Laura Farris (Newbury) (Con)
May I begin by saying what a pleasure it is to follow the hon. Member for Brent North (Barry Gardiner)? I am going to develop a number of points through my submissions, but it is important to say that in a number of regards, when I was listening to his speech, I found myself nodding along. He knows that I care about this issue as an MP because it has affected constituents of mine in Berkshire who were employed by British Airways and Centrica, and I care about it from a technical and legal perspective as an employment barrister.
There are a number of points on which I think we can all agree on both sides of the House. It is unacceptable for employers to use fire and rehire as a pretext to force through changes to long-standing workplace practice at a time when workers are vulnerable and less able to mount a challenge. We all agree that we saw some of that last year, and we all agree that there is scope to tackle the issue. Where I think we disagree is on how we do that.
I would like to pick up where the hon. Gentleman left off. One thing that we do not do enough of in this House is acknowledge that there is room for a legitimate difference of opinion on legal solutions. In fact, even outside the political domain, we know that there is a divergence of views on how to address fire and rehire, because, when the Department for Business, Energy and Industrial Strategy commissioned its call for evidence through ACAS earlier this year, one of the most striking features was how all the people who contributed to it did not agree themselves on how best to resolve the issue. I hope that what comment I have to make on this Bill will be understood and interpreted in that context.
My view is shared by other legal practitioners. I will develop these points, but I know that there will be an interruption in our debate quite shortly. I maintain the view that this Bill actually poses risk to workers’ rights. I also think that it exacerbates one of the deepest problems in industrial relations to have come about through this practice.
The wider point I want to make is that any opposition to this Bill today is not a Tory thing. It is not the Tory party against the Labour party. There is a body of professional legal opinion of mixed political persuasion that holds the same concerns that I do. I am grateful to the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Sutton and Cheam (Paul Scully), to the Secretary of State and to all their officials for the way that they have engaged with me and my proposals. I can tell from the serious scrutiny that they have applied and the questions that they have lobbed back at me throughout the summer that they are thinking carefully about this and that there is scope to address this issue.
One thing that I think has not been acknowledged by any Member of the Opposition, including the hon. Member for Brent North in his opening speech, is that there is already some protection in common law against this practice. It is important to spend a moment looking at what the common law says, because we cannot sensibly say where the law is going wrong until we have a proper look at where the tribunals might be failing. When the issue was first considered by the Employment Appeal Tribunal in 1990, it said that
“you simply cannot hold a pistol to somebody’s head and say: ‘henceforth you are to be employed on wholly different terms’
“‘at 50% of your previous contract.’ We come unhesitatingly to the conclusion”—
that, when that happens, there has been a dismissal.
In what circumstances would an employment tribunal find that dismissal to be fair? First of all, the employer must show that they have a “substantial reason” for that practice within the meaning in section 98(1)(b) of the Employment Rights Act 1996—that is usually interpreted as “sound, genuine business reasons”—and also that they have acted reasonably in accordance with
“equity and the substantial merits of the case”
within the meaning of section 98(4). For any employer to meet those thresholds, they will have to go to the tribunal and show, first, that there is a genuine necessity for the changes—that the changes are there not just to swell shareholder dividends, but to lead to a determinable advantage to the performance of the business. Secondly, there is the reasonableness test, which is really a proportionality exercise.
I refreshed my memory yesterday of the well-known case of Garside & Laycock, which was the last significant appeal court decision that I could find on fire and rehire—it was 10 years ago. In that case, the employee brought a claim for unfair dismissal because he would not accept a reduction in his wages. What questions did the appeal court ask itself? First, it asked why had the employer done it—was it in genuine economic difficulty? The answer to that question was yes. What was the size of the cut that they were asking the employee to take? It was 5% of wages. Had there been a proper consultation with the staff? The answer to that question was yes. Had they balloted the staff? The answer to that question was yes. Had those who had participated in the ballot agreed to the cut? Everybody apart from this employee had agreed, and, in those circumstances, his dismissal was fair.
That is an important yardstick to have in mind in considering whether we need primary legislation to deal with this point. So, why is there an issue? I know that hon. Members across the House continue to believe that there is an issue. The answer was captured very well in one solicitor’s evidence to ACAS. I will quote it because I enjoyed reading that report.
“From an employer perspective so long as you have followed the consultation you will be ok. If it gets to Tribunal, no judge looks very closely behind the reasons why an employer is doing it. It’s all about the procedure.”
Judges do not necessarily ask all the same questions,
“so, in that respect, an employee is not perhaps so well protected.”
It is a fair observation. I mean that with no disrespect to employment tribunal judges, but some of them have not previously run their own business and do not have that direct experience, so they are not always best placed to test the strength of the employer’s explanation.