Employment Rights Bill

Consideration of Commons amendments and / or reasons
Wednesday 10th December 2025 Lords Chamber

Commons Amendments

16:33

Motion A

Moved by

[Baroness Lloyd of Effra]

That this House do not insist on its insistence on Lords Amendment 1B in respect of which the Commons have insisted on their disagreement; and do agree with the Commons in their Amendments 1E and 1F in lieu of Lords Amendment 1B.

[The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Innovation and Technology (Baroness Lloyd of Effra) (Lab)]

My Lords, I shall speak also to Motions A1 to E1. Given the developments that have taken place since the Bill was last debated by the House, I would like to take some time to set out the context of those changes. I therefore must ask for the indulgence of the House with regards to the length of my speech.

Before to turning to the specifics of the amendments in the name of the noble Lord, Lord Fox, I want to provide a general update. Throughout the passage of this important Bill, which delivers on multiple manifesto commitments, we have gone through careful deliberation, scrutiny and debate. Noble Lords will have seen my statement given to your Lordships’ House last week where I outlined how the Government had convened tripartite discussions with trade unions and business representative organisations. Those discussions were focused on finding a way forward on unfair dismissal. This is an issue which business and many in your Lordships’ House, including His Majesty’s loyal Opposition, told us was their number one priority. Solving it was the only means of breaking the current impasse between this House and the other place.

I am glad to report that we have secured an agreement between trade unions and business representative organisations on that issue which has unlocked a path to get this much-needed Bill on to the statute book without further delay. This is acknowledged in the joint statement made by business representative organisations involved in the negotiations, which accepts that any remaining concerns with the Bill can be dealt with in the regulations to come, which will be informed by open and transparent consultation. This negotiated outcome has now been debated and agreed by the elected House. We will, of course, debate it in detail this afternoon, but I ask your Lordships’ House to endorse the agreement reached by worker and employer representatives.

The success of these discussions sets a clear example of the benefits of working together in a tripartite manner. This commitment was front and centre of the Labour Party’s plan to make work pay, and I am pleased to see it in action as part of these discussions. We must not stand in the way of, and further delay, these long-promised improvements to workers’ rights.

As the recent agreement centres on unfair dismal, I shall speak first to Motion B and Amendments 120G to 120M tabled by the Government in the other place, and Motion B1 and the amendments to the Commons amendment tabled by the noble Lord, Lord Sharpe of Epsom, relating to unfair dismissal.

The Government’s amendments in lieu will reduce the qualifying period for unfair dismissal protections from 24 months to six months, all while maintaining existing day-one protections against discrimination and automatically unfair grounds for dismissal. To further strengthen these protections, the Government have also tabled amendments which will ensure that the qualifying period for unfair dismissal protections can be varied only by primary legislation and that the compensation cap for claims will be removed. That will remove both the 52 weeks’ pay and the £118,223 cap. In practice, few awards get anywhere close to these caps, with the median average award for unfair dismissal being £6,746 in 2023-24. Removing the cap would not impact the methodology for how an employment tribunal calculates these awards.

The amendments from the noble Lord, Lord Sharpe, would change the Government’s amendments and go against the negotiated outcome of discussions between the trade unions and business representatives in November. My colleague, Minister Dearden, confirmed the outcomes of these negotiations in the Commons when debating this element of the Bill on Monday. She said

“I was in the room as part of the negotiations with business representatives and trade unions … I can confirm that the compensation cap was discussed and agreed in the room”.— [Official Report, Commons, 8/12/25; col. 94.]

The Government believe that the current compensatory award caps incentivise claimants to construct complex cases which allege discrimination to access uncapped compensation. These types of claims are more complex and take longer for the tribunal to handle. Therefore, by our removing the compensation cap for ordinary unfair dismissal claims, this incentive will be lessened, making it easier for tribunals to reach a judgment more quickly and decreasing burdens on the system.

Following a helpful meeting with the noble Lord, Lord Vaux of Harrowden, I can confirm that we will publish an enactment impact assessment for the Bill as soon as possible once the Bill secures Royal Assent and prior to commencement regulations for the entire unfair dismissal package being presented to Parliament. The new impact assessment will be publicly available and include an assessment of the impact of the removal of the compensation cap. We are aware of representations made by organisations, including the British Retail Consortium and UKHospitality. The Government stand ready to engage with those and similar organisations to hear their concerns and answer their questions.

Our impact assessments will set out how we will review the Bill and any secondary legislation that follows. Implementing the Bill will take several years, and its full effects will not be realised until long after Royal Assent. That is why our monitoring and evaluation framework will ensure that the real-world impacts are tracked and used to inform future policy decisions.

We will also publish post-implementation reviews to assess the impact of the implemented policies. These will typically occur five years after the legislation comes into force. Additionally, the dispute resolution stakeholder taskforce, which includes business representative organisations and trade unions, is looking at the likely impact of the full suite of measures in the Employment Rights Bill on employment tribunals, including the removal of the compensation cap. I can assure noble Lords that findings from the impact assessment on the removal of the compensation cap will be taken into consideration by the taskforce. This taskforce will help the Government to develop reform measures to ensure that the current system, including ACAS, is more efficient and resilient so it is better equipped to respond to future changes.

I now turn to Motion A and the government Amendments 1E and 1F, and to Motion A1 and Amendments 1G and 1H, which were tabled by the noble Lord, Lord Fox, relating to zero-hours contracts. I take this opportunity to thank the noble Lord, Lord Fox, for his contributions throughout the passage of the Bill. Our conversations have been constructive and productive. While others have sought to oppose measures in the Bill outright, we have appreciated his efforts to understand and accommodate our chosen policy approach while ensuring that the Bill is deliverable in a manner that works for employers and employees alike.

We agree that security of work is of the utmost importance, and it is clear that we align on needing to protect workers from precarious employment. We also agree that future arrangements must not place excessive burdens on employers. We will do this by working with businesses and other stakeholders on the detail of the zero-hours measures, which will be set out in future regulations.

We have tabled an amendment in lieu in the other place which will place a statutory duty on the Secretary of State to consult before exercising powers to set the length of the initial and subsequent reference periods. This consultation will conform to best practice and ensure that all stakeholders can contribute and shape how reference periods are set in regulations. The amendments in the name of the noble Lord, Lord Fox, seek to set the subsequent reference period at no less than 26 weeks. I can reassure him that our amendment places a statutory duty to consult on this detail. As part of the consultation, there will be adequate opportunity for him and others to feed in their representations on the length of subsequent reference periods before the detail is set in regulations.

We recognise that there is a strong business interest in this issue, given the new responsibilities that businesses will have under this part of the Bill, and we are committed to working with them, unions and stakeholders ahead of the necessary secondary legislation. It is important we get the detail right, and we cannot do that without consultation. It would not be appropriate for us to pre-empt that exercise and, therefore, I cannot support the noble Lord’s amendment. However, I look forward to hearing what he says on the matter, and I hope he will agree that our proposed approach is fair, workable and balanced, ensuring that the Government can implement their manifesto commitment with the input of key stakeholders.

Motion C and Amendments 48E and 48F, tabled by the Government in the other place, relate to seasonal work. The Government are fully aware that for some employers, work fluctuates throughout the year. The consideration of seasonal work is built into the right to guaranteed hours provisions and embedded in the Bill. There are several ways in which the employer can approach seasonal demand. In the other place, we tabled a further amendment in lieu, placing a statutory duty on the Government to consult before making these relevant regulations, including with representatives of seasonal workers and representative bodies of employers with seasonal workers.

Therefore, before any such regulations are introduced, employers, trade unions and other parts of civil society with interests in seasonal work will be consulted. This will ensure that they have their say and can directly influence the policies set out in the regulations, enabling the flexibility and security that are needed for the seasonal work sector. I thank the noble Lords on the Front Bench opposite and the noble Lord, Lord Fox, for their engagement on this issue. In our engagement, we provided indicative examples of how the relevant provisions would apply to different types of seasonal worker. I have shared these in an all-Peers letter to noble Lords which we hope will further contextualise these points.

16:45

I will now speak to Motion D and Amendments 72J and 72K, tabled by the Government in the other place, and Motion D1 and Amendments 72L to 72N and Amendments 72P to 72R, tabled by the noble Lord, Lord Burns, relating to political funds. I thank the noble Lord, Lord Burns, for engaging with me and with my noble friend Lord Collins of Highbury on this important issue which I know is of great importance to him. The Government remain committed to repealing the Trade Union Act 2016, a commitment set out in the Plan to Make Work Pay, which we have a clear and substantial mandate to deliver.

