Enterprise and Regulatory Reform Bill

Debate between Baroness Brinton and Lord Marland

Monday 10th December 2012 Grand Committee

[Baroness Brinton]

My Lords, I welcome Clause 14, which inserts new Section 12A, but would like to assert the importance of Amendment 20L. New Section 12A(1) allows an employment tribunal, having found that an employer has committed an aggravated breach of workers’ rights, to order penalty payments to the Secretary of State regardless of any previously established financial awards. While this is a just measure, we must not neglect the legal rights and needs of those who find themselves unemployed and faced with their former employer’s insolvency while still owed back pay, expenses or other reimbursements. Under subsection (1) as it stands, employees whose rights have been breached by their former employer would not necessarily receive compensation until after the Treasury, which as primary creditor would receive the penalty for the employer’s infringement before the employees got their redundancy pay. Thus the compensation of workers wronged by their former employers would be secondary to and potentially diminished or even eliminated by the amount paid to the Secretary of State when a company is insolvent and funding is finite. This would obviously be unfair to the former employees of an insolvent company who faced jarring transitions in their finances and everyday lives.

Amendment 20L would cancel subsection (1) where an insolvency officeholder had been appointed. This sensible measure would ensure that employees, as creditors, had primacy in receiving financial redress from an insolvent company. This is an important step to protect workers’ rights. When a company becomes insolvent, tens of thousands of people may become unemployed through no fault of their own, and these people are legally owed compensation, which could also provide much needed fiscal support. If we are genuinely to protect workers’ rights, we should support this Bill with Amendment 20L.

I also support the principles of Amendment 20PA, for the reasons that the noble Baroness, Lady Hayter of Kentish Town, has set out.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Lord Marland)]

Good afternoon, my Lords. I hope that your Lordships all had a good weekend break. I am very grateful to the noble Baroness, Lady Hayter, for putting forward this amendment. As she rightly said, R3 has been working closely with our officials to find a way forward in this important part of the legislation and to try to find a modus operandi—or modus vivendi, whichever one wants to call it—to create the right effect.

I am grateful to my noble friend Lady Brinton for saying that the principle is the right course, and I think we all agree on that. However, as I think most people would agree, the problem lies with the practicality of this. The practicality is that an employee goes to a tribunal suing for wrongful dismissal and the company goes bust. It therefore has no money to pay anybody—in theory, that is why it has gone bust—and there is no right of recourse. I think that my noble friend Lady Brinton was right when she said that we would want to ensure that that wronged employee was very high up the pecking order in attracting revenue from the residual of the company’s assets.

I assure my noble friend that employees have rights equal to those of other creditors. There was some mention that the Exchequer sat ahead of them. The Exchequer does not sit ahead of employees in rights, so it has rights equal of those of the employee. I fear that it is slightly like banging one’s head against a brick wall in that, if nothing is left over in the tin, no one is going to get anything—not the Exchequer, not the suppliers and not the good staff, who have not been paid. That is the problem with this issue. Of course, everything is prefaced by the fact that the tribunal judge knows what is going on and so uses his discretion. It is right that he is empowered to use his discretion in finding out the state of the company to see whether there is going to be money in the tin, quite rightly, to pay this wronged individual.

For the company, £5,000, which we agree is a reasonable figure, is not enough to impact on whether or not it goes into liquidation. It is a small amount in terms of that overall decision and so is not going to be the driver that stops the company trading. Although we are sympathetic to this issue, in our view it is almost impossible to be prescriptive about it, and therefore I do not see how this amendment would work.

Similarly, with Amendment 20PA, there is already a list of four prescriptions for determining the unfitness of directors. If we start adding to that list at this point, where do we stop? Out of a board of 15 directors, is there one director who has failed to behave properly, and should we therefore take action against all directors? Should we expand this prescription, which came into force in October 2009 under the previous Government and which we supported at the time? I just do not think that at this point it can be limited to one director, despite the fact that I see the direction of travel of the noble Baroness.

I also want to say again that the judge at the tribunal will take into account the misbehaviour of a director when making his award. That is his job. He will see the evidence, which will be presented to him openly and fairly, and he will take that into account in his award. I acknowledge the difficulty and problems that we have with this particular aspect, and acknowledge and thank those who have said that it is the right direction of travel, but with this provision we would make it too prescriptive for ourselves. We continue to talk to R3, and we will continue to talk to the noble Baronesses about this as we go into Report. On that basis, I hope that the noble Baroness feels that she can withdraw her amendment.

[Baroness Brinton]

I ask for some clarification. The Minister said that the tribunal judge will obviously have a discretion, and I absolutely accept that point. However, the amount could be considerably more than £5,000. New Section 12A(1) refers to each worker involved, and I referred in my speech to a large organisation going bust. Even at the minimum of £100, if thousands of people lose their job, the penalty will still be quite a large sum that could take precedence over redundancy pay.

[Lord Marland]

We will pick that up in another part of the Bill, on the award, where the penalty is 50% of the award per employee. We have tabled amendments on that point. We can debate the point then, if the noble Baroness is satisfied with that.

Enterprise and Regulatory Reform Bill

Debate between Baroness Brinton and Lord Marland

Wednesday 5th December 2012 Grand Committee

[Lord Marland]

I can clarify that. The certificate is necessary to demonstrate compliance with the obligation. It would have to be issued within that framework.

[Baroness Brinton]

It would be very helpful for other Members of the Grand Committee to be able to see the Minister’s letter to the noble Lord, Lord Monks, and any other replies that are circulated.

