Employment Rights Bill (Twelfth sitting)
Thursday 12th December 2024
(6 days, 10 hours ago)
Public Bill CommitteesEmployment Rights Bill 2024-26 View all Employment Rights Bill 2024-26 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 12 December 2024 - (12 Dec 2024)
Greg Smith (Mid Buckinghamshire) (Con)
I beg to move amendment 127, in clause 22, page 33, line 12, leave out from “that” to end of line 21 and insert—
“the reason for the variation was to provide for improved employment practices and to update and reform outdated working practices, in order to allow for the more effective running of a business or organisation.”
This amendment would provide an exemption to unfair dismissal for failure to agree to a variation of contract.
It is a pleasure to see you back in the Chair for the afternoon sitting, Ms Vaz. The amendment, in my name and those of my hon. Friends, is a probing one—I want to be clear about that from the outset—that would provide an exception to unfair dismissal for failure to agree a variation of contract.
The premise underpinning the Bill’s provisions on fire and rehire is that the only reason for an employer to want to re-engage employees on varied terms is to exploit them by giving them worse terms and conditions. I am in no way, shape or form suggesting that that does not occasionally happen, but I come at this debate from the other direction, presuming that most employers are good employers who care about their workforce and want to see a happy staff getting on, being productive and doing the things they do to make the business a success, be that making things, giving advice or providing a service.
The Bill basically says that a business needs to be going bust for the process of varying a contract to be justified. Again, I am not certain that that is the right starting point. What if there were a legitimate reason for wanting to vary certain terms and conditions? We touched on this in our debate on SNP amendments 160 and 161 before the break, and I gave some examples thinking about the pace of change in a business. Let us say a manufacturing business moves from a very manual process for putting a product together—be it a car, a piece of furniture or some smaller product—to invest in robotics or something.
I can think of a farm in my constituency that was a traditional dairy farm but, thanks to a not insubstantial grant from the previous Government, has built a robotic dairy. That means that the people who work on that farm are doing a fundamentally different job. They no longer have to get up at 4 am to manually hook the cows up to the milking machines; believe it or not, the cows now form an orderly queue for the milking robots. I am not joking, Ms Vaz. I invite anyone to come and see it with their own eyes. There is a vending machine where people can buy the milk direct. The point at which staff intervention is needed is if an alarm indicates that a machine has clogged or broken, the pasteurisation room has hit the wrong temperature, or whatever. It is a fundamentally different job. Sometimes, that happens in a workplace where the employer wants to keep the staff—they do not want to let anyone go and they do not want the robots to replace them—but it involves different terms, different conditions and a different physical thing to do on a daily basis. I offer that as a practical example of how businesses change.
Alex McIntyre (Gloucester) (Lab)
I refer the Committee to my membership of the GMB and Community unions. I have two short questions for the shadow Minister. First, if the changes are so positive for employees, can they not simply accept a change to their terms and conditions? Secondly, let us take the scenario that he describes, where there is a change in processes, and put that in a business-to-business context. Say a business moves from wooden cogs and to metal cogs, and it has a contract with the wooden cog supplier. Is he aware of any circumstances in which that business would be able simply to break that contract without any notice or legal recompense to the other business?
Greg Smith
I understand the point that the hon. Gentleman makes. He is right that the businesses in the situation he describes would have to go through a legal process, probably involving very expensive contract lawyers, to alter such a contract. I do not think it is helpful to directly compare those supply chain contracts with employment contracts, because on one level we are dealing with human beings and on the other we are dealing with the flow of parts, services or whatever.
The hon. Gentleman is also right that a change in terms and conditions can sometimes be very positive for the employee. Perhaps it involves fewer hours for more money—that sometimes happens—or longer holidays. Of course, if something better is being offered, employees should have the flexibility to accept that, having exercised due diligence and looked it over properly—dotted the i’s, crossed the t’s and all that. What I am trying to get at is where the business model, and the day-to-day operation of the job, has fundamentally changed, through robotics or whatever.
Laurence Turner (Birmingham Northfield) (Lab)
I want to continue on the shadow Minister’s theme of milk. It used to be common in factories where there were particulates in the air to include a clause in someone’s contract that said they were entitled to a glass of milk during the day, because it was believed at the time that a glass of milk would remove those particulates from someone’s airway. It was completely misguided, but those contracts still exist, and I have been in situations where I have looked over similar, very outdated terms and conditions. If it is raining on a site, someone might be entitled to a 2p payment, for example. Such contract conditions are very easy to remove; it can be done by agreement.
Does the shadow Minister accept that if a contract is worded appropriately, such variations can be made by an employer—the key factor is whether there has been genuine consultation—and that the circumstances that clause 22 will remedy are really quite separate? It is for those extreme examples that Grant Shapps, the Conservative Business Secretary at the time, spoke out against.
Greg Smith
I am grateful to the hon. Gentleman, although he was possibly milking it with the length of that intervention—[Hon. Members: “Oh!”] It is nearly Christmas.
I accept the hon. Gentleman’s points about some of those very outdated provisions. I really hope that my children do not find a job out there that involves free milk, because they might jump at it a little too quickly. This probing amendment seeks simply to understand a little further where the flexibilities lie, and to get underneath some of the detail around when a variation of contract might be a good thing on both sides, or when things have just changed and there needs to be a variation in order for the jobs to be saved. I would hope that Members on both sides of the Committee would come at this from the perspective of the real world and wanting to save jobs, create more jobs, grow the economy and grow employment.
There may be legitimate reasons for wanting to vary terms and conditions, such as to provide for improved employment practices, or to update and reform outdated working practices—as the hon. Member for Birmingham Northfield referenced—in order to allow for the more effective running of a business or organisation. The amendment seeks to understand the Government’s position should such a situation arise, and to understand why they are legislating to prevent businesses from acting in such a way.
