Grand Committee
Enterprise and Regulatory Reform Bill
The Deputy Chairman of Committees (Baroness Fookes)
My Lords, I remind Members of the Committee of the usual rule that if there is a Division in the Chamber, we adjourn immediately for 10 minutes.
Clause 7 : Conciliation before institution of proceedings
Amendment 16A
Baroness Donaghy
“( ) Prior to the commencement of this section, the Secretary of State shall carry out an impact assessment into the effect of the introduction of proposed fees for the employment tribunal system and the impact this will have on the effectiveness of ACAS conciliation proceedings.”
Baroness Donaghy
Having sat through the first day of the Committee stage listening to a debate on a subject about which I know nothing, I have found out two things: first, that I was none the wiser at the end of the Committee but, more importantly, that the Minister conducts business at a brisk pace. I shall try to match that spirit.
This amendment is a potentially good new story for ACAS. I was chair of ACAS for seven years, and still feel part of the ACAS family, so my interest is obvious. I hope that the Minister does not think, therefore, that I am looking a gift horse in the mouth, but I do not want this to be a gift that keeps on taking.
The Government are building on something which already exists in voluntary form as a pre-claim conciliation, or PCC, and intend to make it compulsory as early conciliation, or EC. The ACAS voluntary system has been running since 2009; last year, in 2011-12, there were 23,777 cases, an increase of 34% over the previous year. Three out of four cases did not go to tribunal, saving cost and stress for employers and employees. Recent independent research found that if you include staff time and legal costs, employers save on average £3,700 compared with the costs involved once the tribunal claim is made.
If ACAS is given the necessary extra resources—and it cannot be done without them—we need clarity from the Government about how this is to be achieved. In the Government’s response to the consultation Resolving Workplace Disputes, they recognised that,
“there will be an increased burden on Acas that will require sufficient resourcing. This requirement will be met through the savings that will accrue to the Exchequer as a result of fewer cases requiring determination at ET”.
I think that ET means employment tribunal.
I must admit that that statement filled me with terror. ACAS and the Tribunals Service come under two separate departments—an unfortunate move in my view. What will the process be to identify the savings given the different timelines of the two systems—conciliation first and employment tribunals later? What will the framework among departments be? After all, we are talking about the Treasury, BIS and the MoJ. What precise impacts have already been identified? In another place, it was argued that consultation was unnecessary as the Government had already consulted on the appropriate charging points and fee levels for tribunals in December 2011. The Minister in the other House indicated that consultation had also taken place on the possible impact of fees as part of their assessment which accompanied the announcement in November 2011 of the introduction of early conciliation. I do not see very much about the impact of ACAS on either of those two assessments.
As ACAS put into its submission to the Government:
“The proposal to introduce fees into Employment Tribunals will mean a very significant change to the system which is likely to have an impact on how disputes are resolved in future”.
Clearly, we do not know how this will manifest itself until it is introduced. I am not asking the Minister to produce a crystal ball, which is why I will be moving an amendment later about a review after one year of implementation. I will also say something about unintended consequences in that amendment.
I believe that the impact of the changes will not just be on the process of resolving disputes and the resolving or otherwise of them, but that it will spread beyond the issues covered in the success criteria into much broader workplace matters. Will the extra ACAS resources be provided upfront and how will the criteria for success be measured? Will they be confined simply to a drop in tribunal cases? This is particularly important as a number of cases at employment tribunal are usually determined by the state of the economy or by how many multiple cases are under consideration. The statistics quoted are too often cases of double-counting, with the employment tribunal tail wagging the employment relations dog.
If insufficient attention is given to resourcing ACAS, I am concerned about the impact on other services. The helpline takes more than 1 million calls a year and in itself helps to prevent dispute by providing crucial information impartially to both employer and employee. It is a trusted brand and the continuing development of the website, collective conciliation and promoting good employment relations are all vital elements of ACAS’s work.
I do not need to remind the Minister that most people at work are not in a trade union. The introduction of employment tribunal fees will hold no fears for trade union members. No doubt the Minister will raise one cheer for being a recruitment sergeant for the trade union movement, maybe even two. It will not hold too many fears for reasonably well paid employees either, but it is the job of the ACAS council to be mindful of all employers and employees. There have been some extremely distinguished members of that council over the years: John Cridland of the CBI served for 10 years and the noble Lords, Lord Monks and Lord Morris of Handsworth, are also former council members.
By acknowledging the importance of ACAS and by giving it this new role, the Minister has got it right and I pay my compliments to him. Resourcing ACAS is a good thing in itself, not just as a forerunner to employment tribunals—but even as that it has an exemplary record. The ET system would have collapsed years ago if it had not been for the proportion of pre-hearing settlements reached. I hope the Minister can give me the assurances about resourcing that I seek and the information I ask for.
Lord Monks
I support my noble friend’s amendment. As she mentioned, I was a member of the council for a good, long time. In fact, I think I am the record holder at about 15 years. One of the pleasures of being a council member was that mostly when you have been associated with large organisations, you are very aware of complaints and people who are dissatisfied about the way the organisation works. That was extremely rare with ACAS. Its record of people, employers and workers alike, being respectful and grateful for the role that it played in sorting out particular disputes was very pleasing and satisfying. The evidence that has been gathered over the years of ACAS’s life shows that good value has been delivered for the public money that has gone into it. ACAS has been a well regarded body all around the country and in all parts of the community. I am pleased to see it getting some support and recognition, and an expanded role, in this Bill.
However, I have two concerns, which partly overlap with those already expressed. I hope the Minister will be able to allay some of those concerns. As all the changes in this Bill go through in this area, particularly in relation to unfair dismissal, will he agree that employees are going to be in a slightly worse position, at least, than they are at present? Is there not a tilt in the law, particularly on unfair dismissal, towards the employer? I will pick out one thing: the increased risk of an applicant having to put down a deposit to take their case through to a tribunal. Is that not going to make them more reluctant to take that risk? They are probably already in a most uncomfortable position, having been fired and now facing the possible ignominy of taking their case against an employer to a tribunal. I am concerned about that generally, but in particular that this is going to lead to a very long queue at ACAS. Will there not be increased demand for its services, with people more insistent that the conciliation stage delivers a result than perhaps they are at present, so that they then avoid the rather hazardous steeplechase course that leads to a tribunal?
I underline the point that the noble Baroness, Lady Donaghy, made about resources. This is not a cost-free exercise. ACAS is already a pretty busy organisation with a lot of people looking to it for help, very often in fairly desperate personal circumstances. If the Minister believes that the maxim for this part of the Bill is, “Blessed are the peacemakers”, then I hope very much that the peacemakers get some money to make sure they can do their job.
Lord Morris of Handsworth
My Lords, I, too, take the opportunity to give my support to the amendment before the Committee. I do so not just on the basis of my own past membership of ACAS but of the contribution that the organisation makes in the overall sphere of industrial relations. We have an institution with two special qualities: trust and confidence. That is what ACAS brings to the whole arena and the debate about industrial relations. It is respected on all sides of the argument; indeed, many overseas industrial relations forums look to ACAS for guidance and support. At a time when we are seeking to expand the economy, looking for growth and looking to develop new areas of economic activity, it seems we should be giving strength and support to the institutions that would enable stability in the workplace.
What is in the Bill so far represents a start but needs to go much further. I genuinely hope that in the course of this Committee’s deliberations, the overall value of what ACAS represents, brings to the table and can offer for the future will be strengthened much more than we have experienced; and that we do not see ACAS become part of what I call the “industrial football”, being kicked from one side of industrial ideology to another.
I hope that when the Bill has passed through its stages here, it will provide for ACAS the support structure for a new and invigorated form of industrial relations, strong and able to take its rightful place in the resolution of disputes. We will always have disputes, irrespective of how meaningfully we conduct our workplace relationships. On that basis, I support the amendment before the Grand Committee.
Baroness Brinton
My Lords, the terms under which ACAS is strengthened are very important, but first I want to reiterate a point I made at Second Reading and to which the noble Baroness, Lady Donaghy, has already referred: it is important to ensure that resources are available right from the start, not just post fees starting to trickle in. When I was a senior county councillor some years ago, I recall that we always believed in the principle of good housekeeping. If the funding of this is based on reducing the costs involved in employment tribunals over the longer run, there is clearly a cash flow problem in business terms before any savings can be made. It is vital that ACAS is staffed and resourced appropriately, so that it is able to pick up the ball and run with it.
I turn to the point made by the noble Lord, Lord Morris. I believe that ACAS is in exactly the right position. One of the great strengths of this Bill is that it recognises that going to mediation before the long wait—I have been involved in EATs both as an employer and as an employee in the past—is the better course. It can sometimes take up to two years for a case to be heard, and that is not good for either side. Early mediation is a good way of resolving this. My knowledge of ACAS over the years leads me to believe that it is in a perfect position to do this.
While I have sympathy with the amendment, I am not sure that it needs to be written into the Bill, but I would hope that the Secretary of State would automatically want to review something like this to ensure that it is actually providing the resources that are needed.
Lord Young of Norwood Green
My Lords, I support the amendment. I am still trying to get my head around the vision of the noble Lord, Lord Marland, as a recruiting sergeant, and I look forward to seeing him at the next factory gates recruitment session. More seriously, this is an appropriate amendment given the background against which the further involvement of ACAS is taking place. Let us be clear on the principle of what the Government are doing. We are at one with the principle of involving ACAS in mediation and conciliation. There is no argument against that. But, as a number of my noble friends have said, if the Government want the ends, they have to will the means. That is the real concern behind the amendment.
As my noble friend Lord Monks said, it is being introduced against the backdrop of a number of other changes being made to workers’ rights, such as the extension of unfair dismissal to two years and the introduction of fees. A lot is going on in this area. We are not opposed to the principle, but we are concerned about whether there will be enough resources. Although the noble Baroness, Lady Brinton, talked about a review, we are actually talking about the anticipation of an impact assessment. We agree about the need for a review, but that will take place in another amendment. I would be interested if the Minister could tell us what the effect of introducing conciliation right across the board will be. Has the situation already been assessed?
It could be said that to a certain extent this is a probing amendment, but we regard it as a serious one. Our concern is that if you want the involvement of ACAS and if it is going to function in a way that will enable it to carry out a conciliation and mediation role, we all need to be assured that the service has the necessary means to do it.
I look forward to hearing from the Minister as to whether the Government have assessed the impact of this issue, including on other areas such as fees. What do they see as the necessary resource requirements of ACAS in its new situation?
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Lord Marland)
My Lords, I thank the noble Baroness, Lady Donaghy, for the amendment. It is, quite rightly, an interesting area to probe. I also compliment her on her work as chair of ACAS and the work of its board.
In summary, this is a nice problem to have. We all agree that ACAS is a terrific institution. It probably sounds rare for this Government to say that they thought it was a very good institution, but we believe strongly in it as an important place to resolve difficulties. That is why we intend to put much more in the way of resources into it, and it will become a fundamental block for early resolution of a lot of disputes. We know it acts fairly and properly, it has a good track record, and we are keen to support it.