Part of this repeal includes reinstating the long-standing practice that existed for 70 years before the Trade Union Act 2016 whereby new union members are automatically included as contributors to a political fund unless they choose to opt out. This is on the basis that they are already making an active choice to join a voluntary organisation which has democratically decided to maintain a political fund. If an individual does not agree with the use of their union’s political fund, or for any other reason does not want to contribute, they can take the decision to opt out. Every new union member will be clearly informed on their application form that they have the right to opt out of contributing to a political fund.

The Government have listened with care to the noble Lord’s perspective and have tabled amendments responding to these concerns while not undermining the manifesto commitment to return to a default opt-in system. Under the pre-2016 legislation, an opt-out notice could take effect only on 1 January in the year after it was given. Under the Government’s amendment, opt-out notices will now have effect on either 1 January the following year after it has been provided or on a day specified in the union’s rules—whichever comes first.

The amendment affirms flexibility under the legislation, allowing unions more quickly to process a member’s request to opt out. The Government’s additional amendment in this area places a statutory duty on the Secretary of State to issue guidance within three months of this clause coming into force. That will set out the kinds of provisions that unions should include in their rules about the timing of giving effect to opt-out notices. This will help to enable unions, as a matter of best practice, to action opt-out notices promptly. However, if this is not the case, or if there are developments in this field, the amendment provides that the guidance can be updated.

Furthermore, to help with transparency, existing government guidance on political funds will be updated to reflect the changes that are being made by the Bill. The decision to contribute to a trade union political fund is entirely one for each individual member. For those who choose not to do so, the government guidance will be clear that exercising that choice must be properly available and practically possible.

Given his long-standing interest in this topic, we would of course be happy to meet again with the noble Lord, Lord Burns, following Royal Assent and prior to the government guidance being published. We believe that these amendments will enable the Government to deliver our manifesto commitment of repealing the 2016 Act and returning to the default opt-out model.

I will speak now on Motion E and Amendment 62E, tabled by the Government in the other place, and Motion E1 and Amendment 62, tabled by the noble Lord, Lord Sharpe of Epsom, relating to the 50% turnout threshold for industrial action ballots. Repealing the 50% ballot threshold is a manifesto commitment linked to the repeal of the Trade Union Act 2016, legislation which imposed unnecessary bureaucratic barriers on the ability of trade unions to organise and negotiate on behalf of their members. Repealing the threshold aligns union democracy with other established democratic practices, such as parliamentary and local elections, which are considered legitimate without the need for turnout thresholds.

However, recognising the strength of feeling on this issue in your Lordships’ House, the Government have reflected on their approach. The Government previously tabled an amendment in lieu that will require the Secretary of State to have regard to any effects of e-balloting on the proportion of those entitled to vote in industrial action ballots who actually do so. The Government have since further built on this amendment by placing a statutory duty on the Secretary of State to lay a Statement before Parliament when making regulations to repeal the 50% threshold to demonstrate how the Government have met the duty to have regard to the impact of e-balloting. We hope that the amendment will assure parliamentarians that, when the 50% threshold is repealed, we will have looked at those issues in the round and aligned the repeal with the establishment of e-balloting.

In conclusion, the Government have listened to the concerns of your Lordships’ House. They have gone away and worked collaboratively with employers and trade unions to find a compromise and have now delivered on that compromise as part of a package deal to get the Bill to Royal Assent. I now respectfully ask your Lordship’s House to acknowledge the movement made by the Government and allow the Bill—a manifesto commitment—to progress on to the statute book so that working people can start to benefit from these important and popular reforms to workers’ rights without any further delay. I beg to move.

Motion A1 (as an amendment to Motion A)

Moved by

[Lord Fox]

Leave out from “disagreement;” to end and insert “do disagree with the Commons in their Amendments 1E and 1F in lieu of Lords Amendment 1B; and do propose Amendments 1G and 1H in lieu of Commons Amendments 1E and 1F—

1G: Clause 1, page 3, line 24, at end insert “and that period must be not less than 26 weeks”

1H: Schedule 1, page 153, line 13, at end insert “and that period must be not less than 26 weeks””

[Lord Fox (LD)]

My Lords, similarly to the Minister, I beg the House’s indulgence because, if this speech is longer than a speech would normally be for round three of ping-pong, it is because, as she pointed out, there have been developments since we last debated the Bill.

My Motion A1 addresses a major issue that has caused us concern. As I have said repeatedly, we support the principle that workers should have a right to guaranteed hours after completing a period of zero-hours work. Our concern has always lain in the cumbersome administration of that right. After several attempts to make what I think were meaningful improvements without undermining that principle, I must admit I have felt quite frustrated on this issue.

However, as we heard just now from the Minister, it is reassuring that the Government have taken these concerns on board. As she partially explained, the reference period is crucial in setting how often the employer must make a new offer of guaranteed hours to an employee. I point out that the employee does not necessarily have to want that offer; there is merely an obligation on the employer to make it. Clearly, if this offer has to be made every month, it is much more burdensome than if it has to be made once or twice a year. That is the nature of the amendment that I have tabled.

I understand that this is subject to consultation, and I am reassured by the description of the consultation that the Minister has just given. My choice of 26 weeks was, first of all, in a sense, to emphasise the point between a month, 26 weeks or 12 months, but also to spark the sort of response that I have just had from the Minister. In that respect, I am satisfied.

A joint press release issued after the negotiations by the business organisations noted:

“We remain committed to working with government and unions to dealing with this in the necessary secondary legislation to implement the Bill. We must ensure that it supports opportunity for workers while avoiding damage to economic growth”.


We subscribe to that view, and I think the Minister gave her support to the nature of the consultation that will follow.

I will now move on to the unfair dismissal issue. As we heard, the government amendment in lieu creates a six-month qualifying period for workers’ rights. It also, crucially, removes the section that would have enabled secondary legislation to alter that qualifying period. That was good news. It will therefore come as no surprise that we welcome this compromise. It represents success for the tripartite discussions that led to its breakthrough, and all three parties should be commended for the good faith that they brought to that meeting.

The Bill’s previous position on day-one rights would have significantly held back the employment prospects of anyone who would have represented the slightest risk to an employer. This avoids that risk. As the British Chambers of Commerce, the Chartered Institute of Personnel and Development, the Confederation of British Industry, the Federation of Small Businesses, the Recruitment & Employment Confederation and Small Business Britain put it in their press release that heralded this deal:

“This agreement keeps a qualifying period that is simple, meaningful, and understood within existing legislation. It is crucial for business confidence to hire and to support employment, at the same time as protecting workers”.


That is a strong endorsement from the employment side for this part of the deal.

I feel sure that one factor that helped concentrate minds during negotiations was the need to meet a deadline. If the Bill does not gain Royal Assent by the end of the year, key benefits that we have discussed, and that many of us support, to be created by the Bill will not be enacted for workers across the country for a further year. I feel proud of those on our Benches who helped create the pressure and who held firm while that decision was in the making. I thank my Liberal Democrat colleagues for turning up, every time, to help the Government, alongside the other two parties, come to the compromise that we now have. It is a credit to this side of the House and the rest of the House.

I move to Motion B1, in the name of the noble Lord, Lord Sharpe. As well as containing good news on day-one rights, the government amendment in lieu contained a surprise, or a surprise to us. It is clear that removing the compensation cap for unfair dismissal has generated unease since the amendment was tabled. This is not something your Lordships have discussed. As we heard, it was discussed during the tripartite negotiations, but there has been some confusion. I suggest that the ambiguity of the word “lift” has contributed to this in no small measure: “lift” can mean both remove and increase, and I suspect there may have been some confusion.

Some employers, while welcoming the shift from day-one rights to a six-month qualifying period, have expressed concern about the possible implications of potentially unlimited financial exposure. Your Lordships should note that, as the Minister said, the average unfair dismissal award for the year 2023-24 was under £7,000, with a ceiling of more than £118,000. Clearly, the cap did not influence the awards being made. I asked the Minister to confirm—and she has—that the criteria that are used to set the award are not changed by the contents of this Bill. This being the case, it seems that the main beneficiaries of this change will be those who earn considerably more than the average wage in this country. It will be those who are paid more, but, in my anecdotal experience, the very highest paid rarely use employment tribunals; their deals are set in boardrooms, usually with NDAs. I genuinely do not believe that SMEs will be disadvantaged by this. However, I think we can all agree that the process was poor.