Michael Wheeler (Worsley and Eccles) (Lab)
On a point of clarity, is it the purpose of the amendment or an unintended consequence of the drafting that it would completely delete the subsection, rather than adding to it? If the purpose is to completely delete the subsection it is amending, are Opposition Members trying to remove the protections for those going concerns?
Greg Smith
The hon. Gentleman asks a perfectly legitimate question. I repeat that this is a probing amendment: we are not going to press it to a vote or try to put it in the Bill. The purpose behind it is to get the evidence base, the justification and some clarity of thought from the Government about why the clause is necessary and proportionate. Sometimes we have to suggest getting rid of something to get a good example or a good justification for going there, doing it and putting it in primary legislation.
The Opposition certainly do not want to see exploitative fire and rehire in any workplace. From talking to businesses, and from the evidence we have heard, we know that there needs to be solid grounding and an evidence base to show that the wording in the Bill is justifiable and does not justify shutting down many businesses that are growing, adapting and changing—hopefully, for the better, so they are more successful. They should be able to keep and grow their staff, rather than go down the redundancy route or other scenarios whereby jobs are lost.
Matthew Percival from the CBI said:
“In the fire and rehire proposals, there is a risk that we might be making it easier to make people redundant than to change contracts”.––[Official Report, Employment Rights Public Bill Committee, 26 November 2024; c. 7, Q1.]
That is the absolute nub of the matter. It would be nothing short of a total disaster if the unintended consequence of the exact wording of the clause or the Bill perversely incentivises companies to make people redundant, so people lose their jobs and have to go home and have that difficult conversation with their loved ones and say that they need to find a new job, with the devastation that that brings to real people’s lives. I cannot imagine that the Government want that to happen. With this probing amendment, we are seeking to kick the tyres. We want an explanation, or at least to encourage the Minister and the wider Business and Trade team to find a better way that does not have that unintended consequence.
A recurring theme of our debates in recent days, and from the Bill Committee witnesses—other than trade union representatives—is that the measures in the Bill on dismissal and re-engagement will be too restrictive for employers. I gently ask the Minister to reflect on that and think about whether the measures will actually work and will not have unintended consequences, so that people’s jobs are protected and saved. We do not want people to be unintentionally forced down the route of job losses.
Michael Wheeler
I agree with the comments of my hon. Friend the Member for Gloucester. I appreciate that this is a probing amendment, but I want to talk to its specifics. It appears to me that there are plenty of consensual mechanisms for achieving most of what the shadow Minister is suggesting about the variation of contracts to reflect working practices. If anything, they are inherently better than anything that is imposed. Quite often, when working practices, organisations and business practices are modernised, communication between those doing the work and the managers and owners leads to a much better outcome.
I suggest that we need to remember that we are talking about fire and rehire, which is inherently quite extreme. The amendment seems to refer to the particulars of normal working practices, looking at updating mechanisms to account for modern technology and suchlike, that are much better handled by the existing consensual mechanisms. While I appreciate that it is a probing amendment, it seems entirely unnecessary and does not necessarily speak to the heart of what the clause is about: ending the extreme practice of fire and rehire.
Sir Ashley Fox (Bridgwater) (Con)
It is a pleasure to see you in the Chair again, Ms Vaz. My hon. Friend the Member for Mid Buckinghamshire has explained that this is a probing amendment to find out the Government’s intentions, but I put it to the Minister and Labour Members that each of the Government’s proposals seems to be based on the premise that we need to legislate against the worst possible outcome.
The hon. Member for Worsley and Eccles referred to P&O, and that was in fact a scandal. But the problem with this approach, of course, is that a regulatory burden is imposed on each and every other employer, and the labour market is made less flexible and employing people is made more expensive. Therefore, every time the Government see a problem with one employer and say, “We have to regulate for everyone,” the whole labour market is made more expensive and less attractive to foreign investors—less like Britain and more like France. As we look across the channel, we see a country with a similar-sized economy, but an unemployment rate approximately double our own.
Combine that, for example, with the proposal on unfair dismissal, and employers could be less likely to employ that marginal worker. In this case, as Matthew Percival from the CBI said, it becomes more attractive, perhaps, for employers to make their workers redundant than to try to renegotiate terms and conditions.
I ask the Minister to consider the cumulative effect of each and every one of his proposals. It is easy for him to stand up and say, “This proposal on its own is modest and reasonable and good,” but the whole Bill will add £5 billion of costs to industry, and the majority of that falls on small and medium-sized enterprises. My fear is that the Minister, through the very best of intentions, will end up with unemployment higher at the end of this Parliament than when he started.
The Parliamentary Under-Secretary of State for Business and Trade (Justin Madders)
It is a pleasure to see you in the Chair this afternoon, Ms Vaz. For the benefit of the Committee, I again refer to my entry in the Register of Members’ Financial Interests and my membership of the Unite and GMB trade unions.
It has been an interesting debate. I think we are on the opposite end of the spectrum from where we were in the earlier debate about where the balance lies with our measures to end fire and rehire. I think that the fact that we have two arguments from other ends of the spectrum suggests that we are in about the right place—but if the shadow Minister expects us to believe that cows queue up to be milked in the morning, I just say to him: pull the other one!
Justin Madders
Yes, they do get worse—it is Thursday afternoon.
The shadow Minister did raise some important points, though. He gave the example of a dairy and its changing practices. Of course, a change in job function does not necessarily mean that terms and conditions have to change or indeed become worse. History is full of examples where technology has come in and made jobs different. As we look forward to the advent of automation and AI in our economy, I hope that people find new jobs and new roles and that those jobs are more fulfilling as a result of technological development.