I know that many noble Lords have read our recently published impact assessment on resolving workplace disputes, which helps to answer a number of issues that have been raised. We will produce in the new year a further impact assessment on how this process will work and whether the funding should be upfront, which the noble Baroness asked for. We are working to determine the extent of the funding and how best it is to be provided. I hope that by the time we get to the Report stage in the Chamber, quite a lot of the questions will have been answered.
It is important that we get it right and that we listen to the words of the chairman, who said, in front of the House of Commons Committee, that he was confident that ACAS would be adequately funded for its new task. Do not, therefore, take it from us; take it from him that he is confident he will get the right funding. We are working closely with him and the organisation to make sure that we do that. I totally accept and agree, as do the Government, that it is critical that ACAS is properly funded, and we will be able, in the normal course of its annual report, to see how that funding is operating. Noble Lords will be able to judge for themselves annually how that is improving and, through the normal avenues, determine that the progress we hope for on all sides of the House is being made as satisfactorily as possible.
I thank the noble Baroness for this probing amendment. It gives me an opportunity to lay out clearly how we are going to proceed. On that basis, I hope that she will withdraw the amendment and look to see how this develops in the next month or so.
Baroness Donaghy
I thank noble Lords who took part in the debate, and particularly the Minister for his response. As he said, it is a good problem to have, and I am glad that he has again publicly acknowledged the work of ACAS and the need to produce substantial funding. I asked four or five questions, and I understand that he is not in a position to answer them today. I note what he said about producing the impact assessment on the process, which is still being worked out. It may well be that by Report stage we will all be gloriously happy. Would it be helpful if I dropped him a note to remind him of those questions, or is he satisfied that they will appear in Hansard?
Lord Marland
Naturally, I have noted the questions and I will save the noble Baroness time because I have excellent officials working on this. We take her questions seriously, and I hope that as the assessment continues we will go skipping as lambs in the new year when we have seen the outcome.
Baroness Donaghy
I thank the Minister for that answer. We will be monitoring the situation closely and are keen to have answers about resourcing. In that context, I beg leave to withdraw the amendment.
Baroness Turner of Camden
“( ) Should the intervention of the conciliation officer not result in an agreed settlement, the claimant may proceed immediately to an employment tribunal.”
Baroness Turner of Camden
My Lords, in moving Amendment 17, I shall speak also to Amendments 18, 19 and 20, with which it is grouped. I put down these amendments to oppose this section of the Bill following the contribution I made at Second Reading because I feel that in many respects the Bill represents an attack on employment rights. My amendments are intended to enforce what I then said.
I have a great deal of respect for ACAS. As we know, Clauses 6 and 9 introduce early ACAS conciliation with regard to workplace problems. I do not oppose early ACAS attempted conciliation, but the Bill includes further steps before there can be a tribunal hearing. I think that these steps are intended to make it as difficult as possible for an employee to proceed further. That is why I propose an amendment which allows an employee, if ACAS intervention fails, to proceed immediately to a tribunal.
If the skilled intervention of ACAS does not produce a settlement, it is unlikely that further stages with different individuals will do so. This is particularly the case where it has to deal with the most difficult of disputes—those concerned with unfair dismissal. I gather that the Government are currently looking at a system of rapid resolution via ACAS for straightforward money-based claims such as alleged underpayment, perhaps, or failure to pay the minimum wage, and that sort of issue which could be dealt with very swiftly and easily by ACAS. I have no objection to that sort of procedure and neither, as I understand from its briefing, has the TUC.
However, unfair dismissal is a much more complicated issue. Failure to maintain oneself in employment can be life threatening for some people, and for many people to lose a job is a disaster, which often results in domestic upheaval and breakdown. It has occasionally resulted in suicide. Certainly, it leads to a lot of disturbance and heartache for the individual. It is a very life-changing situation for many people. For that reason it has to be treated differently from the kind of straightforward money issues that we have been talking about. Therefore, it is very important that if there has been an attempt by ACAS which has failed in a situation of that kind and the conciliation officer has not produced an agreed settlement, it should be possible for the claimant to be able to proceed immediately to an employment tribunal, as my amendment says. This is a special kind of case; it requires that sort of treatment and the individual should not feel that masses of other steps are in the way before he gets before a tribunal and gets his case heard.
For that reason I hope that the Government will be prepared to look at this amendment sympathetically because we are talking about individuals who are often very much at the end of their tether if they have been dismissed, perhaps after a long period of work for a particular company with no future alternative employment available. This is a very dire situation for many people and I do not think that a further set of steps should be placed in the way of them getting a tribunal hearing. I beg to move.
Lord Monks
I intervene again, although I will not make a habit of doing so. In my earlier remarks I referred to a steeplechase that the applicant needs to negotiate to reach the employment tribunal. The tribunal is not a sort of holy grail by any means. The average compensation payments are pretty low when you get there, although there are some spectacular exceptions, and often do not compensate for the loss of employment.
To all the points already introduced into the debate this afternoon, such as needing to be in a job for two years and having to go through the ACAS procedure, the Bill adds the issuing of a rather formal certificate, which the noble Baroness, Lady Turner, is concentrating on. You may then have to pay a deposit for some, or all, of your case and then you arrive in front of the tribunal, which does not have lay members—people who have direct experience a bit like yours—to give you a bit of reassurance.
It is a daunting prospect and, while I can guess some logic behind the need for an ACAS certificate at the end of the conciliation service, it raises a number of points. First, why is it necessary? It is not necessary now and I am not aware of there ever having been any state of confusion. If the two parties have not agreed, the case continues. Anyway, ACAS has to issue a certificate. How long it will take will depend on its case load and whether it is another bureaucratic stage. I know that the time clock does not start running until after the certificate is issued, but it seems that there is scope for some legal problems.
I would be interested in an explanation, if it is possible to get one today, on the reasoning behind this particular stage being put in. Is there some doubt about whether conciliation has failed? Is there a need to signal that conciliation has failed and that you cannot consider it any further informally in some way? Often, conciliation goes on right up to the tribunal itself, even maybe during the tribunal. However, if you have signed the certificate concluding that process rather formally, the informal scope for conciliation is reduced. I wonder if the Minister could explain a little more about this provision.
Lord Young of Norwood Green
My Lords, this is again a legitimate probing amendment. I, too, would be interested in getting some reassurance from the Minister about the process of conciliation. We hope that the conciliation process will work but there are going to be cases—I guess a significant number—where it does not. I suppose that the aim is to ensure that we do not insert any more delay than is necessary. The point about a certificate has already been raised. It would be useful if the Minister could confirm that the clock does not start running again until after the certificate has been issued.
Lord Marland
I am very grateful for this probing amendment—well I am sort of grateful, as much as one can be for an amendment. I recognise the noble Baroness’s direction of travel—time is crucial for someone who has lost their job. The whole point is to be able to get a quick resolution so they can go back and find another job or sort out the problems between them. We all agreed in an earlier amendment that ACAS is in an unrivalled position to do that and that is why we are very keen to support this direction of travel.
Having been quite a significant employer myself—and employee, as I thought in my own mind—and on one rare occasion been associated indirectly with a tribunal and seen how it was operated, I have deep concerns for both the employee and the employee about the terrible time it takes to go through a tribunal. It can be months before a decision is made and hours can be spent often on quite simple things. Both employee and employer are hung out to dry for months on end, not knowing what the cost is going to be, what the result is going to be and whether they will be able to go back to employment. It therefore seems to me that this is a simple process putting firmly in the domain of ACAS the opportunity to resolve an issue before going to the tribunal. It does not stop a party going to the tribunal, of course—it is well within their rights to do so. There is every opportunity to do so.
I emphasise that the Government are open to listening to other alternatives, if a better alternative is found, but I think that most of us here think that ACAS is the right place to go and that if we can have a speedy resolution to our problem, we should do so. I know that other noble Lords have had experience in this area. We would be open to suggestions from the noble Baroness about alternatives.
I am not sure that I can deal with the specific point that the noble Lord, Lord Monks, mentioned because he knows far more about it than I do. I would like to consider the question and drop him a note on it. It is something I want to get my head around. He has probably set me a huge elephant trap that I will stumble into unbeknownst.
I hope that I have given the noble Baroness a clear line of travel and—
Lord Young of Norwood Green
I want to be clear what the Minister is going to clarify. I asked about when the clock starts. Is it after the certificate has been issued? I would be grateful if that could be clarified.
Lord Marland
I can clarify that. The certificate is necessary to demonstrate compliance with the obligation. It would have to be issued within that framework.
Baroness Brinton
It would be very helpful for other Members of the Grand Committee to be able to see the Minister’s letter to the noble Lord, Lord Monks, and any other replies that are circulated.
Lord Brooke of Sutton Mandeville
My Lords, before the noble Baroness rises to make her final decision, I intervene to make the point that there is sympathy around the Grand Committee for the case that she has been putting forward. I have only once been involved in legal proceedings. It was an industrial tribunal. I was advised that once the person who was taking us to the industrial tribunal had instituted proceedings, I should not be involved in giving her advice, against the possibility of misunderstanding, but I was very strongly of the view that she was making a mistake. Our barrister was the noble and learned Lord, Lord Irvine of Lairg, before he ascended to that role, and his pupil, who accompanied him, was the future Prime Minister. They were effective in arguing our case, and the tribunal found that there was no proper cause for compensation to be offered. The irony of the whole thing was that the fees of the noble and learned Lord, Lord Irvine of Lairg, and whatever he provided to the former Prime Minister exactly equalled the money that we had been prepared to give her before she instituted the proceedings against us.
Lord Marland
My officials have suggested that I clarify as I was not perhaps as clear as the noble Lord wanted. They have passed me a note saying that the clock stops when the claim is received by ACAS and starts again when the certificate is received by the claimant. Is that as clear as mud?
Baroness Turner of Camden
I thank the Minister for the very sympathetic response he made to the amendment. I welcome his statement that the Government would also welcome a speedy resolution of these issues. I shall consider very carefully what he said. It seems to me that we could perhaps work towards a form of wording so that in the kind of cases that I have been particularly concerned with, a speedy resolution would be possible. That is terribly important in this kind of case, in particular. I will withdraw the amendment now, but will probably come back on Report with a different form of wording. I beg leave to withdraw the amendment.
Baroness Donaghy
“(3) The Secretary of State must within 12 months of the coming into force of this Act, and afterwards annually, prepare and lay before both Houses of Parliament a report on the workings and implementation of this section.”
Baroness Donaghy
In moving Amendment 20A, I recognise that the new procedures will be implemented. The importance of an early review is to find out not only the impact that they are having on the process and the working relationship between tribunals and ACAS, but also whether there is a wider impact on employment relations, as I mentioned in speaking to an earlier amendment. A review will help to assess the issue of adequate resourcing—I have said most of what I want to on that subject—and to identify any unintended consequences of the new procedures.
First, I welcome the statement in the Explanatory Notes that an ACAS conciliator will be able to continue to try to achieve a settlement after the prescribed period has expired. This is important, as there are various stages before an employee and the employer come to terms with a reality check. Experience shows that there is a high proportion of successful conciliation and settlement in the first two to three weeks of an application being submitted—about a third of the total. Then there is a lull and another flurry of settlements when the tribunal date is announced. Finally, some settlements are reached at the door of the tribunal. Conciliation officers see themselves as part of that whole process and it would be counterproductive to put an end-stop on their involvement.