In my discussions with the Government, I pressed for a meaningful impact assessment. We have just heard the Minister confirm that there will be consultation and a meaningful impact assessment that will be published. This will be completed and published before the clause that lifts the cap is enacted, so if something really bad comes out of that IA then there will be time to act on it. After that, as the Minister noted, ongoing monitoring of the effects of these changes will be essential, and corrective action should and must be taken if negative trends emerge. In any case, I remain unconvinced that Motion B1 would provide the analytic value that we would get from a proper impact assessment. Even in the event that I was supporting the noble Lord, I do not think the route that he seeks to take is one that would be of benefit. It seems more symbolic than meaningful.

17:00

I move now to other issues that have occupied previous bouts of ping-pong. Seasonal work has been discussed by the Minister, but this issue has not returned in moderated form. I thank the Minister for the letter that was circulated a few days ago. I was happy to see the examples that I had requested outlining how seasonal work could be treated using this proposed legislation in a number of different settings. That has helped alleviate the concerns, but, clearly, the consultations and the framing of the regulations that follow will be crucial.

That leaves the union political funds in Motion D1, in the name of the noble Lord, Lord Burns, and strike ballots, covered in Motion E1, in the name of the noble Lord, Lord Sharpe. Your Lordships have discussed both these issues at length. The noble Lord, Lord Burns, has clearly, and in my view persuasively, presented various combinations of opting in or out of political funds. I regret that compromise on this issue has not been reached, although there has been some movement. I understand that the Government have offered to continue to discuss the issue with the noble Lord, Lord Burns. I hope that that will occur before the regulations are laid, to give the noble Lord, Lord Burns, a chance to feed into those regulations. Overall, further discussion is the best way to take this forward from here.

In the final amendment, in Motion E1, the noble Lord, Lord Sharpe, has argued strongly on the issue of strike thresholds. This is a concern. His amendment insists on something that we have previously debated.

I contest that although the political fund and ballots issues are important, they are second-order issues compared to day-one rights and guaranteed hours. That is reflected in the words used by most business organisations and in some of the conversations that I have had. I think it is something that your Lordships should reflect on.

Clearly, there remain many other loose ends in this Bill, with much consultation remaining and many statutory instruments to come. Your Lordships will have a role in incentivising consultation and helping to focus that secondary legislation. There can be jeopardy in secondary legislation only if there is a genuine chance of a statutory instrument being killed; otherwise, the process of secondary legislation in your Lordships’ House is a routine exercise, punctuated by occasional meaningless regret Motions. Unless His Majesty’s loyal Opposition embrace the possibility of voting for fatal Motions on statutory instruments, the pressure on the Government to consult and the pressure on statutory instruments will be minimal. All of the words that were spoken during primary legislation have to be backed up in secondary legislation.

At the outset, we said that this Bill offered important benefits. We supported these benefits, and indeed my noble friends Lord Palmer of Childs Hill and Lady Kramer added further benefits and protections during the progress of the Bill. However, we made it clear that we had fundamental concerns, the largest of which have now been addressed. The extension of the unfair dismissal window is a substantial achievement and deserves clear recognition. Together with the other important reforms in the Bill, these outweigh other concerns. It seems to us that this should be the last round of ping-pong.

For these reasons, we will support the Government to ensure delivery of the change to unfair dismissal, as well as the broader set of new rights in this Bill, which these Benches support. I beg to move Motion A1.

[Lord Sharpe of Epsom (Con)]

My Lords, I will speak principally to Motion B1 in my name. The Government’s introduction of a six-month qualifying period, one that can be amended only through primary legislation, was, I am happy to acknowledge, a very welcome concession and we thank the Government Benches opposite for it. Angela Rayner spoke of disruption, but the truth is that this House was simply doing what it is supposed to do and what it does best—scrutinising legislation diligently and ensuring that our small businesses and our young people retain at least some chance of building a bright future. Those are our vested interests.

However, what followed was the very opposite of proper scrutiny. Without consultation, assessment or, as far as we can tell, any precedent—and without even the courtesy of signalling the change to either House—the Government brought forward at the 11th hour a wholly new measure to abolish entirely the compensation caps for unfair dismissal. These issues had not been discussed at any earlier stage in the Bill’s passage. The constitutional implications of introducing major new policy at ping-pong are profound. This is not responsible government; it is unnecessary, inappropriate and constitutionally troubling.

Motion B1 in my name accepts almost all of the Government’s amendment. It seeks only a modest and responsible safeguard that the Government conduct a review of the compensation limits before abolishing them. I acknowledge that an impact assessment has been promised after this becomes law, but what use would that be? It would already, by definition, be somewhat redundant.

This is not obstruction. It is the bare minimum that a competent Administration should undertake. When Tony Blair increased the cap in 1999, there was consultation. When the coalition Government introduced the 52-week cap in 2015, there was consultation. Why should this Government be exempt from the same cross-party accepted standards of good practice? The Government claim that this change reflects an agreement between business groups and trade unions but I wonder whether this is true.

Neil Carberry, chief executive of the Recruitment and Employment Confederation, was explicit. He said:

“For the employer side of the table last week ‘lifted’ did not mean ‘abolished, right now’. We agreed that the 52 week cap should go—protects ordinary workers better—as part of the deal that retained the qualifying period. We anticipated a further discussion about the future of the cash cap, too. But the decision to go for abolition, now is political”.


The Federation of Small Businesses said on Times Radio this week: “In the agreement between us as business groups and the unions, we agreed that there would be a lifting of the cap. We didn’t suggest it would be both caps abolished. So that’s broader than the agreement, and it helps a very small number of very, very rich people working for corporates”.

When those alleged to have agreed to this package say plainly that they did not agree to abolish both caps, the government rationale collapses. It is rumoured that there are minutes of these various meetings and, to clear all this up, perhaps, I ask the Minister whether that is the case and, if it is, will they place a copy of the minutes in the Library?

Let us also have a look at the possible practical consequences of this. The Government appear not to have considered even the most basic scenarios. For example, what happens when a board is faced with an underperforming CEO on £1 million or more? Today, many boards reach a clean exit. Notice is given, a payment to cover the maximum unfair dismissal award is made and a swift settlement is agreed. It allows the organisation to move on. But under an uncapped regime, the entire risk changes. Will a board now be expected to conduct a full six-month performance improvement plan, offer formal warnings, objectives, documented support and staged reviews, simply to reduce the risk of defending a seven-figure tribunal sum? In answer to the question from the noble Lord, Lord Fox, the incentives have now changed, so we would expect behaviour to change. They will now be incentivised to use the tribunal system, even if they were not in the past.

Let us consider a particular bête noire of your Lordships’ House: the water company executives, those who have overseen sewage being pumped into our rivers and seas. Are these individuals really now to be entitled to multimillion-pound payouts for so-called unfair dismissal? Is that the policy intention? Are noble Lords opposite truly comfortable becoming the party defending corrupt water bosses, while ordinary claimants are pushed further back in the queue? This policy is a recipe for the rich and a wrecking of justice for working people.

On Motion C, we are glad that it has taken the persistence of the Official Opposition to ensure that the Government now concede the need to consult our farmers and our other seasonal businesses. After the jobs tax, the tax on family farms and the business rates increase that are crushing the hospitality and retail sectors, and with the construction sector shrinking at the fastest rate since the pandemic, it is rather vital that such industry concerns are taken seriously.

On Motion D1, I agree with the noble Lord, Lord Burns. He has been entirely reasonable and constructive throughout these discussions. The noble Lord has engaged with the Government in good faith, seeking sensible middle ground rather than conflict. It is precisely because his approach is so measured that the position taken by the noble Lord, Lord Collins, opposite is so remarkable, because it was the Collins review of 2014 that argued that the old model of automatic political fund enrolment was no longer acceptable. It was the Collins review that insisted that workers must give explicit individual opt-in consent before contributing to political activity, and which championed transparency, choice and the principle that democratic legitimacy cannot rest on inertia. We agree with the noble Lord, Lord Collins; dare I say that he is U-turning, and is possibly not the first on those Benches to do so?

In our previous debate, the Minister suggested that the recent wave of industrial action somehow demonstrates that the existing legislative framework is inadequate. The rise in strikes in 2022 and 2023 occurred against a backdrop of the sharpest inflation shock in 40 years, global economic turbulence during and after the pandemic, and the profound wage erosion that followed the peak of the Russia-Ukraine conflict. These are extraordinary economic circumstances, not failures of the Trade Union Act 2016. In 2017, 2018 and 2019—the first full years after the Act was implemented—working days lost to strike action fell to historic lows. In 2018, the 273,000 working days lost represented the sixth-lowest annual total since records began in 1891, according to the ONS. Industrial action in the public sector was at its lowest sustained level for decades.