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[Baroness Brinton]

I have slightly different concerns about Clause 11, but they stem from the same starting point. They are about why the Bill proposes to give the judge much more power to decide on whether a panel should sit with him or her to hear an appeal.

Given that the practice is already there, evidence shows that lay people are brought in to assist a judge, usually on a controversial decision that requires expertise from both the employer and the workforce background. As has been mentioned by other noble Lords, lay members of these appeal panels frequently are respected by both parties. That balance has been an absolute strength of the appeal panel. I am struggling to see why it should become automatic that the judge would sit on his or her own.

I rather pointedly said “his or her own” because I also want to raise the issue of the diversity of an appeal panel when a judge is sitting on his own—it is usually “his” own—and diversity has, ironically, been provided by the lay members. Can the Minister give us some indication of the action the Secretary of State would require to ensure that there was diversity—essential in employment hearings—in appeal proceedings if this process becomes commonplace?

I come back to my initial point: I do not understand why the balance has been tipped from the current situation, in which when a difficult decision has to be made, judges are absolutely clear that they should bring in people, to a proposal in the Bill that presumes that the judges are likely to want to work on their own initially.

[Lord Marland]

When I was being taught how to speak—a long time ago and I have obviously not improved much—I was always told, “Paint a picture of somewhere and everyone will listen to your every word”. It is very hard not to hang on to every word of the noble Lord, Lord Monks. One moment he is at the Grand National; the next moment he is at the Nuremberg trials.

These matters are part of our history, and the words that I was most struck by were that we have to move on. This part of the legislation is about moving on. I am afraid that it is a simple fact that these cases are decided on a point of law. The rule of law defines these cases, and you therefore have to have a lawyer to decide the case. As an employer or an employee— I have been both—I would want to know that I was being supported by the rule of law, which is a fundamental part of this country. Therefore, the judge is the only person I would want to hear from in either of those situations, because the case is decided only on a point of law, not on any extenuating circumstances that may come in.

--- Later in debate ---

[Baroness Brinton]

Does the Minister agree that appeals on employment law are set firmly in the context of employment practice? Concepts such as the range of reasonable response depend on a good understanding of how a reasonable employer would in practice handle a dismissal. Therefore there is a value to having lay members assisting the judge in that decision.

[Lord Marland]

Employment judges know as much about these things as we in this Room do. They have been doing case after case. We are presupposing that judges know nothing and that they are incapable of making decisions based on the rule of law on a subject that is determined by what the law says, not by: “Oh by the way, you must understand that there are extraneous circumstances that may affect the lay person, who quite rightly is sympathetic to them”.

Ultimately, the rule of law prevails. It is the interpretation of the law that prevails, and therefore it is a judge who is qualified to interpret the law, so I do not agree that there is a huge import in having lay members. Of course, as the noble Lord, Lord Monks, who knows so much about this subject, quite rightly says, the judge has the opportunity to choose a panel, and we can get into arm-to-arm combat on whether it is two or four people. Whatever one says, you are damned, in a sense. The judge has the opportunity to have lay members if he thinks there are circumstances he does not understand or working practices with which he is not familiar. Ultimately, these people are being judged on what the law says by someone who can interpret the law, not by people who may or may not understand the law in some circumstances. I am afraid I am not persuaded in this instance—by people who have great knowledge in this subject—that it is in the interests of either party to have lay people, except on cases where the judge himself decides he needs that support.

--- Later in debate ---

[Baroness Brinton]

Might it not be helpful to consider which proceedings ought to have a panel rather than a judge sitting alone? Picking up the point I made earlier about diversity, particularly where there is a claim of discrimination or of inequality of pay, it seems to be an obvious example of where diversity on a panel might provide sage advice as well as reassurance to both parties that diversity is being taken into account.

[Lord Marland]

My Lords, as far as Amendment 20FA is concerned, FA is probably quite appropriate because I am as slightly confused as noble Lords were. I have therefore invited my officials to have a look at this and to bring something forward before Report that clarifies the position because I am not as clear as I should be. I hope that satisfies the noble Lord, Lord Young. It is a victory for him. It is not our intention to use the Lord Chancellor’s power to prevent judges sitting with members where that judge considers it appropriate. The devil will be in the detail, and I think we should reword the detail. I concede that.

The point made by the noble Baroness, Lady Brinton, on diversity was very important. We take it very seriously. It needs to be considered at all times, not just in this particular field. We take that point on board. With that, I hope the noble Lord, Lord Young, will withdraw his amendment.

Employment: Rights

Debate between Baroness Brinton and Lord Marland

Monday 19th November 2012 Lords Chamber

[Lord Marland]

No one is suggesting for one moment that we do not recognise employee rights. It would be outrageous not to do that. We have no intention of doing that. We are putting forward a very sensible and well thought-out scheme, which recognises employee rights but also recognises that if you want to be a shareholder in endeavour or to create value for yourself in a small, emerging company then you have to take the same road as the people who are employing you. This is a fantastic opportunity for employees to share in this enterprise and it is a terrific scheme.

[Baroness Brinton]

Does the noble Lord accept that there is a world of difference between a mutual association such as Waitrose, where the entire staff own the organisation, and the proposed scheme where employees may have a small share? I wonder whether he might consider that the comment coming from Sainsbury’s is more about motivating employees.

[Lord Marland]

My noble friend makes a good point. It is a factor of balance and I merely used the Waitrose example as a contrary to the Sainsbury’s example. The range here is from £2,000 to £50,000. It is a significant shareholding to have £50,000 in a company, if you so wish it, so I think that this is set fair for a good future.