Secondly, it is important to see how the issuing of certificates by ACAS is working—some of that discussion took place when we were considering previous amendments. If it is carried out in the context of an underfunded organisation with inadequate staffing levels, it will simply be an additional administrative process for both parties. It will not reduce the number of cases to tribunal; in fact, the system could collapse under the weight of applications.
Thirdly, it is essential that as few deadlines as possible are set within the process. Keeping it simple will avoid confusion and maximise the potential for successful conciliation. An early review of the legislation will help to tease out whether the process is unnecessarily rigid and therefore counterproductive. It will also help to see whether the system is well balanced. Looking at the possible extreme outcomes, you could have unsuccessful conciliation because an employer holds out in the hope that an employee cannot afford to pay the tribunal fee. At the other extreme, an employee who has taken the decision to pay the fee to the tribunal will be psychologically unprepared for conciliation.
Then there is the issue of no-win no-fee lawyers, who might see a vacuum in the market. For a small fee, they might promise an assessment of the case and then pick the more promising cases to tribunal for a fixed or percentage fee that covers the cost of the tribunal fee. Far from reducing the number of ET cases, it could provide a welcome commercial opportunity for some and flood the employment tribunal service.
The ACAS conciliation process depends for its success on examining the strengths and weaknesses of each party’s case and having the opportunity to challenge perceptions of the merits of each side’s case to encourage consideration of different perspectives. If that process is curtailed in any way—not intentionally, of course—the Government will not succeed in their objective.
Citizens advice bureaux also provide advice and sometimes representation to some applicants. Some 250,000 people, I think, went to a CAB last year on employment-related problems and 1,900 were represented by the CAB at an employment tribunal. With the reductions in funding it is facing, it is likely that more people will be at risk of falling into the hands of those whose motivation is making money rather than good employment relations. It is against that background that I am asking the Minister for an assurance that a review will take place as early as practicable, just to make sure that the Government have the balance right. I beg to move.
Lord Young of Norwood Green
My Lords, this is an eminently sensible proposal and I am sure that the Government are going to review the workings of ACAS in the light of the new procedures. My noble friend has set out in graphic detail the likely impact of what is taking place. We need to ensure that we get this right, because if we do not, we are likely to see the law of unintended consequences take effect. I shall be interested to hear from the Minister what review process the Government have planned, and what the timescale is.
Lord Marland
I can give noble Lords a very simple answer because both the Government and the people observing us will want to make sure that there is a review of how ACAS is performing. As the noble Baroness will know better than I, having been the chair of ACAS, it has to report annually to the Secretary of State, and we will insist on that. For those who are interested, it is set out in Section 253 of the Trade Union and Labour Relations (Consolidation) Act 1992. I can tell the noble Baroness that early conciliation will form part of that report, so in our view there is no need to have a separate report from what is embraced in the annual report. I hope that satisfies the noble Baroness, but I want to say that it is fundamental that this is reviewed and that the whole thing is taken seriously. The report is published and will be available in the Library of the House, so everyone has an opportunity to read it and make sure that everything is progressing in the way we all hope it will.
Baroness Donaghy
I thank my noble friend Lord Young for his contribution and the Minister for his answer. I am afraid that I am not entirely satisfied, mainly because the ACAS council report has to be essentially apolitical and must not comment on government policy, so the likelihood is that the judgment will be made on the efficiency of its organisation and the effectiveness as it sees it of the new procedure. It would not take account of the things I mentioned on an earlier amendment, including the wider impact on employment relations; that is, elements that might be said to be more political, with a small “p”. It also does not take account of an independent assessment of the adequacy of funding or of the impact at employment tribunals because it would not be proper for ACAS to comment on how the tribunals run their business. There are concerns, perhaps more particularly around the certificate. ACAS might have its own judgment about how effective it is as a process, while an independent assessment might make a different judgment. I am not saying that that would happen, but just relying on the annual report of the ACAS council may not provide the information we are looking for.
In agreeing to withdraw the amendment, I hope that the Minister will take account of the points I have made.
“(6E) The Secretary of State and the Lord Chancellor acting jointly, shall consult on—
(a) the level of professional attainment required by legal officers to carry out provisions in subsection (6D);(b) the appropriate remit of proceedings that an appointed legal officer could determine; and(c) the appropriate mechanism for appeal,with regards to the provisions of subsection (6D).”
Lord Young of Norwood Green
My Lords, I remind Members of the Committee that all employment disputes are currently determined by full employment tribunals or by an employment judge sitting alone. Legal officers can be appointed under the Employment Tribunals Act but can determine cases only where the parties have agreed the terms of determination or the case has been withdrawn.
To date, no legal officers have been appointed in the employment tribunals system. Clause 10 states that legal officers should be able to determine specified types of claims where both the employee and employer have consented in writing. We welcome that aspect. However, while we support the principle of rapid resolution of disputes, we have some concerns about the proposal to permit legal officers to determine employment disputes. Legal officers currently do not receive the equivalent training to that of employment judges and may not be employment law specialists, but decisions made by a legal officer would have the same status as an employment tribunal decision. If legal officers are to determine some basic cases, it is essential that any decision can be reviewed by an employment judge or through an appeal to an employment tribunal.
The amendment therefore requires the Secretary of State and the Lord Chancellor to consult on the level of professional attainment, and the remit and mechanism for appeal, of legal officers empowered to make determinations and decisions. We see this as an important area. Although some of these cases may appear to be basic, there can indeed be complex problems underlying them. Therefore, the training and remit of legal officers are fundamentally important. I should welcome a response from the Minister. I beg to move.
Baroness Donaghy
I was having second thoughts on whether I should speak to this amendment because I would not really be doing so with my former ACAS hat on. However, that should not prevent me commenting.
The proposal for legal officers has been dusted down off the filing cabinet many times. I was a member of industrial tribunals, as they were then called, from 1974 to 1989, and therefore have had a long involvement on both sides of the fence on this. I am sure that the idea of legal officers was discussed in the 1970s, 1980s, 1990s and the noughties. In fact, the idea must be so old that it must be growing hairs like gooseberries. I congratulate the Minister on again bringing out this item from the filing cabinet. However, I should point out that that does not make it an antique worth buying.
This is intended to be a cheap way of obtaining legal services, and I suspect that the legal profession will wake up to this one quickly. I suspect that it will be disliked by employment judges; equally, there is a danger that it could second-guess the conciliation process at ACAS. Even more equally, in a time of austerity when the Government are seeking to cut the number of public servants, I should have thought that it was fairly unlikely that a whole platoon or army of these, dare I say, young law graduates or whoever will be employed by any department to do this job. And, if so, which department would it be? Will they be part of the Employment Tribunals Service, or will they be direct employees of BIS or another adjunct of the Ministry of Justice?
I am sorry that in this case I cannot be very enthusiastic but I support the amendment because I think that it may at least give some idea of government thinking on this matter. However, I give a warning that, even though this measure has been recommended many times, the devil is in the detail and the practicalities usually overcome any action on this.
Baroness Turner of Camden
My Lords, I originally intended to delete from the Bill any reference to this form of officer. However, I must point out that the Law Society, which has also briefed me along with the TUC and many other bodies, has already expressed some concern about this provision. It says:
“The Bill provides a new power for Legal Officers to make determinations in some (to be specified) Employment Tribunal Claims. The Society recognises the potential for Legal Officers to perform some duties, but stresses that they must be suitably qualified”.
It is clearly concerned that we will have people who are not suitably qualified making decisions on some of these highly complex potential arbitration cases. Therefore, I echo what my noble friend Lady Donaghy has said: the Government have to be rather careful about this. Given that specialist advice warning, I hope that they will look at it very carefully.
Lord Marland
Members on the Benches opposite make some very timely comments on this amendment because at the moment the Government are reviewing the response to the consultation. One of the elements of that review is rapid resolution, which involves legal officers, so we will obviously consider the points that the noble Baronesses and the noble Lord, Lord Young, have made. As I say, they are timely.
I say in response to the noble Lord, Lord Young, that decisions of a legal officer would be reviewed by a judge, so there is someone looking over their shoulder, and any decision by a legal officer could be reviewed or, indeed, reversed within the existing provisions in the employment tribunal rules. I think we have a level of comfort there but, as I said, this is a timely amendment. It is not something on which we have resolved our position. Noble Lords have identified a number of areas of concern. As we are in the middle of a consultation process, we will obviously take those into account. We will, I hope, have come to our conclusion by Report, when we can talk further and explain what is going on. On the basis of those comments, I hope that the noble Lord will withdraw his amendment.
Lord Young of Norwood Green
I thank the Minister for the assurance that he will give us a more detailed answer prior to Report, pending the results of the consultation. We have stressed the importance of ensuring that the individuals have the right training. We have also stressed the importance of establishing,
“the appropriate remit of proceedings that an appointed legal officer could determine”.
Given the assurances that I have received from the Minister, I will withdraw the amendment. However, if we do not get a satisfactory response, we may return to it on Report. I beg leave to withdraw the amendment.
Lord Young of Norwood Green
This is another important area of the Bill about which we have concerns. It seems to us that in the desire to reduce costs there is a real danger that the whole nature of employment tribunals will fundamentally change. We need to remind ourselves that historically these tribunals have had lay representation on them. That was the very foundation of what were previously called industrial tribunals. All our information and evidence is that the participation of lay representatives is much appreciated and is an integral part of the proceedings that ensures that justice is seen to be done. It gives an essential level of knowledge, experience and expertise and ensures a diversity of views.
Lord Monks
I support this amendment. Clause 7 is one of the key clauses in this part of this rather complex Bill, and I object to it. It rips up, rather contemptuously, several decades of history in the employment field.
There is general agreement that worker and employer representatives on tribunals do a good job. The original idea was from the Conservative Party, way back in the 1960s. From my experience over many years, I know that presidents of the Employment Appeal Tribunal have often said that the views of lay members were crucial. Lay members had a sense of what was going on and a feeling for the issues in the workplace from which judges would inevitably be rather distant. Often, judges followed the view of the lay members. They made sure it complied with the law, checked that there was nothing wrong and would adjudicate if there was a disagreement between the two, which often there was not. Very often, there was consensus between the employer representative and the worker representative. They were not a marginal presence sitting on the edge of the legal proceedings; they were right in the middle of them and central to them.
I acknowledge that times have moved on and tribunals and the Employment Appeal Tribunal have become more legalistic than we hoped. We hoped there would not be eminent QCs and eminent juniors on the kind of case that the noble Lord, Lord Brooke, referred to, that these things would be sorted out more cheaply and informally before a tribunal and that we would see everything done in a much less legalistic and more cost-effective way. However, over many years, the legal profession has colonised the tribunal system to a regrettable extent.