I turn to recent events. Just over a week ago the BMA announced yet another round of industrial action. These strikes will undoubtedly put patients at risk and place even greater strain on our already overstretched National Health Service. Let us also recall that it was the Government’s own Health Secretary who accused the BMA of behaving like a cartel—and you cannot negotiate with a cartel. We have all heard, purely through the most reputable Westminster whispers, of course, that there may be a measure of tension within the Government on this—a hint of disagreement between the Health Secretary and other Ministers, perhaps even the Prime Minister himself. I would never suggest that Ministers are briefing against one another or that competing ambitions are shaping policy, but the murmurings grow louder by the day.

The Government have a splendid opportunity this afternoon to dispel all such unhelpful chatter. They can prove to the House, and perhaps even to themselves, that they are a united operation. They can put all doubts to rest with one simple gesture, by accepting what we are calling the Wes Streeting amendment before your Lordships today. His Majesty’s Official Opposition remain firmly and unapologetically on the side of Britain’s businesses, large and small.

[Lord Burns (CB)]

My Lords, I will speak to Motion D1. In recent years, there has been an extraordinary and significant interest in what has become known as choice architecture. This was popularised by the book Nudge and by one of its authors, Richard Thaler, who received the Nobel Prize for Economics in 2017, partly for his work on it. One key point which is so relevant to the issues I have been raising is that he highlighted that when individuals are presented with a choice, any default option has a very important influence on their decision and should be taken into account in designing the process of choice.

My previous amendment aimed to eliminate the impact of the default option, in one direction or another, when members wish to take advantage of the right not to pay the political contribution. It proposed that new members should be required to make an active choice between two options displayed on the application form: to pay or not to pay. This would eliminate the need for a default option, and potentially reflect more closely the true preferences of members. This proposal has not found favour in the House of Commons: clearly, the Government and the trade unions with political funds want to influence the decision of members in favour of paying the political contribution. They want as many members as possible to pay the contribution, and of course I understand the motivation.

17:15

There are two reasons why I have persisted with this issue. The first is that in such situations, an active choice between two options has become the standard approach for people making a decision. This is 2025, not 1945 when the previous arrangements were established. We strongly believe that people should have the freedom to make personal choices free from bias, and this is much easier to offer in the digital age. There are not huge bureaucratic obstacles; my case is that this principle should extent to political funds as well. Secondly, I have repeatedly said that if we fail to find a lasting solution, I fear that this whole area will be subject to frequent changes with different Governments. That is not going to be in anyone’s long-term interests.

My amendment today is a further attempt at meeting the Government by acknowledging that they are committed, at this stage, to returning to the opt-out model that will favour more members paying in a political contribution. However, I am seeking to minimise the barriers to members opting out by requiring that they be able to do so, if they so choose, by ticking a box on the application form they complete when they join a union. I stumbled across this proposal following an examination of the application forms of some unions. Under the existing post-2016 arrangement, trade unions with political funds have been very happy to allow new members to opt in on the application form to contributing to the political fund. They clearly feel that this helps to reduce the impact of the default option. The Government insist that they want to make it as easy as possible for members to exercise the right to opt out under their new proposal, but they will not go this far.

The Bill outlines several ways in which this could be achieved, and the Minister has explained to me on many occasions that he is committed to trying to make it easier for people to opt out, if that is their wish. However, none of these proposals includes requiring new members to have the right to opt out at the point of application. They are still introducing a significant hurdle by forcing members to go through an entirely separate and burdensome process to opt out. This sounds to me very much like, “Please make us chaste, but not too much”. My amendment would also require that members should be reminded of their option to opt out every year, rather than every 10 years, which is the proposal in the present Bill. When I read that employees might be reminded every year of their right to join a union, I find it ironic that they should be reminded only every 10 years of their right to opt out of the political fund.

Can the Minister confirm that under the proposals in the Bill, a new member who wishes to opt out—using any of the methods listed in Clause 59—will pay the political contribution for the first year of membership, and that they have no entitlement to a rebate? Can she point me to the position in the Bill where this is covered?

The Minister has observed how the amendments from the House of Commons detail some further ways of making the process of opting out easier, but these relate much more to issues of timing, rather than the whole question of how difficult it is to exercise the right to opt out. I continue to hope that Ministers can be persuaded to reconsider their position to remove the obstacles—preferably to go down the route that I have suggested—and to make this process of opting out as easy as possible. Otherwise, I fear that we will have to go down this route many more times in the future.

[Lord Vaux of Harrowden (CB)]

My Lords, I thank the Minister and the noble Lord, Lord Collins, for meeting with me earlier today. It allowed us to sort out some misunderstandings, for which I am very grateful.

I will speak only to Motions B and B1. I somewhat regret that this is not the speech that I had originally intended to make—in fact, I had written it. I had intended to make a very short speech thanking the Minister and the Government for listening to the House, almost every business group, the Resolution Foundation, the Tony Blair Institute and their own impact assessment, and reaching a sensible compromise based on what this House proposed.

I was very pleased that the Government held talks between the business groups and the unions, and that all had agreed that the compromise was workable. Contrary to some of the more irresponsible comments that we have seen in the press—some coming from the other place, sadly—this was not a case of out-of-touch Peers blocking a government Bill. It was a good example of this House doing its job of scrutinising legislation and asking the other place to think again. We do not block legislation; we seek to improve it. I do not underestimate how difficult it was for the Government to make the important concession on day-one unfair dismissal rights that they have made.

Sadly, though, I cannot end my speech there. The Government set out the compromise they reached in an announcement on 27 November. It said that agreement had been reached on a six-month qualifying period, which would be changeable only by primary legislation —so far, so good. It also very briefly mentioned the lifting of the compensation cap, something that has never been discussed during the passage of the Bill. Then I saw the actual amendment, which goes somewhat beyond lifting the compensation cap. The amendment abolishes it altogether so that compensation for unfair dismissal will be unlimited, which I suggest is different from lifting.

As we have heard from the noble Lord, Lord Fox, it is at best ambiguous. I note that the Minister is now referring to removing the cap, which I think is more accurate. As we have heard, this does not appear to have been equally understood by every party to the agreement between the employer organisations and trade unions. A number of employer organisations are still expressing concerns about it.

Does this late change matter? The amendment removes the current cap on what can be claimed in an unfair dismissal claim. Currently, it is the lower of 52 weeks’ pay or £118,223. While it might be true that few claims go over that, that may well be because higher-paid people will generally reach agreement, knowing that the cap exists, rather than taking the matter to the tribunal. This change may incentivise more higher-paid people to turn to the already overburdened tribunal system. There is no downside to them doing so with the hope of a higher payout, or at least a strengthening of their negotiating position. As we have heard, the irony of this is that the main beneficiaries are likely to be senior employees on high salaries who are moving towards the end of their careers, not the workers the Government claim to be helping.

The noble Lord, Lord Sharpe, gave the example of the water industry. I was trying to think of an example and one rather closer to this House occurred to me. When the noble Lord, Lord Mandelson, was fired from his position as ambassador to the United States, there was a lot of speculation in the press that he might be able to claim for unfair dismissal due to the summary nature of his dismissal. Obviously I do not know the details of his contract, what has been agreed or anything else—it would be interesting to know what was agreed—but is this really the sort of situation the Government want to give the possibility of unlimited compensation to? It would certainly strengthen the negotiating hand of the employee in any such situation.

The truth is that we do not know what the effect will be or whether this matters. It has been introduced without warning at the last possible moment in the Bill, with no consultation, no impact assessment and no scrutiny. Whatever one thinks about the merit of removing the cap on compensation, this is not the right way to do it. I would go as far as suggesting that it is testing our constitutional processes to the limit. Legislation should not be decided in—I do not think I am allowed to say “smoke-filled” any more—darkened rooms as a deal between a limited number of interested parties. It is not the way we do things. This is a material change, and it deserves to be properly consulted on, impact-assessed and debated. It should have been introduced much earlier.

The amendment proposed by the noble Lord, Lord Sharpe, is admirably constructive; I thought it would go further. Rather than remove this new clause altogether, it proposes a review of unfair dismissal compensation to take place within three months, and sets out that the review

“must include a consultation with … employers’ organisations … trade unions … employment law practitioners, and … such other persons as the Secretary of State considers appropriate”.

That is a fair and constructive approach.

However, we must be pragmatic. This is the third stage of ping-pong. Whatever we do at this stage is unlikely to move in the other place, and I am conscious that I do not want to see the key concession of a six-month qualifying period being unpicked as a result of our actions. As I said, I accept that that was a big step for the Government to make.

I thank the Minister for her confirmation that there will now be an impact assessment, which will be published as soon as possible. I did not hear clearly that there will be a full consultation with other parties. Currently, this has been consulted on by six organisations and I do not know how many unions. That is not a wide consultation on such a big change. Will there be a proper consultation process on this before it comes into effect?