I will say a few words about the comments from the hon. Member for Bridgwater. We are talking about overall impacts in this Bill of 0.4% of employers’ total costs—a very small price to pay for a comprehensive set of reforms that really are needed for workers. It is about rooting out bad practices and making sure that those bad employers, who we all rightly condemn, are not able to exploit existing loopholes. It is about stopping the race to the bottom. It is about creating a level playing field. One reason why P&O said that it took the action that it did was that its competitors were undercutting it. We do not want to see that race to the bottom continue. We want to see good employers rewarded for respecting and rewarding their employees well by being able to compete on a level playing field.
The general thrust of the shadow Minister’s remarks was interesting. There is nothing to stop an employee agreeing to changes to terms and conditions. Indeed, proposed new section 104I(2)(b) of the Employment Rights Act 1996 makes it clear that these provisions will not apply if the employee agrees to the changes. Changes and discussions happen every day of the week in industry—that is called negotiation, and that is what good industrial relations looks like. That is the sort of thing that we want to encourage.
We are trying to stop a situation that we have seen far too often, where an employer might just say, “Well, here are your new terms and conditions. If you don’t like it, there’s the door.” That, I am afraid, has become far too prevalent in our country. We have heard plenty of evidence about how many employers have been doing that. It is about recognising that there is a loophole in the law. This may be a probing amendment, but it would certainly make this clause ineffective, and arguably, it would make the situation worse than the status quo, because it would effectively legitimise some of those actions by employers. They could point to this legislation and say, “Well, the law says that we are able to do it.”
The way the amendment worded is quite broad. There is a reference to “outdated” terms and conditions. My hon. Friend the Member for Birmingham Northfield gave a good example of where reasonable dialogue between the trade union and the employer would see that change. The shadow Minister’s old colleague, Jacob Rees-Mogg, might have a different view about what “outdated” means. He might think anything after 1874 could be considered modern—[Interruption.] He probably does, yes. There would be very broad latitude for an employer to say that something was outdated. That is why I am concerned that the amendment would make things worse than they are now.
The Bill as drafted makes it very clear what the obligations of a responsible employer are. They are the sort of things that responsible employers do already. We recognise that there will be unfortunate situations in which an employer has no alternative but to change terms and conditions, but the Bill makes sure that, if there is a positive for the employees—there often is from a change in terms of conditions; that is what negotiations often involve—there is a way for that to continue. We are not going to stop that. If employees consent to changes, they will be able to be made under this Bill. I urge the shadow Minister not to press the amendment to a vote.
Greg Smith
I understand the argument that the Minister has set out, and I appreciate that this particular probing amendment was at the extremer end of the spectrum in trying to probe that response from him. I accept that there are many mechanisms whereby employees can consensually work with their employer to change contracts, and that is clear. I am still a little nervous—the proof of the pudding will be in the eating, as the Bill progresses and no doubt becomes legislation—about the nightmare scenario of businesses simply saying, “Rather than trying to engage in this process, as we were warned by the CBI, we will just make everyone redundant instead.”
There needs to be a clear, previously set out mechanism from the Government so that, if that disaster-zone eventuality comes to pass—I hope I am wrong; I do not want to see people being made redundant—there is a quick snapback or sort of provision to allow secondary legislation to throttle those measures down, or to fix them in some other way that still stops the exploitative practices without tying businesses’ hands behind their backs, because the net result will be job losses. I would be incredibly disappointed and sad if these issues, which both the Opposition and businesses have warned about throughout the passage of the Bill so far, became a job killer. The Government need to be ready, if they have got it wrong, to have a process that will give businesses the confidence again to properly engage in negotiations, such as those good industrial relations that the Minister spoke of, and not just make people redundant. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Justin Madders
We are back on fire and rehire again; I should probably count up how many times I have spoken in debates on this issue in the last few years. It has taken a lot of parliamentary time, and rightly so. We all remember the obloquy directed towards P&O when it took those actions, several years ago, and I am afraid that fire and rehire has become far more prevalent in our economy than anyone would want to see.
Investigations by the Trades Union Congress found that around 38,000 employers were using fire and rehire as a tactic. Research from the Chartered Institute for Personnel and Development found that, between August 2021 and 2023, the proportion of firms that had used fire and rehire had almost doubled. The impact assessment estimates that there are around 178,000 workers facing the threat of fire and rehire at this very moment, so the problem is not going away—indeed, because of the way that P&O has been allowed to get away with it, employers see it as a golden opportunity to take a sword to hard-fought terms and conditions.
Other Members have spoken about the household names that have attempted to do that, and USDAW’s written evidence included some notable household names. Once upon a time, fire and rehire was a seldom-used part of the employment law and industrial relations landscape but, as part of the wider pattern of insecurity at work, it has become a much more common tool. I am afraid, as we have seen, it is far too often an act of first—rather than last—resort, and the Government are committed to ending that practice.
The solution to dealing with many of the concerns raised by the shadow Minister and others is to point to what good and bad industrial relations look like, and to say, “This is what bad employer practice looks like.” Good employers and industrial relations will take workers with them. Again I refer to USDAW’s written evidence, which noted occasions where negotiations had begun with fire and rehire on the table almost from the start. That is not a healthy place to have sometimes very difficult discussions about changes to terms and conditions. The impact assessment notes that the power asymmetry can provide incentives for the more powerful party, in this case the employer, to act in a strategic manner to suppress wages and conditions. Such tactics are why we have seen such a slump in wage growth over recent years.
Greg Smith
Most of my concerns have been outlined in the amendments to the clause, but I want to ensure that it is placed on the record that the Opposition want to see employers engage in good faith and believe that most employers do. I accept the Minister’s point about the scandal of P&O Ferries—I was on the Transport Committee at the time, so possibly looked into it in more detail than most colleagues from the previous Parliament.