The lay members on the employment tribunals, originally, and on the Employment Appeal Tribunal have tried to push that back a little, keep its feet firmly on the ground and keep the costs of the whole exercise down. Clause 11 says that we are giving up on that and that the legal profession can have the lot, at least the ones that manage to get round the Grand National course and actually get their case there without falling at several Becher’s Brooks on the way. Inevitably, when they do get there, the whole thing will be more legalistic. That is not a criticism of the judges—I have seen some very fine ones in the Employment Appeal Tribunal, and elsewhere—but the whole experience of the EAT will be much changed and made much weaker than needs to be the case.
I have been thinking about how judges might operate this, because the Minister would say, “Well, if he wants one, the judge can have a couple of wing people—even four, we are expanding it”. It could look like the Nuremberg war crimes tribunal. “Why do we need an extra two?”. I do not know where that came from, as we have never felt that one from each side was not enough. I would be interested to know where it did come from.
I can see the first judge who comes forward after this Bill goes through saying, “I think I need two lay helpers for this particular case”. I do not think that many judges will feel comfortable doing that. Such judges would be regarded as a wimp by their peers, who will ask, “Why do they need a couple of people holding their hand when dealing with these cases? What effect is this going to have on the budget, if we have to pay some expenses for the lay members? Is this not all about cost savings, economies and making sure that the cuts work effectively in this area?”.
I am interested in the Minister’s reply to these points. I hope that the Government will pause before they go further down this road. They have already done it, in a way, to employment tribunals. The same provision is already there and I suppose it will be argued that this is a logical continuation. However, it is the continuation of a bad practice; and it is in the peak body this time, which makes it qualitatively different.
Baroness Turner of Camden
My Lords, we have got on to talking about Clause 11, which I opposed at Second Reading on the basis that it was quite unnecessary. I did not really understand why the Government decided to proceed along these lines because the tripartite system that we have works extremely well. The lay people who serve in it are highly respected and in no way put off by the somewhat legalistic environment. They are quite well able to look after the whole situation as concerns workplace arrangements—they know about workplaces, which is why they are appointed to serve on the tribunal.
I still do not really understand why the Government believe that a judge sitting alone on unfair dismissal cases is likely to be more competent. Do they expect him to find more ways to go against the employee? Have they decided that they want a judge sitting alone because the decisions are more likely to be the kind that the Government would like? We know that they are not very keen on tribunal hearings anyway. I want to know why the Government think that this is a good idea.
In the document that the Government have already issued, they have indicated that the points at issue would be legal points, which is why it would be a good idea to have a judge sitting on his own. However, I remind the Government that they have already introduced LASPO, which means that there is no access to legal aid in employment cases. In fact, the individual who is not represented by someone he can afford to appoint to look after him, if he does not have a union to support him, will be entirely on his own and will have no access to any form of legal aid because LASPO has decided against it, as far as employment cases are concerned. An unfortunate individual such as this would have only himself to rely on before a judge sitting on his own. That is not a good idea. It would be far better to have lay people still operating, and I very much hope that the Government will reconsider their position here because it is not fair. It means that individuals will very often, if they are taking up their case themself, be left without anyone to represent them. That is not a good idea if they are going before a judge sitting on his own who is guided simply by legal principles, not by what happens in a normal workplace.
Baroness Brinton
I have slightly different concerns about Clause 11, but they stem from the same starting point. They are about why the Bill proposes to give the judge much more power to decide on whether a panel should sit with him or her to hear an appeal.
Given that the practice is already there, evidence shows that lay people are brought in to assist a judge, usually on a controversial decision that requires expertise from both the employer and the workforce background. As has been mentioned by other noble Lords, lay members of these appeal panels frequently are respected by both parties. That balance has been an absolute strength of the appeal panel. I am struggling to see why it should become automatic that the judge would sit on his or her own.
I rather pointedly said “his or her own” because I also want to raise the issue of the diversity of an appeal panel when a judge is sitting on his own—it is usually “his” own—and diversity has, ironically, been provided by the lay members. Can the Minister give us some indication of the action the Secretary of State would require to ensure that there was diversity—essential in employment hearings—in appeal proceedings if this process becomes commonplace?
I come back to my initial point: I do not understand why the balance has been tipped from the current situation, in which when a difficult decision has to be made, judges are absolutely clear that they should bring in people, to a proposal in the Bill that presumes that the judges are likely to want to work on their own initially.
Lord Marland
When I was being taught how to speak—a long time ago and I have obviously not improved much—I was always told, “Paint a picture of somewhere and everyone will listen to your every word”. It is very hard not to hang on to every word of the noble Lord, Lord Monks. One moment he is at the Grand National; the next moment he is at the Nuremberg trials.
These matters are part of our history, and the words that I was most struck by were that we have to move on. This part of the legislation is about moving on. I am afraid that it is a simple fact that these cases are decided on a point of law. The rule of law defines these cases, and you therefore have to have a lawyer to decide the case. As an employer or an employee— I have been both—I would want to know that I was being supported by the rule of law, which is a fundamental part of this country. Therefore, the judge is the only person I would want to hear from in either of those situations, because the case is decided only on a point of law, not on any extenuating circumstances that may come in.
Lord Morris of Handsworth
It is accepted that ultimately the decision is on a point of law, but the law is guided by the facts of the case. Therefore, it is important to recognise that facts guide law. On the basis of what has been said so far, it seems to me that we are turning the argument on its head in thinking that it is only law and not fact.
Baroness Brinton
Does the Minister agree that appeals on employment law are set firmly in the context of employment practice? Concepts such as the range of reasonable response depend on a good understanding of how a reasonable employer would in practice handle a dismissal. Therefore there is a value to having lay members assisting the judge in that decision.
Lord Marland
Employment judges know as much about these things as we in this Room do. They have been doing case after case. We are presupposing that judges know nothing and that they are incapable of making decisions based on the rule of law on a subject that is determined by what the law says, not by: “Oh by the way, you must understand that there are extraneous circumstances that may affect the lay person, who quite rightly is sympathetic to them”.
Ultimately, the rule of law prevails. It is the interpretation of the law that prevails, and therefore it is a judge who is qualified to interpret the law, so I do not agree that there is a huge import in having lay members. Of course, as the noble Lord, Lord Monks, who knows so much about this subject, quite rightly says, the judge has the opportunity to choose a panel, and we can get into arm-to-arm combat on whether it is two or four people. Whatever one says, you are damned, in a sense. The judge has the opportunity to have lay members if he thinks there are circumstances he does not understand or working practices with which he is not familiar. Ultimately, these people are being judged on what the law says by someone who can interpret the law, not by people who may or may not understand the law in some circumstances. I am afraid I am not persuaded in this instance—by people who have great knowledge in this subject—that it is in the interests of either party to have lay people, except on cases where the judge himself decides he needs that support.
Baroness Turner of Camden
Does the noble Lord not recall that his Government introduced a law, which we now call LASPO, which denies any kind of legal aid rights to anybody in employment cases? Individuals, unless they are represented by a union or can afford legal representation themselves, have no representation because LASPO forbids it.
Lord Marland
I note what the noble Baroness says, but I do not think that it has any relevance to this amendment. This amendment is about who is going to decide, who is going to interpret the law in this particular case. Therefore, with great respect, I hope the noble Lord, Lord Young, hears what I have to say because it is actually what people will want.
Baroness Donaghy
I want to emphasise that I think that the noble Baroness, Lady Brinton, had it spot on about the reasonableness issue. I know a great number of judges who sit on employment tribunals, and their background is not always in employment relations. They are interchangeable. They go on to the High Court in many cases. I think that they value very much an area of law which is a much more vague part of our legal system in the sense that it is about the workplace and the different power structures of a workplace.
It is important to the judges that they have people with experience of the employment relations world—not employment law, but the employment relations world. That comes back to what I said earlier. I accept that, as the Minister said, this is about whether the case was carried out properly, but it is in a context where the employment situation has to be taken into consideration. We are not talking about equals in a power struggle; we are talking about a very different level of perception. This is about perception: it is important that people see that, up there, there is an employer and an employee sitting in judgment. I think that the applicant and the respondent would be much more likely to respond to a result—as I said, perception is important in the employment world—than they would if a judge, possibly a brand-new judge who had not sat on the case before, were sitting alone. This issue is important, and we would like the Minister to reconsider it.
Lord Marland
I am not denying the issues that the noble Baroness refers to. No one is. We completely understand those issues. As I referenced earlier—the noble Lord, Lord Monks, referenced it, too—the judge can turn to external advice to support them in a case if they need to. There are complicated circumstances but, in relation to this amendment, the reality is that they are being invited to make a judgment based on the law. It is not about the extenuating circumstances; it is not a question of asking, “Should we give them more money?”. It is about the law and the interpretation of the law in coming to a judgment. Other aspects are involved, which is why the ACAS system is so good because it is conciliatory between two parties. In this instance, however, where you are being asked to interpret the law, we believe that the judge is the person to do that. We totally understand all the permutations around employment disputes, but at the end of the day it is the judge who will determine it. An employer or an employee should want their case to be found within the law by someone who can interpret it.
Lord Young of Norwood Green
My Lords, having heard what the Minister said, I admit that I find his response deeply unsatisfactory. He said that that is what an employer or an employee should want because it is only a point of law. Although this debate has touched on other amendments, what we are saying through this amendment is that if things are as clear-cut as the Minister has said, having the consent of both parties for the judge to sit alone should not be a problem. I do not think that it is as clear-cut, for all the reasons given. The noble Baroness, Lady Brinton, pointed out the importance of diversity, which is what lay members bring. A range of other points have been raised. My noble friend Lady Donaghy said that the employment context needs to be taken into account, not just the law. That is what lay members bring to the legal analysis at the Employment Appeal Tribunal. We are in Grand Committee, so we will withdraw the amendment, but we make it absolutely clear that we will return to this on Report, because the Minister’s response does not deal with the genuine concerns that have been expressed on both sides of the Committee.
Lord Young of Norwood Green
I shall speak also to Amendment 20FA. These amendments are designed to probe the Government’s intentions behind granting the Lord Chancellor additional powers over the composition of certain employment appeal tribunals. Subsections 6 and 7 grant the Lord Chancellor discretion in certain cases to determine as he sees fit the number of employer representatives and worker representatives that may serve on that tribunal. The intention of Amendments 20D and 20FA is to ensure that the Lord Chancellor does not exercise that power in a way that may unfairly disadvantage the worker.
Amendment 20D clarifies that the Lord Chancellor may not use this power to set the number of lay members at zero and therefore prohibit, in certain cases, the judge deciding to sit with lay members, even if he thinks it appropriate. Is it the Government’s intention that the Lord Chancellor should be able to use this power to prevent judges calling lay members to sit on the Employment Appeal Tribunal? Amendment 20F would ensure that the Lord Chancellor cannot exercise this power so that one group is represented by greater numbers than the other. It is about balance on any tribunal. It surely cannot be fair to have a situation where there are lay members sitting on the EAT with experience from the point of view of the employer, but none with experience from the other side.
It may be that the Minister feels that we are being a bit paranoid at this point but, as somebody once said, just because you are paranoid, it does not mean that they are not trying to get you. I would welcome clarification on that and on all the issues I have raised. If the Government will not accept this principle, will the Minister tell the Committee in what circumstances they believe it would be appropriate and fair for a judge to sit on the EAT with an employer-representative lay member and without a worker representative or, indeed, vice versa? I beg to move.
