discrimination on the grounds of gender, race or whatever is considerably lower. The median payout for all those is less than £7,000, which is a world apart from the £2 million that the hon. Gentleman has cited, and we need to put that firmly on the public record. Those payouts of under £7,000 are also all way below the maximum cap for unfair dismissal, which is £68,000, so it really is desperately important that what the hon. Gentleman says about high-end payments should not determine the tribunal payouts for sex discrimination or for discrimination on the grounds of gender, race or whatever. Such discrimination still infects our workplaces, and people suffer enormously.
The median payout of £7,000 recognises the loss of earnings that takes place, but people do not simply lose their jobs, because those who go through such intolerable bullying in the workplace suffer enormously at psychological and personal levels, too. Earlier, we debated good and bad employers, and the fact that such tribunal cases are fought successfully is evidence that some employers allow the most unacceptable practices in the workplace. However, those cases do not involve the mega-payouts that the hon. Gentleman has mentioned.
If the idea is to equate, for example, sex discrimination with unfair dismissal, I also say gently to the hon. Gentleman that I do not understand why he has not equalised the cap on each. I share with him my profound belief, however, that he was right to challenge the Minister on the impact of European law, because it would not be possible to bring in his legislation without at least a massive challenge going right through our domestic legal system to—I think I am right in saying—the Court in Luxembourg and, perhaps, to the Court in Strasbourg. He will therefore have some difficulty persuading any Government to take on the Bill as it stands.
Diana Johnson (Kingston upon Hull North) (Lab)
I stand to oppose the Bill. There was little hard evidence in the opening speech of the hon. Member for Christchurch (Mr Chope) for the Bill. The evidence available from employment tribunals on the levels of compensatory awards shows that they are nothing like the figures that he gave. Of course, there have been some high-profile cases in the papers, but the compensation awarded in the vast majority of tribunal cases is less than £10,000.
The Bill intends to limit compensation in wrongful dismissal, unfair dismissal and discrimination tribunal cases. Most people recognise that it is important to have employment regulation that is fair and treats employees properly. The Opposition do not believe that setting the arbitrary figure in the Bill of £50,000 as the maximum that can be awarded in compensation, without having a wider debate about the employment, legal and equalities issues, is the proper way to set employment policy. Issues such as compensation, fines and penalties for health and safety, rights on leave and dismissal, and many others should be dealt with in a far more integrated way.
As a constituency MP, I saw the Hull trawlermen suffer hugely from not having proper employment rights; they had no redundancy rights and had to fight for pensions. I am therefore very aware of the need for good, clear employment protection legislation. When I worked in law centres before I entered the House, I often acted for people who found themselves in great difficulties with employers who had not treated them fairly and properly.
Of course, before 1997, to get unfair dismissal protection one had to be in employment for two years and there was no statutory right to annual paid leave unless it was in one’s contract. From 1997, the Labour Government opted into the social chapter, brought in the right to paid annual leave, reduced the period for unfair dismissal protection to one year, brought in the statutory right to paternity leave and improved maternity leave. It would be a retrograde step to start to unpick the straightforward and basic employment protection rights we now have in this country.
I will return to the compensation levels that I referred to in my intervention. When we make laws in this country, we must do so based on evidence and consider carefully what that evidence shows. As I pointed out to the hon. Member for Christchurch, £4,903 was the median award in 2009-10 for unfair dismissal claims in tribunals. That is nowhere near the millions that he talked about.
Diana Johnson
Obviously, I cannot comment on the circumstances of that case. The tribunal or court that dealt with it would have considered all the issues that arose. Some dreadful discrimination cases are brought before the tribunals and courts, and tribunals do their best to make just and equitable awards that fit the circumstances that are brought before them. I dispute the idea that everybody who goes before a tribunal is awarded a huge amount of money. When people are awarded very high compensation payments, there may well be very good reasons.
May I also say to the hon. Member for Christchurch that I believe he has got the law wrong in a number of ways, particularly on wrongful dismissal? He wants to limit payments that can be made for that, but often people’s contracts of employment contain clear rights to notice. If he wants to limit those rights, he may find that he is in breach of contract. That may apply to some high earners.
I want the Minister to have an opportunity to contribute, so I will cut my comments short, but I wish to point out that at the moment there is a limit of about £68,000 on unfair dismissal compensation payments. My hon. Friend the Member for Manchester Central (Tony Lloyd) made that point. When awarding compensation for unfair dismissal, the tribunal has to make clear judgments about the immediate loss of earnings that the person has experienced, their future loss of earnings, the expenses that they have incurred, the loss of statutory rights and the loss of pension rights. At the moment, tribunals consider the range of losses to an individual and make a judgment based on that, but there is a cap of about £68,000 on the compensation.
I am interested to hear what the Minister has to say about the particular issues of sex, race and disability discrimination claims. We know from the Marshall case that European law states that it is not possible to have an upper limit for those claims, because damages should be awarded for the losses sustained.
Diana Johnson
I am very keen to hear from the Minister, but I will give way.
Mr Nuttall
Is it not the case that since the decision to which the hon. Lady refers, EU directive 2006/54/EC has recast the legal position so that there is a prohibition on the fixing of a prior upper limit to restrict compensation, and a provision that the “effective, proportionate and dissuasive” remedy should be given? I believe that a cap of £50,000 would be dissuasive.
Diana Johnson
That is obviously where the hon. Gentleman and the Labour party disagree. We do not think it is right to have such a cap. I would be interested to hear the Minister’s view about the European dimension to imposing a cap on sex, race and disability discrimination compensation. On the basis of what I have said this afternoon, the Opposition oppose the Bill.
The Minister for Immigration (Damian Green)
I thank my hon. Friend the Member for Christchurch (Mr Chope) for giving the House the opportunity to discuss this matter. He said in his opening remarks that he regretted my absence from the previous debate, particularly when there was reference to asylum seeking. In that context, I would say that what he proposed in his Employment Opportunities Bill was the biggest single incentive to increasing the amount of asylum seeking in this country that I have seen in potential legislation. That was why I was extremely pleased to be in the Division Lobby voting successfully against it.
I move on to the current Bill. My hon. Friend is right to point out the concerns that businesses have raised about the high levels of compensation sometimes awarded by employment tribunals in cases of unfair or wrongful dismissal or discrimination. The debate has been particularly timely, on which I congratulate him, because as I said, one aspect of the Bill is currently under active consideration by the Government as part of our general review of employment law.
I should make it clear to the House that there already exists a limit on compensation for unfair dismissal. It stands at £68,400. The average award is considerably below that level, as the hon. Member for Kingston upon Hull North (Diana Johnson) said. The median award for unfair dismissal is £4,903, and the mean is £9,120.
On 27 January we launched a consultation on proposals to improve the way in which workplace disputes are resolved, and we published an employers charter to give employers more confidence to take on workers and support growth. In that consultation, we sought views on changing the formula for calculating employment tribunal awards, including that current limit on compensation for unfair dismissal. Among other things, the consultation sought views on increasing the current qualifying period for unfair dismissal rights from one to two years. The consultation closed after 12 weeks on 20 April 2011, and we are currently considering our response. We will publish that, setting out what we intend—