Where we perhaps still have a difference is that taking that unacceptable, scandalous situation at P&O and legislating for everybody on the back of it is not necessarily the best starting place. As I said in the previous debate, working on the presumption that all businesses are trying to exploit their workforces is not healthy or, I would suggest, reflective of the real world. Although there have to be measures to shut down things like what happened at P&O so that it does not happen again, there must equally be flexibility and understanding so that, when employers have engaged in good faith and really are trying to save the business—to save the jobs in the first place—we do not find ourselves in that nightmare scenario of people saying, “It’s too difficult—we’ll just have to make everyone redundant.”
I fully accept that this clause will pass in a few moments, but perhaps the Minister could consider, before we come to Report, some additional safeguards on that so that we do not end up with job losses and employers slamming their heads down on the desk, unable to find another way to save the jobs and the workforce. That would keep giving people the living they need to get on and prosper as part of our country, part of the business they are engaged in and part of our vibrant UK economy.
Laurence Turner
I will not speak for long, because most of the points have been made in the debate, but I want to come back to the point made by the shadow Minister and the hon. Member for Bridgwater. There is perhaps a legitimate difference in principle between the two sides: when there are extreme examples, should there or should there not be legislation in response? It is important to respond to that, because we have seen extreme examples of abuse across different parts of the labour market. To go back to the example of blacklisting, I suggest that that was a failure of successive Parliaments to tackle a practice that had been thought to be relatively rare, but proved to have been carried out on an industrial scale. It was right for Parliament to enact the blacklisting regulations.
I go back, too, to the Grunwick dispute, the ancestor of the statutory recognition regime. At the time, it was thought that the abusive patterns of employment behaviour on full display in that particular employer would be unlikely to recur. The Government of the day commissioned a public inquiry under Lord Scarman in the belief that, if the inquiry concluded that there should be trade union recognition, it was inconceivable that any employer would not abide by that—but that is exactly what happened.
Where we see those extreme abuses, other employers—by no means the majority, or even a substantial minority, but enough to have a seriously deleterious effect on the lives of many workers—will follow. Since P&O, we have seen other examples; hon. Members have referred to particular employers and sectors, and I could add parts of the retail, utilities and even the public sector, where such tactics have become more common. The previous Government made strong statements—I could quote some—about the practice, but I suggest that the action that was subsequently taken, the code of practice, was not sufficiently strong. In the case of P&O, where the employer made it clear at the time that it intended to ignore the existing legislation, it did not prove sufficient remedy.
We do need stronger action. The measures in the Bill will only ever affect a tiny minority of employers. It is important to stress that, but it is necessary to put this action into the Bill. P&O will always loom large in discussions of this topic, but the practice is by no means confined to that particular employer, and it is right to take the action that was not taken in the previous Parliament.
Steve Darling (Torbay) (LD)
Fire and rehire is an absolute scourge to those people who are impacted by it. Whether in significant numbers or a minority, it is utterly shameful. My Liberal Democrat colleagues broadly welcome the amendments, and we look forward to supporting the clause.
Justin Madders
It is good to hear that we have the support of the Liberal Democrats. Most of the country supports this measure; fire and rehire is rightly seen as a practice that should see its end. I quote the former right hon. Member for Welwyn Hatfield, Grant Shapps, who said at the time, when P&O first started on that course, that
“we will not allow this to happen again: that where new laws are needed, we will create them, that where legal loopholes are cynically exploited, we will close them, and that where employment rights are too weak, we will strengthen them.”—[Official Report, 30 March 2022; Vol. 711, c. 840.]
I have news for the Committee: I am afraid that only this week several Members of this place have told me about fire and rehire tactics going on in their constituency. A fire and rehire situation is taking place right now in Wrexham. The loopholes have not been closed. That is why we need to act.
To put the shadow Minister’s mind at rest, I believe that proposed new subsection (5) gives employers a real guideline as to how they need to deal with this. Furthermore, as was common to much of the evidence we heard, responsible and good employers do all those things anyway, so they will not be penalised or face any additional burdens, but rather will be able to operate on a level playing field.
To refer to the evidence given by DFDS about this particular matter, or to someone working in an area very relevant to it, they said that they were pleased that fire and rehire was going to be dealt with, because as an operator, they are
“simply looking for a fair and level playing field.”––[Official Report, Employment Rights Public Bill Committee, 26 November 2024; c. 56, Q54.]
That is why we need to act today.
I also refer to the support of the Institute of Directors; approximately two thirds of its members who were polled supported this action, too. I think it will come to be seen as a watershed moment in industrial relations in this country, where we finally got rid of one of the most obnoxious and outdated practices that this country has ever seen.
Question put and agreed to.
Clause 22 accordingly ordered to stand part of the Bill.
Clause 23
Collective redundancy: extended application of requirements
Justin Madders
I beg to move amendment 58, in clause 23, page 34, line 27, at end insert—
“(3A) In section 197 (power to vary provisions), in subsection (1)—
(a) in paragraph (a), for “188(2)” substitute “188(1A)”;
(b) in the words after paragraph (b), for “188(2)” substitute “188(1A)”.”
This amendment would correct incorrect cross-references in section 197 of the Trade Union and Labour Relations (Consolidation) Act 1992.
This is a purely technical amendment to fix an incorrect cross-reference in section 197(1)(a) of the Trade Union and Labour Relations (Consolidation) Act 1992. Section 197(1)(a) provides that the Secretary of State may make secondary legislation to amend the minimum time period for collective consultations in section 188(2) of the same Act. However, as I am sure the shadow Minister had already noticed, that reference is incorrect: “section 188(2)” should read “section 188(1A)”. A consequential amendment was missed when section 188 was amended by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 1995. That instrument renumbered section 188(2) as section 188(1A). Of course, it should have also made a consequential amendment to section 197(1)(a), but did not.