Baroness Whitaker
My Lords, I apologise for not being able to take part in the proceedings on this Bill earlier, but as a former employment tribunal member, I would like to reiterate arguments made earlier that the whole point of employment tribunals and the EAT is experience of the workplace from relevant and, in fact, instrumental perspectives of justice. That refers to points of law as well as to facts because the law is interpreted in a context, as the noble Baroness, Lady Brinton, said earlier. It is not a just process—that is, interpreting and applying the law. As well as not being objective, it is not informed by both these perspectives as of right. The risk with the Bill as it stands is that you could have a representative of the employer or the employee but not necessarily both. That is going to make a travesty of the tribunal concept.
Lord Brooke of Sutton Mandeville
My Lords, I have listened with great care to everything that was said by the Official Opposition in this context. I do not understand why the Lord Chancellor should feel in any way moved to make use of this clause if he was not going to add appointed members to the proceedings. It states that it is for a particular kind of case, but why would he do it if he had no intention of making use of the opportunity to provide the extra advice?
Baroness Brinton
Might it not be helpful to consider which proceedings ought to have a panel rather than a judge sitting alone? Picking up the point I made earlier about diversity, particularly where there is a claim of discrimination or of inequality of pay, it seems to be an obvious example of where diversity on a panel might provide sage advice as well as reassurance to both parties that diversity is being taken into account.
Lord Marland
My Lords, as far as Amendment 20FA is concerned, FA is probably quite appropriate because I am as slightly confused as noble Lords were. I have therefore invited my officials to have a look at this and to bring something forward before Report that clarifies the position because I am not as clear as I should be. I hope that satisfies the noble Lord, Lord Young. It is a victory for him. It is not our intention to use the Lord Chancellor’s power to prevent judges sitting with members where that judge considers it appropriate. The devil will be in the detail, and I think we should reword the detail. I concede that.
The point made by the noble Baroness, Lady Brinton, on diversity was very important. We take it very seriously. It needs to be considered at all times, not just in this particular field. We take that point on board. With that, I hope the noble Lord, Lord Young, will withdraw his amendment.
Lord Young of Norwood Green
I thank the Minister for his constructive response. I reassure the noble Lord, Lord Brooke, that these are in the nature of probing amendments. We were seeking to elicit the kind of response that we received. I welcome the assurance that clarification will be provided prior to Report. With that in mind, I beg leave to withdraw the amendment.
“(7A) The Secretary of State must—
(a) prepare guidance for the purpose of assisting judges in deciding when it may be appropriate for proceedings to be heard by a judge alone; and(b) publish and lay before Parliament guidance given under paragraph (a).”
Lord Young of Norwood Green
My Lords, this again could be seen as a probing amendment but it would constitute useful, practical advice or guidance for judges. It is a simple amendment which seeks to place a duty on the Secretary of State to prepare guidance for judges regarding situations where it is appropriate for them to sit alone. It would be helpful to define those criteria. Such a definition could take into account the points that have already been made about the need for diversity and the need to have an injection, as it were, of lay experience and wisdom. I think that is fairly straightforward.
I wish to speak also to Amendment 20F which would impose an additional duty on judges to have regard to the Secretary of State’s guidance under the terms of Amendment 20E and, if it is decided that a judge should sit alone, would require that a statement be published explaining the reasons for that decision. That would provide reassurance to those appearing before the tribunal. It would probably also establish some useful precedents in these cases regarding when such a measure is appropriate.
Amendments 20E and 20F are both probing amendments but are reasonably practical examples of how we think that this clause could be suitably amended if we are going to go down this road. I beg to move.
Lord Marland
My Lords, I am afraid that I have a slightly different philosophical view on this matter from that of the noble Lord, Lord Young, although I recognise that this is a probing amendment. I do not think that it is for the Secretary of State or, for that matter, government to intervene in the judiciary. The judiciary should be set aside from government and particularly from some, if not all, Secretaries of State. Whereas I understand the accountability aspect, I do not think this is the right form in which to set it out. Clearly, Parliament sets the framework for these tribunals and how they are managed but I do not think that it is for the Secretary of State or the Government to interfere in this. I am sure that the noble Lord, Lord Young, having been in government himself, and with all his wisdom and experience in these areas, will recognise that that does not strengthen the situation. However, we will doubtless debate this matter further and other ideas will come forward. We are always open to ideas, as we should be, but I hope that with those comments he will withdraw his amendment.
Lord Young of Norwood Green
The noble Lord did not really address Amendment 20F, which talks about imposing an additional duty on judges. Even if he does not like the idea of the Secretary of State providing guidance, part of the amendment refers to publishing a statement explaining the reasons for a decision if it is decided that a judge should sit alone. I would welcome a response on that.
Lord Marland
I apologise; I should have responded on that. I was more interested in the overall scheme of the thing. Our view is that this measure would interfere with the discretion given to judges and that it is up to the judges to decide whether they should sit on a panel or not. I do not think that they necessarily need to justify that because we have empowered the judges to take the action if they so wish.
Lord Young of Norwood Green
I cannot say that I am particularly happy with that answer. As I have said previously, while we recognise that we are in Grand Committee and therefore we will withdraw the amendment, we will certainly return to these points at the Report stage.
Baroness Turner of Camden
My Lords, my noble friend has indicated that we do not care for Clause 11. I do not intend to proceed any further with the arguments because we have been over the ground quite substantially and of course I shall not press the debate because we are in Grand Committee. However, we shall have to look at all this again when we reach the Report stage. Perhaps some of the remarks that the Minister has made in response to the comments made by a number of us will cause us to use a different form of wording at the next stage. In the mean time, I am not pressing that Clause 11 should not stand part of the Bill.
(a) a trade union official;(b) a workplace representative; or(c) a legal representative.”
Lord Young of Norwood Green
My Lords, this clause gives us real concerns. The concept of a settlement agreement whereby an employee waives their right to go to a tribunal is something that we find unacceptable. It undermines some basic principles. In the circumstances, Amendment 20G is quite appropriate in that it would ensure that the employee could request union, workplace or legal representation at the settlement negotiations. The whole idea of an employer being able, for any reason whatever, to pick on a particular employee and enter into the kind of negotiations that are recommended in the Bill is totally unacceptable because it could open the door to all kinds of discrimination. For those reasons, we believe that if there is to be any possible settlement, although we are opposed to the concept as it is currently defined in the Bill, the employee ought to be entitled to be accompanied by a union, workplace or legal representative. I beg to move.
Lord Monks
I want to support this amendment. Clause 12 generally complicates a situation which is reasonably clear at present. It will make life a little more complicated for workers and probably not that uncomplicated for employers. Essentially, it seeks to make it easier for an employer to end the employment relationship by offering an individual money in exchange for a compensation agreement—the title is changed in Clause 18. Let me explain the situation. At present, where there is a dispute, the terms of an offer cannot be reported to a tribunal. It is called a “without prejudice rule”; in other words, what has gone on before is kept away from tribunal cases. Clause 12 will change that and extend the without prejudice rule so that employers can offer an employee money and an agreement where there is no pre-existing dispute and no application has been made. The worker does not even know that there is a dispute, and the employer says, “Here’s some money, get lost”. This is giving the signal that you can fire staff for an arbitrary reason without following any dismissal procedure.
It was not just this side of the House—I remember some wise remarks by the noble Baroness, Lady Brinton, at Second Reading—that welcomed the dismissal by the Secretary of State for Business, Innovation and Skills of the report from Adrian Beecroft, chief executive of Wonga, the payday loans company. He introduced the concept of no-fault dismissal, which was roundly dismissed by the Secretary of State. I very much welcome what he said about it.
However, this provision in Clause 12 is not that far away from that. It is quite similar. It is expressed differently and rather technically, and is not that easy to follow, but essentially the key thing is that there is no unfair dismissal provision. You have not been warned and do not know anything, but the employer can say, “Here is X amount, get lost. Sign here”. You can no doubt go through the tribunal if you wish, but the provisions legalise that signal. I hope that this is not Beecroft through the back door, or “Beecroft-lite” as some people have been calling it, and that we can persuade the Government to take another look at this and recognise that, although it is in different clothing, it is rather similar to what this well known venture capitalist came up with—a measure that he thinks will create jobs and I think will increase unfairness.
Baroness Donaghy
I support this amendment because the improvement of employment relations should be the dog, not the termination of employment the tail. The emphasis throughout this clause is on avoiding proper procedures, not on following and adopting them. An employer can go to the ACAS website and get one side of A4 on decent procedure on discipline and grievance. Such procedure does not have to be long or complicated. I know that in the public sector it is usually 60 pages long, and nobody ever reads it, but you can do it on one side of A4 and it will be a perfectly proper procedure for dealing with employee relations.
All this provision does is encourage employers, with a nod and a wink, to forget about employment procedures such as those on discipline and grievance. Instead, they can just have a nice quiet chat, especially when the employee is feeling a bit low, and say, “Surely you’d be better off out of here. Times are going to get worse and it’s going to be even harder for you. Let’s have an amicable departure”. It is still quite easy to get rid of people from an employment situation in this country if it is dealt with properly. However, employers are very often terrified of dealing with these procedures because they are unfamiliar with them, cannot be bothered or feel, as an employer, that they are doing a good job by employing people and therefore have the right to get rid of them as and when required. A good employer will recognise that to get the best out of an employee, the employee needs to know where they stand, to know what the procedures are in their situation, to have a letter saying how much they are getting paid and what their conditions of service are, to have a little bit of an idea what their future is, and to understand their part in the scheme of things and what their role is. It can be a job description, but what an employee is looking for is to know what their role is.
To me, this just sums up the attitude of a bad employer rather than a good one. I urge the Government to reconsider. If an employer has a decent discipline and grievance procedure, it is perfectly possible to talk to an employee without prejudice about what is expected of them. If that employee fails to meet those expectations within a reasonable time limit, stated in writing if necessary, it is perfectly possible to see that employee out of the building without any danger of going to a tribunal.
The Government are emphasising the wrong end of the stick on employment relations and concentrating too much on reassuring bad employers that they can get rid of employees without any comeback. That is the wrong way round and, long-term, the Government will live to regret it.
Lord Brooke of Sutton Mandeville
My Lords, this intervention is not intended to be unhelpful or mischievous, but I cannot help remarking that in earlier amendments there has been heavy concentration on there being equal representation on both sides. I notice that there is the possibility of a legal representative in the procedure recommended by the amendment. However, I am not sure what powers that that gives the employer if the employer wants to have a legal representative there as well.
I realise that there are two answers to this. One is that of course the employer would be entitled to have a legal representative there because he was the employer. Alternatively, to go back to what the noble Lord, Lord Monks, said about the introduction of silks into the case—about which I am in no way sensitive—there seems to be a feeling on the part of those who have propounded the amendment that if there is going to be a legal representative for the employee, they totally understand that the employer will have one too. However, the absence of those words might otherwise be used against the interests of the employer in the discussion that was taking place.