Assuming the answer to that question is to the positive, reluctantly, and while protesting in the strongest possible terms that introducing such a significant change at such a late stage runs a coach and horses through the proper process of scrutiny of legislation, I am minded to bring this to an end and accept the Government’s amendment. But, as I said, I will listen to what the Minister says before I make that final decision.

I have one final request. This late insertion of a material change to legislation in the third stage of ping-pong must not become a precedent. Can the Minister confirm that the Government see this as a one-off, extraordinary case, and not something to be repeated?

[Lord Sentamu (CB)]

My Lords, I thank the Minister, who is new at the Dispatch Box, for explaining things quite clearly. I am thankful for the Government accepting that amendment, which has clearly enabled the country to feel, when people take on jobs, that there is a qualifying period, although not an indefinite one. I said in your Lordships’ House that I was like a gramophone playing a record that was stuck in a groove. The Government have given me a new needle and I am out of that groove, so I thank them very much.

[Lord Cromwell (CB)]

My Lords, I will speak fairly briefly in support of Motion D1 from the noble Lord, Lord Burns. This has become known as the hokey-cokey amendment—opt in, opt out, opt in, opt out, through the chain of amendments that have been put down. I support the vital role of trade unions, but I find it hard to understand why legislation should be used to steer—or, if you prefer, nudge—employees towards funding political causes.

The noble Lord, Lord Burns, has shifted a very long way from his original amendment. All the amendments now require is a checkbox at the start to allow employees to opt out if they so wish. This is surely the absolute minimum that should be available to them. I would have preferred asking trade union members if they wished to opt in, as a positive statement, rather than to opt out, which is a negative that would perhaps attract black marks in the membership list of their union. It does the Government no credit to seek to deny employees this opt-in choice. However, like the noble Lords, Lord Fox and Lord Vaux, I am reluctant to extend ping-pong, and I will be guided by the noble Lord whose amendment this is.

17:30

[Lord Barber of Ainsdale (Lab)]

My Lords, the subjects covered by these amendments have been more than extensively debated already, so I do not need to rehearse all the arguments around each issue. Nor do I need, I hope, to remind the House that this whole Bill represents the fulfilment of a hugely important manifesto commitment and, by long-established convention, it must ultimately be recognised and accepted by this House.

As a former chair of ACAS, I will briefly focus on what is new since our previous debate on the Bill: the unprecedented agreement between the TUC and unions and the major employers’ organisations in this country. I say “unprecedented” because, although there have been agreements on some issues over the years between the TUC and the CBI—I think of the joint work that was excellently done developing the furlough scheme during the Covid crisis—I cannot recall such a grouping of the representative organisations of employers ever coming together to seek and to reach an understanding with the TUC. I do not need to list all those organisations on the employer side in this process; the noble Lord, Lord Fox, has done that for me already. This is a historic development and, to my mind, a very positive one. I warmly congratulate those on all sides who gave leadership, for the Government, the unions and the employers, to make this possible. All the parties needed to move from their original positions to make this possible.

As is clear, the centrepiece of this agreement is moving from a right to protection against unfair dismissal from day one of employment to after six months in the job. This proposal was championed by many noble Lords in our earlier debates, speaking up, as they have, for what they have seen as employers’ most important concern about the different provisions in the Bill. But, of course, this agreement is more ambitious than that, in also clearing the decks for the Bill to move swiftly to Royal Assent. As the joint statement by all the employers’ organisations makes clear:

“This change addresses the key problem that must be sorted in primary legislation”.


That statement acknowledges that other issues covered by the Bill, on which those organisations may have concerns, will be consulted on in due course after Royal Assent. This reflects a widely shared view that, rather than leaving continued uncertainty and dragging this debate out further, it is now better for all parties to get the Bill passed so that we can all move on to the next stage of bringing some key provisions into force, in line with the published timetable, and the planned consultations on other issues covered by the Bill.

My ACAS and TUC experience has taught me how difficult it can be to find intelligent compromise on issues that may have been hard fought. It has also taught me the vital importance of agreements being honoured when a deal is done. If the passing of this Bill is further delayed it would frustrate one of the key objectives of this agreement.

As the employers’ organisations said in their statement, this shows that dialogue works. I truly hope that the positive spirit that underpins the agreement continues to the next phase—I mean in the changes to be made across the workplaces of this country, not just the consultations on detailed aspects of the Bill. My ambition has always been for unions and employers to find constructive ways of working together in order to build successful organisations. In that spirit, I hope all noble Lords will now get on board and show—dare I say it—solidarity with the employers of our country in the compromise that they have reached. I hope noble Lords will not just support the changes in unfair dismissal arrangements but now pass the Bill through to Royal Assent without any further delay.

[Lord de Clifford (CB)]

My Lords, I will speak on Motions B and B1 and register that I speak on behalf of SMEs and as a small employer of 130 people. I thank the Government for listening to businesses and this Chamber with regard to the change to unfair dismissal. Six months is certainly enough time for businesses to assess employees.

I thank the Opposition, the Liberal Democrat Front Bench and my noble friend Lord Vaux of Harrowden for persisting in trying to change Clause 23. This change could have had the effect of allowing employers, especially SMEs and micro-businesses, to take a chance on a prospective employee who shows the skills and talents for a particular role when the employer, for whatever reason, may have doubts. This could be due to a lack of experience, the different ways in which some individuals need to work nowadays, or an employment gap. This change certainly would help that.

However, the Government’s introduction of the change to lift the compensation cap will potentially significantly dampen down employers’ enthusiasm to take this chance. This is especially true for micro-businesses. The regulatory burden and the risk of starting to take on employees is significant, and the removal of a cap will add to the real fear about starting to employ people. All those businesses hear is an unlimited cap, which is what the focus will be in their minds. They will not know about the average limit being just £7,000 or £8,000. The thought of an unlimited liability if you get the dismissal process wrong will either stop businesses taking on employees or mean that some employee issues are not tackled for fear of the possible amounts. This will have a negative impact on productivity and, possibly, the culture that people work in.

I have listened to the Minister and welcome the impact assessment and consideration, but I ask the Government to reconsider this change and put some limit on the compensation, so that small businesses can assess the liability and not have the fear, even if unfounded, of paying a large fine that could put those businesses or business owners at risk.

[Lord Hendy (Lab)]

My Lords, I will make two points. The first relates to Motion B and the removal of the arbitrary statutory limit on compensation. My noble friend the Minister mentioned the tribunal statistics for 2023-24, published by the Government, and the fact that the median award for unfair dismissal was £6,746. That is the median award, not, as the noble Lord, Lord Fox, mentioned, the average award. It means that 50% of all awards for unfair dismissal are less than £6,746.

But those statistics reveal something that I found even more startling: in that year, 2023-24, the tribunals disposed of 31,000 single-claim cases and 2,000 multiple-claim cases; of those, only 646 awards were made in respect of compensation for unfair dismissal. Of course, one accepts that many cases were settled through ACAS or between the parties and then approved by the tribunal, and that would count as a disposal. But 646 cases out of 33,000 means that this jurisdiction of unfair dismissal is little used.

Of those awarded compensation, the latest government survey, which dates from 2013 and has never been updated, found that only 49% of claimants had been paid in full, a further 16% had been paid in part and 35% of successful claimants receiving a tribunal award had never received a penny of their awards. In 2016, the then Government sought to address this lamentable state of affairs by establishing the employment tribunal penalty enforcement and naming scheme to penalise companies that do not pay within 28 days of the tribunal order and, since 2018, by publicly naming them.

However, the BBC and the Bureau of Investigative Journalism published research two months ago showing that of the 7,000 unpaid claimants using the scheme, no less than 5,000 had failed to obtain any recovery. Some 4,800 penalty notices had been issued, with a combined value of £9 million of unpaid awards, but government records show that only 109 of those notices were actually paid, and none of the employers in question was named, despite nearly 4,000 requests for naming as well as compensation. These are the issues that the Government need to confront, not whether highly paid executives and others who are found to have been unfairly dismissed are entitled to the full measure of compensation for their losses.

My second and final point relates to Motion D, the amendment to it from the noble Lord, Lord Burns, and the discussion there has been, on this occasion and on the previous one, which my noble friend Lord Barber was involved in, about the compromise that was reached in 2016. I will go back a little further in the history of trade union political funds. In 1871, the Trade Union Act gave unions, for the first time in British history, legitimacy under the law. A trade union was materially defined as

“such combination, whether temporary or permanent, for regulating the relations between workmen and masters”.