The amendment will not change the law, which can already be interpreted to refer to the correct cross-reference by way of the Interpretation Act 1978. The 1978 Act provides that where an instrument repeals and re-enacts a provision then, unless the contrary intention appears, any reference in any other enactment to the repealed provision is to be read as a reference to the re-enacted provision. The amendment will improve the clarity and accessibility of the law, which I am sure we will all be relieved to hear.
Greg Smith
I can be very brief on this amendment, Ms Vaz; in fact, I will channel the questioning style of my right hon. Friend the Member for New Forest West (Sir Desmond Swayne). This is what happens when a Bill gets rushed to meet an arbitrary political deadline, is it not?
Justin Madders
The shadow Minister will be pleased to hear that we have picked the error up at this stage, so that when the Bill is enacted it will of course be absolutely correct.
Amendment 58 agreed to.
Question proposed, That the clause, as amended, stand part of the Bill.
Justin Madders
Employers are currently obliged to collectively consult when they propose to make 20 or more employees redundant at one establishment. Collective consultations are an important part of ensuring fairness and transparency between employers and employees.
In the year to November 2024, approximately 3,500 employers in Great Britain gave notification that they were initiating a collective redundancy process at a single establishment. The benefits of consultation are felt by both employees and employers. Consultation ensures that affected employees can input into the process with a view to avoiding or mitigating redundancies wherever possible, and it helps employers to retain skilled workers and reduce the risk of disputes.
That is why the Government intend to strengthen the collective redundancy framework. The clause will amend the framework to ensure that employers must fulfil collective consultation obligations whenever they are proposing 20 or more redundancies, regardless of whether the redundancies take place at one establishment or not. This will ensure that more employees—many of them in vulnerable positions—will now benefit from redundancy consultation, and that affected employees can participate meaningfully in the redundancy process, regardless of how they might be dispersed across an employer’s business. The clause will also make it easier for employers to understand when they have to comply with these obligations.
I know that businesses have raised some concerns about the practical implications of the clause and I will take this opportunity to clarify its scope. First, the clause does not mean that employers will need to consult with the entire workforce in their organisation whenever they propose 20 or more redundancies. As is currently the case, they must consult only the relevant trade union or employee representatives of employees being proposed to be made redundant, or those who may be affected by measures implemented as a result of the proposed redundancies, such as relevant line managers.
Secondly, when an employer is required to undertake collective consultation with employees across different establishments, they have the flexibility to tailor the process to suit each location. For example, they are not required to undertake a single, uniform consultation across affected locations, but can hold separate consultation activities with each group of affected employees to ensure that discussions are both localised and meaningful.
Greg Smith
I have a couple of brief questions. I am grateful for the Minister’s clarification that the clause does not provide for a consultation of the whole workforce. That was a legitimate concern for many as they looked at the drafting of the Bill. The clarification will be welcome.
My bigger question is about the practicalities where an organisation has in excess of 20 employees. For example, a small chain of five or six pubs could easily have that volume of employees across bar and kitchen staff—chefs—cleaners and perhaps security, but in that sort of setting it is very rare for staff to be unionised, or even organised among themselves. In that scenario, where a smaller business employs that number of people across multiple sites, how does the Minister expect the requirement for the involvement of a trade union or employee organisation that does not exist to be engaged with? What is the mechanism for that? I appreciate that many Government Members would quite like everybody to be in a trade union—
Greg Smith
Indeed, we know from their declarations of interest that they all are. I hope the Minister takes the question with the good intent with which it is asked. Not everybody is in a trade union and not everybody organises in that way, so how would the mechanics of the measure work in those circumstances?
That leads to the wider question, “Why 20?” Why not 19, 18 or 15? Why not 25? It seems like an arbitrary number. I accept that a number needs to be put down. In some ways, in specifying a number, this clause is more detailed than most in the Bill, and it gives certainty, but I would like to understand why it is 20. It seems like a number picked from thin air. It could negatively impact an organisation if it led the employer to decide, “Well, we’ll just get rid of 19 of them, and we won’t have to comply.” That seems at odds with the other provisions in the Bill, where the Government seem to want to move all rights back to day one, yet they do not seem to want to apply that to organisations where, for whatever reason, 20 people are, sadly, being consulted on being made redundant. I would like clarity on that point.
Michael Wheeler
I will keep my contribution relatively short, but I did not want to let the clause pass without warmly welcoming its inclusion in the Bill. In a previous life, I worked to represent shop and retail workers. While P&O and the scandal of fire and rehire entered the collective consciousness, the Woolworths redundancy situation was burned into the consciousness of the workers I represented at that time. That is exactly the loophole that this measure is trying to close. Thousands of workers affected by the Woolworths redundancy missed out on the compensation they deserved as part of the lack of consultation because they worked in individual establishments that were small and fell below the threshold. The interpretation of the law at that point meant they were isolated, divided and not included as part of what was clearly, to everyone—
Greg Smith
Perhaps I can test the hon. Gentleman a little bit on that. I remember many happy hours as a child in Woolworths in the town where I grew up. They were fantastic stores, and they are greatly missed. Given where he is coming from, is he content with the number being set at 20? While Woolworths was a substantial business, I can think of smaller businesses with separate sites, retail outlets, pubs, restaurants or whatever that might employ 19 or 15 people.