Lord Deben
My Lords, I declare an interest as an employer. I make the point that these discussions are much better done on the relevance of the facts and the nature of the argument. I really could not listen to the comments about Mr Beecroft without suggesting that the idea that we should discuss this as if it were “Beecroft-lite”—I think that was the phrase—rather than as a proposition to be properly discussed for its nature is rather a sad thing. If people are talking about “Beecroft-lite”, I must not be moving in the right circles; I have heard no one use such a phrase.
The real issue is: do we have the right balance at the moment? Is it sensible or not to allow employers, in circumstances where this seems to be a better answer, to offer, not impose, an arrangement that includes a payment of this sum? It seems a perfectly reasonable suggestion, and we should not be arguing about it because someone we do not like did not suggest it but suggested something else, and now a Government we do not like are actually bringing forward something different and it might be rather close to that. Frankly, that is not a very good argument. We have to have an argument about the facts; and the facts seem to be that this is a moderate change that would in many circumstances be very convenient for both workers and employers.
Lord Phillips of Sudbury
My Lords, I hesitate to intervene, but I read Amendment 20G as having a different impact from the one that its mover has suggested. It may be that my legal wits are failing me, but surely new Section 111A(2), which it intends to amend, merely defines what the pre-termination negotiations are in subsection 12(1). It states that,
“‘pre-determination negotiations’ means any offer made or discussions held … with a view to”,
there being agreement between the employer and the employee. I do not see where the amendment comes into that. It is irrelevant in terms of who may assist the employee in arriving at that agreement, be it a trade union official, a workplace representative or a legal representative. The way that the amendment has been moved is not consistent with its potential impact on the clause concerned.
Baroness Brinton
My Lords, I want to make it clear that I do not consider Clause 12 to be “Beecroft-lite”, whether that term is acceptable or not to my noble friend. I hope that there might be some information from the Minister to confirm that, but that was certainly not how I read it.
I want to raise a particular question and I apologise for not having given notice of it; I am more than happy to receive a written answer. I understand that an offer of a settlement agreement could not be used as evidence in an unfair dismissal claim but could be used as evidence in a discrimination claim. It is not unheard of at tribunals to hear both at the same time; therefore, which would take priority?
Lord Young of Norwood Green
My Lords, I want to respond to a couple of points that have been made. I am happy to delete “Beecroft-lite”, if that is causing the noble Lord, Lord Deben, to break out in a rash. The plain fact is that as a result of the introduction of this clause, an employee can be called to a meeting without advance notice of the topic or a formal grievance between the employer and employee, and be presented with a proposal for them to leave their employment for a small payment and after signing a confidential settlement agreement.
I hesitate even more to dispute or cross swords with the noble Lord, Lord Phillips, because in some ways I do not feel qualified to do so. However, it is quite relevant that you should be accompanied by someone if you are going to be called to such a meeting. Perhaps we do not have the wording absolutely right and we will take that into account, but I am merely describing the situation that the amendment was intended to react to, and I apologise if it is not exactly right. However, I agree with my noble friend Lord Monks that this fundamentally changes the nature of employment. As my noble friend Lady Donaghy said, if we really want to give employers some helpful advice on employment relationships, this is not the route that we should going down or the advice we should be giving them. It represents all the negatives.
I am fascinated that termination of employment is the most important thing to focus on as the answer to our current employment problems. When the Chartered Management Institute tells me that only one in five managers receives any training at all these days, I consider that to be a far more important area for us to focus on. I do not make any apologies for the amendment, even though it may not be precisely right. The clause fundamentally changes the nature of the employment situation. In answer to the noble Lord, Lord Brooke, on whether the amendment is unbalanced, we do not think it is. The clause as currently drafted is unbalanced because the employer has the right to call you in without any prior notice and for no apparent reason, and suggest that your employment should be terminated. If only employers could get their contracts of employment, their training and their appraisal procedures right. From my experience of dealing with employers, that is the sort of advice that we should be giving them.
Lord Marland
I note the legal brain of the noble Lord, Lord Phillips of Sudbury, and I am grateful to him for pointing out some of the weaknesses in this amendment. I was also struck by the words of my noble friend Lord Deben. This is a mild change. Listening to the Benches opposite, you would think that we had torn up the law. Scenes from “Oliver!” kept coming back to me while noble Lords were speaking. We are not going to make progress if on the mildest proposal we start bandying words like “Beecroft” and warn of terrible things. All this is doing is mildly redressing the balance that exists, which noble Lords opposite may not agree with because they have taken a position on it. People on this side agree with it. I am grateful to the noble Baroness, Lady Greengross, because she made a very good point at Second Reading that we have to get the balance right so that employers are given the confidence to start employing again. That is all we are trying to do here. We are not seeking to tear up the rulebook, as has been suggested. Indeed, my noble friend Lord Brooke of Sutton Mandeville came right to the point: the claimant has to have legal advice before agreeing a settlement. Nothing will change that and we are not tearing it away; he has to have legal advice. So far as we are concerned, he can get it from any suitable or qualified individual and, obviously, even from trade unions.
It is fundamental that we ensure the safeguards for both the employer and the employee. It is fundamental that an offer is made and that the claimant is properly guided through the process and understands its extent. But as the noble Lord, Lord Brooke, pointed out, the claimant is the only person who is legally able to take advice because the employer is not. On that basis, something of a mountain has been made out of a molehill and I hope the noble Lord will withdraw his amendment.
The noble Baroness, Lady Brinton, again turned to the subject of discrimination. I am told by my officials— I am happy to amplify if my response now is not adequate—that a tribunal would take into account a discussion of the settlement for discrimination element of a claim, but would disregard that information when deciding the unfair dismissal element. I hope that that clarifies the point, but if not, of course I and my officials are at the disposal of the noble Baroness at any time.
Baroness Dean of Thornton-le-Fylde
My Lords, having had some experience of industrial negotiations, I find it unacceptable for the Minister to imply that this is a very mild clause. This is the only part of the Bill where the confidentiality clause appears. Perhaps it requires a clause in its own right, which is something that my colleagues are seeking. New Section 111A(2) refers to,
“any offer made or discussions held”.
Anyone who has been involved in industrial relations knows that in 99 out of 100 cases, an employer will have taken legal advice before speaking to an employee and implying that that employee is not wanted in the company any longer. This assumes that the employer has not taken advice before calling in the employee.
Let us imagination the situation here. With all due respect, we are talking about the workplace, not lawyers’ offices. We are talking about someone at work who is asked to go and see the employer. When they get into the employer’s office, the employer makes them an offer. It might be the first time that the employee has any inkling that the employer wants them out of the company and the psychological impact of that can be substantial. We are talking about someone’s job and livelihood, and getting another job may be quite difficult. This is not a mild amendment. It is trying to keep that balance. It is more than likely that an employer will have taken legal advice and will probably have even got the lawyer to write the letter suggesting that the employee leave the company. If the employee wants to have a representative in that meeting, they should. I think this is a mild amendment; I do not think it is a mild clause as it currently stands.
Lord Young of Norwood Green
I could not have put it any better than my noble friend Lady Dean. It is unfortunate that the Minister chose to dismiss the Government’s proposal as just a mild change. It is not a mild change. It is fundamental for the reasons that my noble friend Lady Dean and others have described. It is pointing employers in totally the wrong direction. If we are going to talk about something as serious as dismissal, it is perfectly reasonable to request that somebody should be accompanied by a representative. I do not think that is unbalanced. It is justice and fairness. We are in Committee, so, again, I shall reluctantly withdraw the amendment, but I advise the Minister that we will be returning to this on Report.
Lord Young of Norwood Green
My Lords, I do not want to go over the core arguments about why we are opposed to the direction of travel, to borrow a phrase that the Minister has been using today, but we are. We think it is the wrong direction. We want to undermine the confidentiality. We think it is unfair, unbalanced and inappropriate. Amendment 20H clarifies that settlement negotiations should still be admissible as evidence in a constructive dismissal claim. I shall be interested to hear the Minister’s response. I beg to move.
Lord Brooke of Sutton Mandeville
My Lords, on this occasion, I have considerable sympathy with the amendment moved by the Official Opposition. I do not know whether there are particularly reasons why the words “or constructively” are unacceptable to the Government. No doubt they will emerge, but I can understand that there might be circumstances to which this clause would be relevant where unfairness and constructiveness were mutually exclusive. Something might not qualify as being unfair, but could be interpreted as being constructive dismissal, so I have sympathy for why this amendment has been put down.
Lord Marland
Of course we all have sympathy with this issue, but we are seeking to ensure that the balance is rebalanced so that the employer has some protection and unfair dismissal is not one-sided, as we and the bulk of employers believe it currently is. We are going over quite a lot of ground that has already been covered.
In response to the noble Baroness, Lady Dean, there is a very clear safeguard for employees. There is a very clear procedure that protects them. She made out that a poor person comes into the room and is told for the first time in his or her life that he or she is going to be put out of work, or that there was potential for that, because you cannot do it the first time. It is three strikes, as the Committee knows. The fact of the matter is that often there is justification. The employee is no longer fulfilling their role, and the employer has come to the conclusion that they cannot carry on fulfilling the task that they were employed to carry out. We have to understand that there has to a balance or the employer is not going to carry on employing.
I have been a significant employer and have seen huge—and correct—changes in the balance in favour of the employee and that there has not been indiscriminate behaviour from the employer. I note that the noble Baroness, Lady Donaghy, was more concerned, not about the big companies to which the noble Baroness, Lady Dean, referred—big companies that can prepare the way and will have had all the legal advice before they call that employee in—but the smaller companies that do not have that advice. They are the ones which do not consult and do not handle the whole programme properly. They are the ones we are all concerned about. Indeed, they themselves should be concerned because they have not prepared in the decent and proper way employers should in handling this very important issue in someone’s livelihood.
As such, we must get the balance right. We must understand that we have to be balanced in our rhetoric and that there are two sides to this, as fundamentally we all do, because all of us in this Room want people to employ more people, do it decently and create livelihoods. All we are trying to do here is establish a slightly better balance. With that understanding I hope the noble Lord will withdraw his amendment.
Lord Phillips of Sudbury
Am I not right in thinking that the proposal to add the words “or constructively” is superfluous as an unfair dismissal includes a constructive dismissal?
Lord Young of Norwood Green
My Lords, I really want to respond to the point about restoring the balance. An employer now has two years to decide whether an employee is suitable. That is two years where you have the opportunity to appraise them, train them and find that they are not responding to that. It really harks back to the point made previously by my noble friend Lady Donaghy that the procedures are there and that if an employer acts in a proper manner they can dismiss employees. I would not demur from that. There are employees who do not measure up. What we do not support, and indeed oppose, is the idea that you can carry out this process and somehow the evidence of settlement and negotiations is not there and is not admissible in any dismissal claim. I will withdraw the “constructive and unfair dismissal” claim because I realise that that offends the legal precision.
We are quite clear that the idea that confidentiality should be used in these circumstances is not just a question of rebalancing. It is not, in our view, in any way helping the prospects for future employment. If we really believed that that was the case then maybe we would consider it, but I doubt it because it seems to us that it is both unfair and unjust. This is a perfectly reasonable amendment and it will be another reluctant withdrawal. We will return to it on Report.