The Act protected such organisations from illegality, in particular for restraint of trade, what is now called anti-competitive activities, of which collective bargaining as the means of regulating relations was the paradigm example. With various tweaks, the essential element of regulating relations between workers and employers remains the essential element in the current legislation for the definition of trade unions.

The point I want to make is that before the 1871 Act and for 40 years afterwards, trade unions continued to spend money promoting parliamentary Bills for the benefit of working people, such as on health and safety, national insurance, restoration of the right to strike after the Taff Vale judgment of 1901, and so on. At the end of the century, they came to the conclusion that they needed representation in Parliament. The Labour Representation Committee was founded by the TUC in 1900 and became the Labour Party in 1906. All this was largely financed by the unions from their general funds, just as employers financed the Tories and the Liberals. But in December 1909—

[Noble Lords]

Oh!

[Lord Hendy (Lab)]

Thanks for bearing with me. In December 1909, all this changed. The Judicial Committee of this House held, in the Amalgamated Society of Railway Servants v Osborne, that the statutory definition was exhaustive and it was therefore unlawful for a union to spend money on any object other than the regulation of industrial relations. That decision was not a foregone conclusion. Three years earlier in the High Court, in a case called Steele v South Wales Miners’ Federation, Mr Justice Darling had held that the statutory definition —I am getting to the point here, bear with me—

“was not intended to be exhaustive, or to prevent an association from lawfully doing other acts beyond those there mentioned. It is significant that the section is silent about providing benefits for members, which is one of the recognised branches of trade union business. So that even if the purposes mentioned in the rule do not come within those specified in the section, there is nothing to render them illegal. But, further, I am of the opinion that they do fall within those specified in the section. It seems to me that one of the ways of regulating the relations between workmen and masters … is to get laws passed by Parliament for their regulation, and that one of the first steps towards getting those laws passed would be to send a representative to Parliament to promote a Bill for that purpose”.

17:45

The Osborne judgment was met with widespread outrage. The Liberal Government procrastinated in addressing the evident injustice of the case. Eventually, a political compromise was offered, which the then 29 Labour MPs and the unions were obliged to accept. It contained three elements. It changed the definition of a trade union.

[Noble Lords]

Oh!

[Lord Hendy (Lab)]

I am coming to the end.

[Lord in Waiting/Government Whip (Lord Leong) (Lab)]

Will my noble friend speak more specifically on the points raised? Perhaps he could wind up his contribution.

[Lord Hendy (Lab)]

I am coming to the conclusion. The Trade Union Act 1913 changed the definition of a trade union to allow it legitimately to spend funds on other objects beyond industrial relations and, if approved by a ballot of the members, a union could have a political fund to be used for specified political purposes. Each member had to be given the opportunity to opt out of payment of that part of the subscription earmarked for the political fund. That was the compromise. In seeking to maintain, in this Bill, the outdated compromise of 1913, the Government have gone further than they needed. What they should have done—and what they could do, if objection is still maintained—is repeal the modern form of the 1913 Act and allow unions, like all other clubs, corporations, partnerships and co-ops—

[Lord Leong (Lab)]

Order. May I ask my noble friend to wind up now, please?

[Lord Londesborough (CB)]

My Lords, I am going to speak, in mercifully brief terms, about SMEs, but I will spare noble Lords the history of SMEs in the UK from 1910 to 2026.

My point, in relation to Motions B and B1, is that lifting the cap on unfair dismissal without warning and at this very late stage fundamentally undermines the claims of careful consultation with employers. My email inbox, like those of many others in this place, is awash with anger and indignation from SMEs in particular. The question they keep asking is: how can we trust this Government, coming as this does after punitive and disproportionate hits on employers’ national insurance contributions and inflation-busting increases in the minimum wage, who are sneaking in this clause on uncapped compensation? SMEs will not be persuaded by the data we have heard in this debate on medians and modes. Frankly, we are creating yet more uncertainty, piling up the risks of employing new staff and fuelling unemployment that much further. It is anti-entrepreneurial, anti-enterprise and, I fear, a job destroyer. In my view, it has no place in a free, growth-driven economy.

[Lord Pannick (CB)]

My Lords, there is one short point that the House should bear in mind in relation to Motion B1. There is already no cap on the award of compensation in employment tribunals for race discrimination, sex discrimination and disability discrimination cases. The House may therefore think that the concerns that have been expressed about the impact of the removal of the cap are perhaps rather exaggerated.

[Baroness Lloyd of Effra (Lab)]

My Lords, I thank all noble Lords for their contributions today. This continues the robust discussion that we have had throughout the passage of the Bill.

I come first to some of the constitutional points, or those that go to the way that we do business. As I outlined in my opening speech, the tripartite talks and the amendments resulting from them were context- and Bill-specific. They were really a demonstration of the way in which we listened very clearly to the views expressed in this House through many exchanges, which led to a very productive tripartite discussion. However, they are very context- and Bill-specific. The noble Lords, Lord Vaux and Lord Cromwell, will be familiar with discussions with the Leader of the House on how she and other Members would like to conduct business more regularly.

I will address some of the points made. Again, coming back to the nature of it all, these were discussions between business representative organisations, trade unions and the Government. Specifically on the question of the minutes, there are Civil Service contemporaneous notes of the meetings, but they have not been shared with participants or more widely. We think that it would be impolite and inappropriate to share the meeting notes without the agreement of those who attended the meetings. The Government’s statement and update on the Employment Rights Bill, released on 27 November, and the subsequent Written Ministerial Statement laid in both Houses provide the public summary and conclusion of that meeting. Although it was a slightly different process, we laid that Written Ministerial Statement as soon as we could to give as much clarity as possible to the House on the developments that were happening, which were, as I said before, in response to concerns raised here.

On the question of lifting or removing, that is indeed something that I have also given some thought to. The word “lift”—lifting embargoes; lifting bans—is used very commonly in that manner to mean “remove”. When asked this question in the other place, my colleague, Minister Dearden, confirmed the outcomes of the negotiations and said

“I was in the room as part of the negotiations … I can confirm that the compensation cap was discussed and agreed in the room”.—[Official Report, Commons, 8/12/25; col. 94.]

I was not in the room and I therefore give weight to the comments that she made on that.

To address the comments and interventions made by the noble Lord, Lord Vaux, and my noble friend Lord Barber, this is, in total, a pragmatic way forward. The opposition amendment would not enable us to move forward because it would remove the cap and replace it with the report. It is not something that can be encompassed, and we should continue with the package as negotiated; it is not consistent with the agreement that was reached and which we have brought to your Lordships and encapsulated in the Bill. I just underline that it is not something that we can accept.

Points have been made about the actual substance of the cap. The noble Lord who spoke just before me made the extremely pertinent point that there are already areas of the law that have uncapped areas, and we do not think that removing the cap will mean that compensatory awards will necessarily increase in the way that others have set out. Tribunals have well-established ways of calculating the compensation that might be awarded for particular types of losses resulting from unfair dismissal. As the figures cited today show, those methodologies lead to awards that are, on average, under £7,000. Employment tribunals will continue to focus on claimants’ actual losses when determining awards. I think that some of the fears are unwarranted but, in any case, we will publish the impact assessment and we will engage with business organisations continuously. The last month has shown how productive it can be to engage with business organisations and trade unions together to advance all the measures here. I think that I have dealt with all the points made by Members on the cap.

I come on to the political funds and the question of whether it is an active choice or whether we are trying to restrict people from making an active choice as to whether to contribute to a political fund. When joining a trade union, new members are taking an active choice to voluntarily join a collective organisation that has decided, via a democratic ballot of members, to establish a political fund. We do not see these as two distinct decisions—a decision to join a democratic organisation that has a political fund and a decision to opt in to a political fund—but one active decision. I remind noble Lords that all we are proposing to do is to restore the position as it was for 70 years—I will perhaps not give quite as much detail as my noble friend—before the Trade Union Act 2016 came into force. This simplifies the political funds process to ensure that a balance is struck between protecting trade unions from administrative burdens and ensuring that members continue to have a choice on whether they wish to contribute to a political fund.

Crucially, we agree with the noble Lord, Lord Burns, that members who, for whatever reason, choose not to contribute, should and will be able to do so easily and without detriment, and can exercise that right to opt out of contributing. We will continue to require trade unions to make new members aware of their right to opt out of the political fund. The unions will have to explain to members on the application form that opting out will not affect other aspects of their membership and they will not face any disadvantage. Members will be able to easily inform unions of their decision to opt in or out, including by post, email, completion of electronic form or by any other electronic means.