Michael Wheeler
The hon. Gentleman invites to me to say whether I am content. I draw his attention to the fact that the clause removes the single establishment loophole while leaving in place the thresholds that are already part of the law around consultation and the time period. I have not examined and, despite the invitation, I will not speculate on where those thresholds should be, but I warmly welcome the removal of the single establishment loophole, so that where the numbers in a redundancy cross those thresholds—legitimately and apparently to everyone looking at it—there are not legalistic mechanisms for those workers to be left out.
Having warmly welcomed the removal of the loophole, let me reassure the shadow Minister. In a previous, previous life I was in a different job—we have all had many jobs—where trade unions were not recognised. I speak for myself alone when I say that I would love for every worker in this country to have the benefit of trade union representation. I confirm for the shadow Minister that I would love to see that, because I think it has genuine benefits.
Michael Wheeler
I am sure it is not. I worked in a retail establishment that did not benefit from trade union representation and that went through consultation, not on redundancy but on a variation of contracts, so it is relevant to what we were talking about before. It was actually a relatively smooth and easy process for employee representatives to be appointed and elected from among our number, despite the lack of an existing structure, and to engage with the company in those consultation exercises. While I would love there to be a trade union fighting the corner for every worker, when it is absent it is not a burdensome process to have employee engagement in these processes.
Justin Madders
I recognise that the shadow Minister welcomed the clarification I provided. No doubt there will be debate to come, as is often the case with legal issues, but the Government are fairly clear and confident that the clause will not have the unintended consequences we heard raised in evidence.
The shadow Minister asked, “Why 20?” He will pleased to know that that was a product of EU regulation. It is in existing law as part of the Trade Union and Labour Relations (Consolidation) Act 1992, which has been amended many times, so I could not say exactly when it came into force, but—
Greg Smith
The Minister can of course look back in history at when these measures were put in, but the Bill seeks to change all sorts of things across all sorts of sectors. We are free from the European Union! He could change it if he wished.
Justin Madders
I will remember that next time the shadow Minister tells me that we are trying to do too much in this Bill. With the Retained EU Law (Revocation and Reform) Act 2023, the Bill Committee for which I had the great pleasure of serving on, his Government could have done something about this before they left office.
The figure of 20 is long established, and we have no current plans to change it, but we are keen to ensure that the scenario my hon. Friend the Member for Worsley and Eccles described cannot continue. As he said, Woolworths made 27,000 people redundant, and about 3,000 of those were completely exempt from collective redundancy consultations because of this issue. There has been a number of high-profile retail redundancies where people have missed out on collective redundancy obligations because of this law, which we are pleased to be able to change.
On the question of smaller employers where there may not be trade union representation readily available, the regulations already provide for employee representatives to be engaged and elected in those circumstances, so there is no change to the law in that respect. There is already provision to deal with that situation.
Question put and agreed to.
Clause 23, as amended, accordingly ordered to stand part of the Bill.
Clause 24
Collective redundancy notifications: ships’ crew
Question proposed, That the clause stand part of the Bill.
Justin Madders
The clause will address the loophole that allowed P&O Ferries to avoid prosecution when it dismissed 786 seafarers without notice in March 2022. It will require operators of frequent services to British ports to notify the UK Government when making 20 or more redundancies even if those affected work aboard ships registered in another state. The clause means that if an operator of frequent services to a British port chooses to copy P&O Ferries and make collective redundancies without providing notice to the Government, it could face prosecution under the Trade Union and Labour Relations (Consolidation) Act 1992 and ultimately be liable for an unlimited fine.
The clause will apply to services calling between Great Britain and another place in the UK. It will also apply to any services entering Great Britain from a place outside the UK on at least 120 occasions in a 12-month period before the redundancy notification, or to new services that have been operating for less than 12 months and have called 10 times or more per month while they have been operating. We estimate the number of operators in scope of the measure to be around 2,000. The cost to businesses will be minimal; it is estimated to be around £20 per notification. We hope that the prospect of an unlimited fine will deter operators from making mass redundancies without the appropriate notification.
While this measure may not prevent redundancies from being made, it will mean that the Government and any employee representatives must be notified before any dismissals take effect. It will prevent the sort of disruption seen following the P&O Ferries dismissals and will mean that the Government will be able to provide valuable support to seafarers facing redundancy. I therefore commend the clause to the Committee.
Greg Smith
I understand where the Minister is coming from, particularly on the expansion of the requirement to notify the flag state. I spoke earlier about my time on the Transport Committee watching the P&O scandal unfold; we held some pretty tough evidence sessions as part of that. I understand that the clause is very specifically to protect seafarers from that sort of engagement. I very much hope that it works to protect those seafarers, and we will not oppose it.
Justin Madders
I am pleased to see that we have support all round.
Question put and agreed to.
Clause 24 accordingly ordered to stand part of the Bill.
Clause 25
Public sector outsourcing: protection of workers
Justin Madders
I beg to move amendment 59, in clause 25, page 36, line 14, leave out subsection (2) and insert—
“(2) After Part 5 insert—
‘Part 5A
Outsourcing: protection of workers
83A Application of this Part
(1) This Part provides for a Minister of the Crown, the Scottish Ministers and the Welsh Ministers to make provision for the protection of workers in relation to relevant outsourcing contracts (see section 83B).
(2) Accordingly, in this Part, “appropriate authority”—
(a) means—
(i) a Minister of the Crown,
(ii) the Scottish Ministers, or
(iii) the Welsh Ministers, and
(b) does not include a Northern Ireland department.
(3) In addition to the restrictions in section 113, a Minister of the Crown—
(a) may exercise a power under this Part for the purpose of regulating devolved Scottish authorities only in relation to joint or centralised procurement under a reserved procurement arrangement;
(b) may not exercise a power under this Part for the purpose of regulating joint or centralised procurement under a devolved Scottish procurement arrangement.