“(3A) The employer will provide to the employee a written statement, setting out the reasons for any offer made under subsection (2), and subsection (1) will not apply in relation to such statement.”
Lord Young of Norwood Green
I do not need to detain noble Lords too long in this case. We believe that it would be appropriate and necessary for balance, fairness and justice for the employer to provide an individual with a written statement on reasons for any settlement offer that ought to be admissible as evidence in any unfair dismissal case. To use the phrase about restoring balance again, we believe that, if we were to go down this road, this amendment is necessary to restore balance and provide justice for an employee who is facing the prospect of dismissal and the difficulty of finding future employment. I beg to move.
Lord Marland
I do not want to delay the noble Baroness, Lady Turner, any longer so will just very quickly say that the Government believe that this amendment undermines the purpose of the clause. However, we have been in consultation on this. That consultation closed on 23 November, and we are considering the responses at the moment. We will obviously publish those responses before Report and will have something more to get our teeth into, although we will doubtless disappoint the Opposition with what we come up with. On the basis of what I have said, I hope the noble Lord will withdraw his amendment.
Baroness Turner of Camden
I understand that the TUC refers to Clause 12 as “Beecroft-lite”, and I think my noble friend Lord Monks has already referred to it in that light. It will be recalled that the Beecroft recommendations were intended to make it easier for employers to hire and fire workers without having to justify or explain the decisions. The recommendations were widely condemned, even by employers’ organisations such as the EEF. Clause 12 enables employers to offer employees a sum of money and a compromise agreement in return for leaving their employment, as we have heard during these discussions. The conversations will remain confidential and cannot be admitted as evidence in unfair dismissal cases.
The TUC opposes the proposals in this clause since it believes that it will send out a clear signal to employers that it is acceptable for them to sack staff for an arbitrary reason without having to follow a dismissal procedure. The provisions in this clause are very complex and likely to lead to possibly costly legal wrangles.
Another point that occurred to me is that nowhere in the Government’s wording is there any reference to trade union representation, although my noble friend Lord Young attempted to introduce it in Amendment 20G. Quite obviously, the right to trade union representation in these circumstances is very necessary. At the same time, as I have already indicated, the proposals are so unsatisfactory that even with the reservations that have been expressed—which may, I hope, cause the Government to look again at these provisions—I still think that this clause should be opposed. That is what the TUC would like us to do, and I certainly believe that there are strong reasons for doing so.
Lord Stevenson of Balmacara
My Lords, I am very grateful to my noble friend Lady Turner for raising this particular debate because it is when one looks at the whole clause that one is able to reflect a little on the debate so far. We have learnt quite a lot, I think, about the way that the Government wish to approach this area, but we have not understood very much.
Many of the clauses we are discussing in this section of the Bill, and this clause in particular, strike at the heart of the way in which we want our society to be run. I had always understood that it was commonly agreed among the parties represented in your Lordships’ House, and more widely, that there was a case for government to regulate properly the way in which employers and employees went about their business. It should not be obstructive or didactic, but it must bring to bear fairness and other aspects of the good society we all wish to live in.
Lord Deben
My Lords, may I intervene for a moment? I was very impressed by that last speech and thought that it was presented exactly in a proper way—although I do not entirely agree with it, as it is not a charter for bad employers that is being placed in this clause. Let me give the Committee an example of when this clause would be very helpful. It is a real example but, for obvious reasons, I am putting it in a way that could not be traced back to an individual. Somebody had been working for a company for some years but was increasingly unable to cope with the work that they were given. Had that person gone to a tribunal, the details of that lack of ability would have had to be discussed at length because that would be necessary. The employer concerned was a good employer. He sought to give that individual the recompense which they might have got in a tribunal while avoiding the tribunal, which would have been particularly difficult. Under the law as it stands, that was very difficult to do.
All this measure does is to give an opportunity for employers to look for the best way to solve many of these problems. I can think of many occasions on which a perfectly legitimate and reasonable solution could be brought about in this way. After all, it is not a compulsion; it is perfectly possible for people to say, “I want to go to a tribunal”. Therefore, I do not understand why we feel that people are unable to make that choice, or why employers should be refused the possibility of offering that choice.
It seems to me that the Minister is right in saying that this is a very small change but I can think of a number of occasions on which good employers would be able to choose it very effectively. My one concern about this discussion is that we seem to be moving back to a concept whereby somehow or other any flexibility in the law is advantageous only to bad employers. The truth is that the law at the moment makes it more difficult for good employers to do the best thing. As somebody who has to deal with these matters, I believe that most employers in this country are good and that they seek to do things properly. This change will make it easier for good employers to behave properly in circumstances where the necessary paraphernalia of the law would be best avoided in the interests of the employee.
Lord Young of Norwood Green
I do not want anecdotally to try to assess whether the majority of employers are good, bad or indifferent. They occupy a spectrum. Many are good and others are not so good. I say to the noble Lord, Lord Deben, that settlements are currently made outside the tribunal. We do not need to go down this road. I am sorry but the only interpretation we can put on this is that it encourages bad employers. Where does it encourage proper appraisal procedures or proper training procedures? If we really thought that this was about restoring balance, encouraging good practices and good behaviour and encouraging extra employment opportunities, as my noble friend Lord Stevenson of Balmacara said, then of course we would support it. However, in our view it does none of those things, which is why we strenuously oppose it.
Lord Marland
The noble Lord, Lord Young, has just explained why the Benches opposite have got this wrong. All they have talked about is the employee. At no point have they said, “What about the employer? Does this measure in any way improve things for the employer?”. The employer is the person who will employ people, provide jobs and create new jobs. My noble friend Lord Deben made the case beautifully; I need say little because he put it so well. This is exaggerated rhetoric and nonsense. The measure is a mild change but all we are getting is exaggerated rhetoric as if we are all going back to the workplace run by bad employers with bullying and all this sort of thing.
We know that bad employers go out of business—they go out of business fast because people do not want to work for them. They are not good employers, so they go bust. Good employers, who are the larger proportion of people, exist. Very strong rules and regulations have been improved over time—rightly so—and this Government are not saying under any circumstances that they should not be improved, or that they should not have been improved in the past.
We are trying to speed up the process and give people legitimate rights and clear interpretation of the law; then both parties will benefit. Employers will employ more employees, bad employers will go out of business, and bad employees will no longer be employed. At no point has anyone said “What about the bad employees? How do we get rid of the bad employees, who are a burden on good businesses and stop them surviving?”.
Lord Marland
I am not giving way, because we have had enough on this. We have heard everything that the noble Lord has had to say on it. This is a matter of debate, and we will doubtless say more.
Ultimately, we are all coming from the same place. We want good employers and good employees. We want them both to be properly represented and to have the opportunity. As my noble friend Lord Deben says, this simply puts a mild balance back. What employers would like to see happen is just as important as what employees want.
Lord Young of Norwood Green
I wish to put the record straight on one point. I specifically mentioned that there was a proper way to deal with—to use the Minister’s phrase—“bad employees”, or employees who fail to live up to the mark. If the appraisal system is done properly, then there is a route to dismissal.
Baroness Turner of Camden
My Lords, I am still in opposition to this clause. Of course, we know that we cannot press it in Committee. We will take away what has been said during this debate, which has been very interesting and useful, and see what we come up with on Report.
Certainly, I am not at all happy with what has been said. I do not believe that this helps the good employer—quite the reverse. It helps the bad employer who seeks to get rid of employees as easily as possible, which was what Beecroft was all about; we opposed that, as did a lot of other people. We cannot press this now, and it is not our intention to do so, but we shall have a close look at what has been said before we come back again on Report. There are aspects of this clause that I do not like, and which I would like to pursue further.
“(2A) Before the commencement of this section, the Secretary of State shall consult on the appropriate amount to be specified under subsection (2).
(2B) The Secretary of State must lay a copy of the results of any consultation undertaken under subsection (2A) before Parliament.”
Lord Young of Norwood Green
My Lords, the amendment is designed to probe the Government’s rationale behind their plans to cap compensation at 12 months’ pay. Clause 13 grants the Secretary of State the power to limit compensatory awards, which this Government have announced they plan to cap at 12 months’ pay, subject to an overall cap of between one and three times median annual earnings.
The Government have justified the cap on the basis of correcting a misalignment arising from inflation-busting increases over the years, in particular in 1999, when the cap was increased from £12,000 to £50,000. However, it is totally misleading to imply that this was an inflation-busting boost. The year 1999 was a one-off uprating, designed to correct levels that had lagged behind average wages. When the cap was introduced in 1971, it was calculated at 104 weeks’ pay, or £4,160. There has been no requirement to review the cap annually, although it has been increased. Had it increased in line with average earnings—and I stress that—since 1971, the cap would have amounted to £52,800 in 1999.
The Government’s comparison between the increase in the cap between 1999 and 2011—it was 503%, which includes the one-off uprating and the increase in median earnings at 47%—is therefore totally misleading. Were the Government to compare the 47% increase on the figure of £52,800, as it would have been in 1999, had it risen in line with median wages previously, it would be £73,500, which aligns well with the current cap level of £72,000. The Government claim that lowering the cap to 12 months’ wages would give employees and employers a more realistic expectation about the level of tribunal awards, based on the fact that the median unfair dismissal award, including basic and compensatory elements, was £4,560 in 2011-12, or just nine weeks’ average pay. If the Government are really committed to this logic, they would set the cap at substantially less than even the median wage, as it is difficult to see how setting up an expectation of recovering 5.7 times the average award is much better than one of recovering 15.8 times. If the Government want to increase awareness of the average award level, surely it would be better to encourage external services such as ACAS and Citizens Advice to make this clearer when giving advice and guidance.
The reality is that this cap will affect no more than around 150 cases a year out of some 50,000—just 0.3% of all unfair dismissal claims. However, among those 150 individuals who will be denied full compensation, such as a substantial loss of pension rights, are people in the squeezed middle who were previously on above average wages but perhaps are close to retirement and therefore have fewer prospects of finding new employment. That is a daunting prospect given today’s high unemployment rates. Almost half of unemployed workers aged over 50 now face being out of work for more than a year, while there has been a 41% increase unemployment among older women in the past year alone. The link with annual salaries will also mean that low-paid and part-time workers are severely disadvantaged. These workers are more vulnerable in today’s dismal economic climate. I beg to move.
Lord Monks
I support my noble friend in this amendment. He gave the statistics for the current situation and pointed out that the median award is just £4,500. Set against the mean annual salary or average salary, that is very low indeed. This is just a mechanism for transferring the costs of dismissal away from the employer and reducing the employer’s potential liability. I disagree with it and again it is the wrong signal to send. It is not a huge signal—I do not want to be accused by the Minister of gross exaggeration, as might have been the case once or twice earlier in our debates—but it is clearly the duty of the Committee to indicate that this is a transfer, a potential loss for the employee and a potential gain for the employer.
While I am on my feet, if at some point in the subsequent proceedings the Minister can explain the difference between the no-fault dismissal provisions of Mr Beecroft and the provisions in Clause 12, I shall be very interested to hear it. In practical terms, they are very similar.