I was asked about the guidance or regulations in this area. The Secretary of State will be under a duty to issue the guidance within three months of the relevant section coming into force. This guidance will set out expectations as to how quickly unions should action opt-out notifications and will state that unions should, as a matter of best practice, give effect to opt-out notices at the earliest feasible opportunity. This will help to ensure that unions action the opt-out notices promptly. As I stated earlier—I can commit to this again—the guidance will also be clear that opting out must be properly available and practically possible for members who wish to exercise that right. We want to make sure that members are able to opt out in that way, and the guidance will be clear on how that is effected. On the question of the rebate, that will be effected at the earliest time possible once the opt-out notice has been given.

On the question of ballot thresholds, I noticed the attempt to recontextualise the recent year’s industrial action, but the fact is that a threshold of 50% has not led to less industrial action. All strike action recently has taken place with a turnout of more than the 50% threshold, so we do not think that this will inhibit good industrial relations. In fact, we think that the 50% level is unnecessary. It is inhibiting the democratic right of union members and unions to demonstrate their will. It does not take place in other areas—for example, local government or parliamentary elections. Therefore, we do not think it should continue. However, to reiterate, we will not repeal the 50% threshold until we have assessed the impact of e-balloting. The Secretary of State will have to have regard to the impact of that, and he will lay a Statement explaining what the effect of e-balloting is before the 50% threshold is rescinded.

To conclude, we now want to move forward with purpose, guided by our manifesto commitment to work constructively with stakeholders.

18:00

[Lord Trefgarne (Con)]

My Lords, I move that the Question be now put.

[Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)]

My noble friend is coming to the end. We should hear her remarks and then we will go to the votes.

[Baroness Lloyd of Effra (Lab)]

I emphasise again that the Government’s convening of recent discussions and our willingness to compromise on the issue of unfair dismissal should signal to parliamentarians and stakeholders that we want to get this right. I emphasise that the Government’s work on this agenda is far from over. There will be opportunities for further debate and scrutiny, and I look forward to these discussions. I therefore hope that noble Lords will join business representatives and trade unions in supporting the position reached in recent discussions and backing the Government’s Motions today.

[Lord Fox (LD)]

My Lords, there was a moment when I was engulfed in shame that I had misunderstood the difference between median and average. Fortunately, the noble Lord, Lord Hendy, distracted your Lordships quite quickly, so I have recovered.

Nobody in this House is pretending that this is perfect. We are at a point of pragmatism and, I remind your Lordships, at the third round of ping-pong. The noble Lord, Lord Vaux, has made some important points. All of us go into this. If it was perfect, I would press Motion A1 and I would want to keep on iterating. I know that now is the time for this Bill to pass. Therefore, I beg leave to withdraw Motion A1.

Motion A1 (as an amendment to Motion A) withdrawn.

Motion A agreed.

Motion B

Moved by

[Baroness Lloyd of Effra]

That this House do not insist on its insistence on Lords Amendments 23 and 106 to 120 in respect of which the Commons have insisted on their disagreement; and do agree with the Commons in their Amendments 120G, 120H and 120J to 120M in lieu of Lords Amendments 23 and 106 to 120.

120G: Leave out Clause 23 and insert the following new Clause—
“Right not to be unfairly dismissed: qualifying period and compensatory awards
Part 10 of the Employment Rights Act 1996 (unfair dismissal) is amended in accordance with subsections (2) and (3).
In section 108 (qualifying period of employment)—
(a) in subsection (1), for “two years” substitute “six months”;
(b) in subsection (2), for ““two years”” substitute ““six months””.
(3) Omit section 124 (limit of compensatory award etc).
(4) In section 209 of that Act (powers to amend Act), in subsection (5), omit “108(1),”.
(5) Schedule (Minor and consequential amendments relating to section (Right not to be unfairly dismissed: qualifying period and compensatory awards)) contains minor and consequential amendments relating to this section.”

120H: Leave out Schedule 3 and insert the following new Schedule—
“SCHEDULE
MINOR AND CONSEQUENTIAL AMENDMENTS RELATING TO SECTION (RIGHT NOT TO BE UNFAIRLY DISMISSED: QUALIFYING PERIOD AND COMPENSATORY AWARDS)
Employment Rights Act 1996
1 (1) The Employment Rights Act 1996 is amended as follows.
(2) In section 92 (right to written statement of reasons for dismissal), in subsection (3), for “two years” substitute “six months”.
(3) In section 108 (qualifying period of employment), in subsection (3)—
(a) after paragraph (h) insert—
“(ha) section 4(3)(b) of the Rehabilitation of Offenders Act 1974 (read with any order made under section 4(4) of that Act) applies,”;
(b) omit paragraphs (k) and (o).
(4) In section 117 (enforcement of order for reinstatement or re-engagement and compensation), in subsection (2), for “Subject to section 124, the” substitute “The”.
(5) In section 118 (compensation: general), in subsection (1)(b), omit “124,”.
(6) In section 123 (compensatory award), in subsection (1), omit “124,”.
(7) In section 205A (employee shareholders), in subsection (10), for the words from “where” to the end substitute “where—
(a) the dismissal is by reason of any requirement or recommendation that is referred to in section 64(2), or
b) the reason (or, if more than one, the principal reason) for the dismissal is, or relates to, the employee’s political opinions or affiliations.”
(8) In section 209 (powers to amend Act)—
(a) in subsection (2)—
(i) in paragraph (e), omit “section 124(1), (2) and (5),”;
(ii) in paragraph (j), omit “, 124(2)”;
(b) in subsection (5), omit “92(3),”.
(9) In section 226 (rights on termination), in subsection (3), for “, 121 or 124”
substitute “or 121”.
(10) In section 236 (orders and regulations), in subsection (3), omit “124(2),”.
Employment Relations Act 1999
2 (1) The Employment Relations Act 1999 is amended as follows.
(2) In section 34 (indexation of amounts, etc)—
(a) in subsection (1), omit paragraph (c);
(b) omit subsections (4) to (4B).
(3) In section 37, omit subsection (1).
Enterprise and Regulatory Reform Act 2013
3 In the Enterprise and Regulatory Reform Act 2013, omit section 15 (power to increase or decrease limit of compensatory award).
Coronavirus Act 2020
4 In Schedule 7 to the Coronavirus Act 2020, omit paragraph 17.
Power to make further consequential amendments
5 (1) The provision that may be made under section 151 (power to make consequential amendments) by any regulations that amend a relevant provision in consequence of the repeal of section 124 of the Employment Rights Act 1996 by section (Right not to be unfairly dismissed: qualifying period and compensatory awards)(3) includes (among other things)—
(a) provision amending section 34 of the Employment Relations Act 1999 for the purpose of applying that section to a relevant sum;
(b) provision conferring power on the Secretary of State by regulations to vary a relevant limit, in the same manner and to the same extent as the power conferred by section 15 of the Enterprise and Regulatory Reform Act 2013 to vary the limit imposed by section 124(1) of the Employment Rights Act 1996 (but see sub-paragraph (4));
(c) provision that is consequential on provision within paragraph (a) or (b).
(2) For the purposes of this paragraph—
(a) “relevant provision” means—
(i) a provision listed in sub-paragraph (3), or
(ii) any other provision that limits the amount of compensation payable by virtue of the provision by reference to the limit imposed by section 124 of the Employment Rights Act 1996;
(b) “relevant sum” means a sum specified in a relevant provision, in consequence of the repeal of that section, for the purposes of limiting the amount of compensation payable by virtue of the provision;
(c) “relevant limit” means a limit on the amount of compensation payable by virtue of a relevant provision that is specified in the provision in consequence of that repeal;
(d) the reference in sub-paragraph (1)(b) to section 15 of the Enterprise and Regulatory Reform Act 2013 is a reference to that section as it had effect immediately before the coming into force of paragraph 3.
(3) The provisions referred to in sub-paragraph (2)(a)(i) (each of which limits the amount of compensation payable by virtue of the provision by reference to the limit imposed by section 124 of the Employment Rights Act 1996) are—
(a) section 67 of the Trade Union and Labour Relations (Consolidation) Act 1992 (right not to be unjustifiably disciplined by trade union: remedies for infringement);
(b) section 140 of that Act (remedies for refusal of employment, etc on grounds related to union membership);
(c) section 176 of that Act (right not to be excluded or expelled from trade union: remedies);
(d) paragraph 160 of Schedule A1 to that Act (trade union recognition: enforcement of right not to be subjected to detriment);
(e) section 49 of the Employment Rights Act 1996 (protection from suffering detriment in employment: remedies), so far as relating to subsection (5A), (7), (7A) or (7B) of that section;
(f) section 24 of the National Minimum Wage Act 1998 (enforcement of right not to be subjected to detriment), so far as relating to employment tribunals in Great Britain;
(g) section 56 of the Pensions Act 2008 (pension scheme membership: enforcement of right not to be subjected to detriment);
(h) regulation 4 of the Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015 (S.I. 2015/2021) (enforcement of right not to be subjected to detriment);
(i) regulation 9 of the Exclusivity Terms for Zero Hours Workers (Unenforceability and Redress) Regulations 2022 (S.I. 2022/1145) (enforcement of right not to be subjected to detriment).
(4) The power that may be conferred by provision made by virtue of sub-paragraph (1)(b) includes power to specify different amounts in relation to different descriptions of persons by whom compensation is payable by virtue of a relevant provision.
(5) The power to make regulations under section 151 is to be regarded as including power to make provision amending section 49(7A) or (7B) of the Employment Rights Act 1996, as inserted by paragraph 9 of Schedule 2, in consequence of the repeal of section 124 of the Employment Rights Act 1996 regardless of whether that repeal comes into force before or after the day on which that paragraph is brought into force for any purpose.”