(4) The Scottish Ministers—
(a) may only exercise a power under this Part for the purpose of regulating—
(i) devolved Scottish authorities, or
(ii) procurement under a devolved Scottish procurement arrangement;
(b) may not exercise a power under this Part for the purpose of regulating—
(i) joint or centralised procurement under a reserved procurement arrangement, or
(ii) joint or centralised procurement under a devolved Welsh procurement arrangement.
(5) In addition to the restrictions in section 111, the Welsh Ministers—
(a) may exercise a power under this Part for the purpose of regulating devolved Scottish authorities only in relation to joint or centralised procurement under a devolved Welsh procurement arrangement;
(b) may not exercise a power under this Part for the purpose of regulating joint or centralised procurement under a devolved Scottish procurement arrangement.
(6) This Part does not apply in relation to—
(a) a private utility;
(b) a person referred to in regulation 4(1)(b) of the Utilities Contracts (Scotland) Regulations 2016 (S.S.I. 2016/49);
(c) a devolved Welsh authority listed in Schedule 1 of the Social Partnership and Public Procurement (Wales) Act 2023 (asc 1);
(d) procurement under a transferred Northern Ireland procurement arrangement, except to the extent that the procurement—
(i) is carried out by a devolved Scottish authority, and
(ii) is not joint or centralised;
(e) a transferred Northern Ireland authority, except in relation to—
(i) procurement under a reserved procurement arrangement,
(ii) procurement under a devolved Scottish procurement arrangement, or
(iii) procurement under a devolved Welsh procurement arrangement.
(7) For the purposes of this section, procurement under a procurement arrangement is “joint or centralised” if as part of that procurement arrangement a contract is to be awarded following a procedure or other selection process carried out—
(a) jointly by a devolved Scottish authority and another contracting authority which is not a devolved Scottish authority, or
(b) by a centralised procurement authority or equivalent body.
83B Relevant outsourcing contracts
(1) In this Part, “relevant outsourcing contract” means a contract in relation to which conditions A to C are met.
(2) Condition A is met where the contract—
(a) is a public contract under this Act, or
(b) is a contract regulated by Scottish procurement legislation.
(3) Condition B is met where the contract—
(a) is a contract for the supply of services that include the performance of functions that are or have previously been performed by the contracting authority, or
(b) is—
(i) in the case of a public contract, a framework for the future award of a contract referred to in paragraph (a), or
(ii) in the case of a contract regulated by Scottish procurement legislation, a framework agreement the purpose of which is to establish the terms governing a contract referred to in paragraph (a).
(4) Condition C is met where the functions referred to in subsection (3)(a) are, or are expected to be, performed by individuals (“transferring workers”) who—
(a) in performing the functions, are employed by the supplier or a sub-contractor under a worker’s contract, and
(b) were employed by the contracting authority under a worker’s contract in performing functions of the same kind.
(5) For the purposes of this Part—
(a) “contract regulated by Scottish procurement legislation” means a contract the procurement of which by a devolved Scottish authority is regulated by Scottish procurement legislation;
(b) in relation to a contract regulated by Scottish procurement legislation—
(i) “contracting authority” means a devolved Scottish authority that is a contracting authority within the meaning of the relevant Scottish procurement legislation;
(ii) “framework agreement” has the same meaning as in the relevant Scottish procurement legislation;
(iii) “supplier” means an economic operator within the meaning of the relevant Scottish procurement legislation;
(iv) “the relevant Scottish procurement legislation” means the Scottish procurement legislation regulating the procurement of the contract.
83C Power to specify provision for inclusion in relevant outsourcing contracts
(1) An appropriate authority may by regulations specify provision to be included in a relevant outsourcing contract for the purpose of ensuring that—
(a) transferring workers of a specified description are treated no less favourably as workers of the supplier or a sub-contractor than they were as workers of the contracting authority, and
(b) workers of the supplier or a sub-contractor who are not transferring workers and are of a specified description are treated no less favourably than those transferring workers.
(2) In carrying out the procurement of a relevant outsourcing contract, the contracting authority must—
(a) take all reasonable steps to ensure that provision specified under subsection (1) is included in the contract;
(b) where provision specified under subsection (1) is included in the contract, take all reasonable steps to secure that such provision is complied with.
(3) Subsection (2) does not apply—
(a) where the contracting authority or the relevant outsourcing contract is of a specified description, or
(b) in specified circumstances.
(4) In this section, “specified” means specified in regulations made by an appropriate authority.
83D Code of practice on relevant outsourcing contracts
(1) An appropriate authority must prepare and publish a code of practice containing guidance to contracting authorities for the purpose of ensuring that, where a contracting authority carries out the procurement of a relevant outsourcing contract—
(a) transferring workers of a description specified in the code are treated no less favourably as workers of the supplier or a sub-contractor than they were as workers of the contracting authority, and
(b) workers of the supplier or a sub-contractor who are not transferring workers and are of a description specified in the code are treated no less favourably than those transferring workers.
(2) An appropriate authority—
(a) may amend or replace a code published by it under subsection (1), and
(b) must publish any amended or replacement code.
(3) A code published under subsection (1) or (2) must—
(a) in the case of a code published by a Minister of the Crown, be laid before Parliament;
(b) in the case of a code published by the Scottish Ministers, be laid before the Scottish Parliament;
(c) in the case of a code published by the Welsh Ministers, be laid before Senedd Cymru.
(4) In carrying out the procurement of a relevant outsourcing contract, the contracting authority must have regard to the code of practice for the time being published under subsection (1) or (2).
(5) This section does not require an appropriate authority to do anything which the authority does not have power to do (see section 83A and Part 11).