Lord Marland
I am not going to get into that for the moment, but I am sure we will pick it up later. The Government take the matter of this cap seriously and that is why we are consulting on it. The consultation closed on 23 November and we will publish the response before we reach the Report stage, so we will be able to have a good debate on it. I thought that the noble Lords, Lord Young and Lord Monks, made some very poignant remarks, and we share their concerns. We also acknowledge the keen detail of the facts that have been presented. There are very few cases which get to the limit, but they are important. The average award is £5,000, of course, and the cap is £72,300. We recognise that, we understand it; we know that we have got to get it right. We are obviously sympathetic to a number of the cases that the noble Lord, Lord Young, has mentioned and, with that, I hope that we can revisit this in the spirit of co-operation because I think it is important, and that we can be conjugated—conjugare, which means to bind together in the same outcome—in time to come.
Lord Young of Norwood Green
I would not say that it is peace in our time but it is not a bad offer. I genuinely thank the Minister for his response. In the circumstances, I beg leave to withdraw the amendment and I look forward to the further consideration as a result of the consultation.
Baroness Turner of Camden
I want briefly to speak in opposition to Clause 13 and to say that, according to my briefing from the TUC, it is also opposed to the proposals to reduce the cap for compensatory awards in unfair dismissal and other cases. The Government are proposing to reduce the statutory limit for compensatory awards. They claim that reducing the statutory cap would help to reduce employees’ expectations in unfair dismissal claims. However, there is concern that the main effect of these proposals will be to make it cheaper for employers to sack staff unlawfully. Clause 13(2) gives the Government a power to cap the compensatory awards. It is not just the TUC that is concerned about this. The Law Society says in its briefing:
“The Government is seeking a power to vary the compensatory award in line with annual average earnings. The Society queries the arbitrary nature of this limit, which will prevent a substantial number of claimants who have been unfairly dismissed from recovering their full losses”.
Older workers, who are more likely to have accrued higher occupational pension and other entitlements, may find it more difficult to get new employment and will be disproportionately affected. Recent unemployment figures show that nearly half of unemployed workers over the age of 50 have now been out of work for a year or more. Obviously, they find it very difficult to get alternative work. The link with annual salaries could mean also that low-paid and part-time workers could lose out. For all these reasons it is suggested that this clause should not be proceeded with. I am therefore raising my objection to Clause 13.
Lord Young of Norwood Green
I will be very brief. I think my noble friend Lady Turner has expressed our concerns quite clearly. I await with interest the Government’s assurances that they want to get this right. As it stands, we will obviously be returning to this clause on Report.
Baroness Brinton
I am sorry, I am trying to stand up but I am not very fast. I want to add to the comments made by the noble Baroness, Lady Turner of Camden, about matters other than straight salary. The pension pot is one of them, but there are others that need to be taken into account, and I wonder if this has been overlooked or if it is intentional. If it is intentional, I would have real concerns, particularly about some of the pension issues.
Lord Brooke of Sutton Mandeville
My Lords, I hope the Minister will regard this as a late contribution to his consultation, but since the academic research on which it is based is 50 years old, and I have no idea whether it has been updated, he does not need to take it very seriously. I recall that when I set out in business 51 years ago, some very detailed academic research had been done in the context of executives—I am not necessarily talking about the shop floor—which found that each employee had a particular gradient for the ascent of their salary. If they went above a figure, whatever the figure was on the line, they were highly likely to fail. If they went below it, they were highly likely to seek another job. The research was sufficiently comprehensive to be an interesting observation and contribution to the process.
Lord Deben
My Lords, I will make a simple statement. We have to get an atmosphere in Britain in which employers are less frightened of taking on more staff. I have to say to the Opposition that, if you are an employer, for a long time now there has been a general feeling that you are better off not increasing the number of people you employ. Some of us have fought against that and employed more and more people, but it is not a general trend. I think the Opposition, and particularly the Trades Union Congress have got to come to terms with this psychological fact. It is important for employers to feel that the problems that may open up for them if they make a mistake in employing someone are at least reasonably limited. That is why the Government’s approach in this Bill is absolutely right—it simply, delicately and very slightly seeks to shift the balance so that employers begin to feel that there is a real reason for them no longer to be afraid.
The trouble is that, in this whole discussion, there are 200 years of accumulated dislike of the concept of employers. I find that very hard to understand. The noble Baroness, Lady Turner, speaking from the TUC brief and from a long history as a negotiator, could hardly hide from us the feeling that people ought to employ people and that they will do it automatically. The truth is that we have found, over the past few years, an increasing reluctance to employ, although we ought to have a society in which we restrain our use of material resources and extend our use of human resources. That is what sustainability actually means. However, to do that you must have a format within which people are not so worried that they do not employ.
The very moderate steps being taken here are essential if we are to see an increasing number of people in employment. The unemployment figures are much better than many thought they would be, and I think this Bill will help. If it helps, then it will do more good for the working people of Britain than anything else. I am very unhappy that the Opposition are suggesting that the Bill is in some way anti the workers in factories and businesses; it is not. It is a mechanism to get more people into jobs by removing the feeling that employment is too dangerous an activity to step further into than you really have to. That is the change we have to make and we need to make it now.
Baroness Donaghy
I do not want to prolong things as I realise that we are winding up. We had this debate when we were discussing the regulations on employment tribunals and the noble Lord, Lord De Mauley, was in the lead. The very same remarks as those made by the noble Lord, Lord Deben, were uttered then by the noble Lord, Lord Jones of Birmingham. This is not a new debate. The only thing that I would say is that some of us come from a climate—I will remind the Committee that I was chair of ACAS—where we support employers as well as employees. We want to create good employment relations because we believe that that is good for growth in Britain.
We know that companies fail because they are sometimes badly managed and sometimes undercapitalised. I do not know of many companies that failed simply because an employer could not get to grips with getting rid of a bad employee. I have been a manager myself and have dismissed people, and I fully accept that there are poor employees. However, what we need in this country are decent skills and a good vocational education system, and I think the Government are trying to tackle that. We also need good management—something that I do not believe has been sufficiently emphasised in this discussion—and we need to be able to explain to employees where they fit in in the scheme of things so that they understand that and feel involved. Those are the points that I wish to make. This is not a new debate.
Lord Monks
I shall not detain the Committee for very long. I was disappointed to hear the noble Lord, Lord Deben, make the points in the way that he did. Not only is this not a new debate; it is an old debate. It was debated in this Parliament in Victorian times in relation to intolerable factory conditions. It is a debate about sending children up chimneys. Noble Lords can wince at that but the debate is an old one. I recognise it and have heard it in many employer circles. I recall that over the 10 years from 1997 to 2007—I am not making a party-political point here—we added a million jobs in this country. The employment market boomed. As noble Lords will know, a large number of those jobs went to migrant staff—although that is another issue for another day—but the fact is that there was an incredible expansion of jobs at that time.
Lord Deben
The noble Lord must remember that almost every one of those jobs was created by the Government and paid for by the taxpayer, and that has been a significant burden for Britain. We are now creating proper jobs which make money for the nation. It is a wholly different situation. I can create a million jobs if I pay for them out of taxpayers’ money. That really is not an argument that can be put forward.
Lord Monks
That is not a constructive suggestion. Many of those million jobs were in the private sector. Unfortunately, far too many of them were in the south-east of England and not in the poorer regions. I accept that the noble Lord has a point in that the public sector was the major driver of the economy and of the regeneration of our cities in the north of England and in Scotland and south Wales. A large number of jobs were created. There have been some exaggerated claims about the possible effects of the national minimum wage and so on but that is probably another debate for another day and well beyond the scope of this clause. However, in the OECD league tables, the British labour market is ranked number three for flexibility. This country is the third easiest when it comes to employers being able to sack people. I wish that employers would stop moaning about this, look at some of the evidence from abroad and get on with seeking to help to increase employment by looking at what they can do themselves and at the changes that the Government can make, possibly in relation to national insurance and so on. That would boost employment opportunities far more than giving a licence to some employers—I think that they are a minority but they are not very good employers—who would take advantage of these kinds of provisions.
Lord Marland
My Lords, if we are to make any progress on this Bill, we have to take a more conciliatory position between ourselves. I believe that underlying all this is a conciliatory position, because ultimately we all want more jobs and more people employing others. We all feel passionately about that. We cannot always come at this from the polarised position of the TUC. Indeed, we as government are not coming at this by saying, “Beecroft says this, so we must do it”. In fact, as a department, we rejected quite a few things that Beecroft said because we did not think that they were in the interests of employees. Therefore, we are not taking a polarised position based upon part of the argument. In the end, we are all interdependent. Without the employer, we do not have employees, and without employees, we do not have a return to prosperity.
It was a pleasure to negotiate with unions in the north. Sellafield was my area of responsibility. I much admired the way in which they came to the table and to understand that they had to improve their working terms and conditions for Britain to become competitive again. It is to their eternal credit that after two rounds, three pinfalls and one submission, we got to a very amicable and successful direct contact where there was mutual respect. As an employer, the first company with which I was involved in setting up, the majority of people who worked there were shareholders. We believed that that community spirit was the best way forward.
I have already conceded on this matter and we do not really need to debate it, but we have a roaming brief on this issue. I think that all parties agree that we need to have a cap on awards but we need to make sure that we get it right and that it is fair. It should not be in favour of the employee or the employee: it should be fair and balanced. This House is good at being fair and balanced.
I am grateful for the contributions, which have been fair and balanced at times. When they have been fair and balanced, we have started to make progress. I think that in our hearts we all want the same thing. At the end of all this, we will have the same thing. It will leave this place a better Bill. It will have been challenged. It will not have been challenged by taking unreasonable, polarised positions. If we did, we would not end up with something reasonable at the end.
After all this, I hope that the noble Baroness will support this clause.
Baroness Turner of Camden
I thank the Minister for his fairly sympathetic response. I also thank noble Lords who have contributed to the debate, particularly my noble friend Lord Monks who set out what has happened over the years in relation to employment rights, which have been the fruit of the struggle of many of us over the years. Workers in their unions, and workers not always in unions, have struggled very hard to maintain rights in employment, which did not come easily to them.
Eventually, we succeeded in getting quite a lot of employment rights. My former noble friend, Lord Wedderburn of Charlton, who I am sorry is no longer with us, was very instrumental in changing the law in this country. He did it as a result of pressure from unions on behalf of the workers who, at that time and in the past 200 years, have been through most appalling conditions. Through organisation and struggle, they managed to change that and we now have a set of employment rights which many of us are now fighting to maintain.
A good employer does not dispute that workers have entitlement to rights. Usually, they are quite willing to honour those rights. It is the poor employer who does not and who wishes that they can regard their employees as disposable. We do not regard employees as disposable. We want to ensure that employment rights are suitably maintained. We shall continue with this when the legislation now before us reaches Report stage. We take on board what the Government have said but I think that we shall come back with different wording and we shall argue for it. That will not be for this evening but perhaps for another time.
Lord Gardiner of Kimble
My Lords, this may be a convenient moment for the Committee to adjourn until Monday next at 3.30 pm.