120J: Clause 26, page 45, line 30, at end insert—
“(3D) Subsection (1) does not apply in relation to an employee if on the effective date of termination the employee has not yet started work.”

120K: As an amendment to Lords Amendment 40, at the end of line 34 insert—
“(2A) Subsection (1) does not apply in relation to an employee if on the effective date of termination the employee has not yet started work.”

120L: As an amendment to Lords Amendment 41, leave out “(4) and” and insert “(3D) to”

120M: As an amendment to Lords Amendment 42, line 2, leave out “(3) and” and insert “(2A) to”

[Baroness Lloyd of Effra (Lab)]

My Lords, I have already spoken to Motion B. I beg to move.

Motion B1 (as an amendment to Motion B)

Moved by

[Lord Sharpe of Epsom]

At end insert “and do propose Amendment 120N as an amendment to Commons Amendment 120G and Amendments 120P to 120S as amendments to Commons Amendment 120H—

120N: Leave out subsection (3) and insert—
“(3) In section 124 (limit of compensatory award etc.), after subsection (5), insert—
“(6) The Secretary of State must, within three months of the day on which the Employment Rights Act 2025 is passed, conduct a review of the limit imposed by this section on the amount of the compensation awarded or compensatory award made.
(7) A review under subsection (6) must include a consultation with—
(a) employers’ organisations,
(b) trade unions,
(c) organisations representing employment law practitioners, and
(d) such other persons as the Secretary of State considers appropriate.””

120P: Leave out sub-paragraphs 1(4) to (6)

120Q: In sub-paragraph 1(8), leave out paragraph (a)

120R: Leave out sub-paragraphs 1(9) and (10)

120S: Leave out paragraphs 2 to 5”

[Lord Sharpe of Epsom (Con)]

My Lords, in view of the manifest constitutional impropriety on display, I do not think we have a choice. I beg to move Motion B1.

18:04

Division 1

Motion B1 agreed.

Ayes: 244

Noes: 220

18:16

Motion B, as amended, agreed.

Motion C

Moved by

[Baroness Lloyd of Effra]

That this House do not insist on its insistence on Lords Amendment 48B in respect of which the Commons have insisted on their disagreement; and do agree with the Commons in their Amendments 48E and 48F in lieu of Lords Amendment 48B.

48E: Clause 1, page 6, line 20, at end insert—
“(9A) Before making the first regulations to be made under subsection (9)(c) the Secretary of State must consult—
(a) such persons representing the interests of seasonal workers as the Secretary of State considers appropriate,
(b) such persons representing the interests of employers of seasonal workers as the Secretary of State considers appropriate, and
(c) such other persons as the Secretary of State considers appropriate.”

48F: Schedule 1, page 155, line 11, at end insert—
“(7ZA) Before making the first regulations to be made under sub-paragraph (7)(c) the Secretary of State must consult—
(a) such persons representing the interests of agency workers who do seasonal work as the Secretary of State considers appropriate,
(b) such persons representing the interests of hirers to whom agency workers are supplied to do seasonal work as the Secretary of State considers appropriate, and
(c) such other persons as the Secretary of State considers appropriate.”

Motion C agreed.

Motion D

Moved by

[Baroness Lloyd of Effra]

That this House do not insist on Lords Amendments 72D to 72H, to which the Commons have disagreed; and do agree with the Commons in their Amendments 72J and 72K in lieu of Lords Amendments 72D to 72H.

72J: Clause 59, page 87, line 10, after “case,” insert “the earlier of—
(i) a day specified in, or determined in accordance with, the rules of the union, and
(ii) ”

72K: Clause 59, page 87, line 23, at end insert—
“(7) The Secretary of State must, before the end of the period of three months beginning with the day on which this section comes into force, publish guidance about the kind of provision which the Secretary of State considers it is appropriate for the rules of a trade union to make for the purposes of subsection (4)(b)(i).
(8) The Secretary of State—
(a) may from time to time revise guidance published under subsection (7);
(b) must publish any revisions of that guidance.”

[The Deputy Speaker (Baroness Fookes) (Con)]

Before I call Motion D1, I should alert the House to a typographical error in Amendment 72P. The reference to “page 37” should be to “page 87”. If the amendment is agreed to, it will be corrected by printing point.

Motion D1 (as an amendment to Motion D)

Moved by

[Lord Burns]

Leave out from “disagreed;” to end and insert “do disagree with the Commons in their Amendments 72J and 72K in lieu of Lords Amendments 72D to 72H; and do propose Amendments 72L to 72N and 72P to 72R in lieu of Commons Amendments 72J and 72K—

72L: Clause 59, page 86, line 24, leave out from “fund),” to end of line 25, and insert “for subsection (1)(ca)(i) substitute—
(i ) a check box allowing the member to opt out of being a contributor to the fund from the start of their membership of the union,”

72M: Clause 59, page 86, line 30, after “unless” insert “they have opted out of contributing under section 82(1)(ca)(i) or”

72N: Clause 59, page 87, line 12, after “withdraws” insert “an opt-out decision under section 82(1)(ca)(i) or”

72P: Clause 59, page 37, line 31, leave out “ten years” and insert “one year”

72Q: Clause 59, page 87, line 33, leave out “ten years” and insert “one year”

72R: Clause 59, page 87, line 34, leave out “ten years” and insert “one year””

[Lord Burns (CB)]

My Lords, I have listened closely to the Minister and I have had several conversations with the Front-Bench team. I remain very disappointed with the determination to go back towards the 1945 arrangements. I fear that, unless we can make further progress and improve how this Bill works in practice, in time it will end badly; I cannot believe that it has a great shelf life.

I was involved in the 2016 discussions, which were very fraught and there was a lot of ill will. We compromised on that occasion with the greatest of difficulty. The chances of reaching compromise in the same circumstances on another occasion will be very difficult. I hope that, whatever further discussions take place about how this works in practice, we are going to get something that is much nearer to what I describe as a real, effective and active choice for those who wish to opt out.

However, I recognise that I have reached the end of the road on this. I got involved in this issue by accident back in 2016 and I will not press my amendment. I beg leave to withdraw it.

Motion D1 (as an amendment to Motion D) withdrawn.

Motion D agreed.

Motion E

[Baroness Lloyd of Effra]

Moved by

That this House do not insist on its insistence on Lords Amendment 62 in respect of which the Commons have insisted on their disagreement; and do agree with the Commons in their Amendment 62E in lieu of Lords Amendment 62.

62E: Clause 156, page 151, line 6, at end insert—“(5) In deciding whether and when to make regulations under subsection (3) bringing section 65 (industrial action ballots: turnout threshold) into force for any purpose, the Secretary of State must have regard to what effect any provision made after this Act is passed for industrial action ballots to be conducted otherwise than by post has had, or is expected to have, on the proportion of those eligible to vote in such ballots doing so.(6) The Secretary of State may not make regulations under subsection (3) bringing section 65 into force for any purpose unless the Secretary of State has laid before Parliament a statement as to how the Secretary of State has had regard to any such effect.(7) In subsection (5) “industrial action ballot” means a ballot for the purposes of section 226 of the Trade Union and Labour Relations (Consolidation) Act 1992 (ballots on industrial action).”

[Baroness Lloyd of Effra (Lab)]

My Lords, I have already spoken to Motion E. I beg to move.

Motion E1 (as an amendment to Motion E)

[Lord Sharpe of Epsom]

Moved by

Leave out from “House” to end and insert “do insist on its Amendment 62, and do disagree with the Commons in their Amendment 62E in lieu of Lords Amendment 62.”

[Lord Sharpe of Epsom (Con)]

I beg to move.

18:22

Division 2

Motion E1 disagreed.

Ayes: 219

Noes: 223

18:33

Motion E agreed.