83E Interpretation of this Part
(1) In this Part—
“appropriate authority” has the meaning given in section 83A(2);
“contract regulated by Scottish procurement legislation” has the meaning given in section 83B(5)(a);
“relevant outsourcing contract” has the meaning given in section 83B;
“transferring worker”, in relation to a relevant outsourcing contract, has the meaning given in section 83B(4);
“worker” and “worker’s contract” have the same meaning as in the Employment Rights Act 1996 (see section 230 of that Act).
(2) For the purposes of this Part, in relation to a contract regulated by Scottish procurement legislation, “contracting authority”, “framework agreement”, “supplier” and “the relevant Scottish procurement legislation” have the meaning given in section 83B(5)(b).
83F Power of Scottish Ministers to amend this Part
The Scottish Ministers may by regulations modify section 83A, 83B or 83E in consequence of a modification of Scottish procurement legislation.’”
This amendment would restructure the new provisions to be inserted into the Procurement Act 2023 so that the powers and duties extend to the Scottish Ministers and Welsh Ministers and devolved Scottish and Welsh authorities. The amendment also clarifies that the duty to publish a code of practice does not depend on the making of the regulations.
Justin Madders
Amendment 59 will expand and restructure the provisions in clause 25, which amends the Procurement Act 2023, to reinstate and strengthen the two-tier code for relevant outsourced contracts for public services so that the powers and duties in clause 25 extend to Scottish and Welsh Ministers. Amendments 60 to 64 make changes that are consequential on those made by amendment 59, including by updating various definitions in the Procurement Act 2023 and by providing that regulations made by Scottish and Welsh Ministers must be made using the affirmative procedure of the Scottish Parliament and the Senedd.
We are making the amendments at the request of the Scottish and Welsh Governments. They are necessary because to get the benefits of a consistent approach to fair and equitable employment terms and conditions on relevant outsourced contracts, it is essential that a reinstated two-tier code applies throughout the UK.
We continue to engage with our counterparts in Northern Ireland about whether the powers should also extend to Ministers there. The regulations and code of practice created in our provisions will apply to reserved Northern Irish authorities. I commend the amendments to the Committee.
Greg Smith
I am reminded of the old chestnut about rushing out a Bill in 100 days and forgetting about the devolved settlements as part of the process. Given that devolution was largely the product of the previous Labour Government, I am slightly surprised that the current one would forget about Holyrood and Cardiff Bay. However, it is good that we now have clarity. We will of course want to test how things are actually going to work. Indeed, the question of Northern Ireland—which is just as important a part of our country as England, Scotland and Wales—really should be resolved sooner rather than later, so that there can be clarity that the Government are seeking to legislate for the whole of our United Kingdom of Great Britain and Northern Ireland, and not doing it in a piecemeal fashion.
Justin Madders
I gently correct the shadow Minister: we did not forget to engage with the Scottish and Welsh Governments. We were making sure that we had agreement before we tabled amendments, which is why they have appeared as they have today.
Chris Murray (Edinburgh East and Musselburgh) (Lab)
Does the Minister agree that this is actually an example of the Government keeping not only their manifesto promise to deliver a new deal for working people, but the manifesto promise that I certainly made many times during the election campaign, which was that the new Government would show the utmost respect for the Scottish Parliament and Government, and for all the devolved institutions? I reassure the Minister that the Scottish Parliament was not forgotten during the drafting of the Bill, because there was extensive engagement with the Scottish Government, some of which I saw myself.
Justin Madders
I could not agree more with my hon. Friend. On that note, I commend the amendments to the Committee. “appropriate authority (except in Part 5A) section 123 appropriate authority (in Part 5A) section 83A”
Amendment 59 agreed to.
Amendments made: 60, in clause 25, page 37, line 33, at end insert—
“(2A) In section 2 (contracting authorities), after subsection (1) insert—
‘(1A) But see also section 83B(5)(b)(i) (which provides for “contracting authority” to have an extended meaning in relation to certain contracts regulated under Part 5A (outsourcing: protection of workers)).’”
See the explanatory statement to amendment 59.
Amendment 61, in clause 25, page 37, line 34, leave out subsection (3).
See the explanatory statement to amendment 59 - because the new provisions are now being inserted as a new Part of the Procurement Act 2023, there is no longer any need to amend section 100 of that Act.
Amendment 62, in clause 25, page 38, line 3, leave out subsection (4) and insert—
“(4) In section 122 (regulations)—
(a) in subsection (4) (regulations by Ministers of the Crown subject to affirmative procedure), after paragraph (i) insert—
‘(ia) section 83C (provision for inclusion in relevant outsourcing contracts);’
(b) in subsection (10) (regulations by Welsh Ministers subject to affirmative procedure), after paragraph (g) insert—
‘(ga) section 83C (provision for inclusion in relevant outsourcing contracts);’
(c) in subsection (14) (regulations by Scottish Ministers subject to affirmative procedure), before paragraph (a) insert—
‘(za) section 83C (provision to be included in relevant outsourcing contracts);
(zb) section 83F (power to amend section 83A, 83B or 83E);’”.
See the explanatory statement to amendment 59.
Amendment 63, in clause 25, page 38, line 6, at end insert—
“(4A) In section 123 (interpretation), in subsection (1), in the definition of ‘appropriate authority’, at the end insert—
‘(but see section 83A(2) for a different meaning of “appropriate authority” in Part 5A (outsourcing: protection of workers));’.
(4B) In section 124 (index of defined expressions), for the entry for ‘appropriate authority’ substitute—
See the explanatory statement to amendment 59.
Amendment 64, in clause 25, page 38, leave out lines 9 to 11 and insert—
“Part 5A (outsourcing: protection of workers)”.—(Justin Madders.)
See the explanatory statement to amendment 59.
Ordered, That further consideration be now adjourned. —(Anna McMorrin.)