Employment Rights Bill

Debate between Lord Hendy and Lord Sharpe of Epsom

Report stage
Monday 21st July 2025 Lords Chamber

[Lord Sharpe of Epsom (Con)]

My Lords, Amendment 125 in my name speaks to a fundamental principle that we should run through every piece of employment legislation that we consider, and that it is the right of the individual to determine their own path.

Too much of the Bill rests on an implicit and rather patronising assumption that workers are somehow incapable of managing their own affairs—that they must be corralled, collectively represented, spoken for and ultimately told what is best for them. This amendment challenges that assumption head on. It affirms the right of a worker who is not a union member to say that they wish to stand on their own two feet and do not wish to be bound by collective agreements that they had no part in negotiating and no say in accepting. That is not anti-union; it is pro-choice and pro-individual. If we believe in personal responsibility then we must also believe in personal freedom. Some workers are independent-minded individuals, who want to make their own decisions about their pay and their terms and conditions.

We have to be clear: statutory rights remain in place. This amendment would do nothing to undermine minimum standards; it would simply allow the worker to rely on those rights without being bound by a collectivist framework that they never opted into. That is not a threat to fairness but the definition of fairness.

The Government treat workers as a monolith. They are defined not by merit or initiative but by membership and conformity. This proposed clause offers a quiet but powerful alternative: that the individual workers matter, that their preferences matter, and that freedom of contract is not some abstract legal concept but a cornerstone of liberty. I beg to move.

[Lord Hendy (Lab)]

My Lords, before I speak to my Amendment 127, I will say a few words about Amendment 125, from the noble Lord, Lord Sharpe. He and other noble Lords on that side of the House often accuse those on this side of ignorance of business, but his amendment shows ignorance of what happens in industrial relations on the ground.

I will make three points. First, there is nothing in the law to prevent an employer and an individual employee agreeing an improvement to terms and conditions on an existing collective agreement, save in exceptional circumstances such as that illustrated by the case of Wilson and Palmer v the United Kingdom, where the employer offered to pay workers a higher rate of pay if they surrendered their union membership. That principle would also apply to prevent the penalisation of workers on the grounds of any other protected characteristic. However, as a general principle, workers and employers can agree to improve on an existing collective agreement.

Secondly, why would an individual employee agree to detrimental terms worse than an existing collective agreement—lower wages, longer hours, fewer holidays, fewer breaks, and worse terms and conditions? There can be no reason why a worker would wish not to abide by the existing collective agreement. Employees need protection against bad employers who might otherwise exploit the proposed loophole by saying to an individual employee, “I want you to opt out of the collective agreement”, hence undermining it.

Thirdly, collective agreements are not dictated by the trade unions but are agreed by an employer and, usually, by a vote of the employees. We need more negotiation and less litigation.

With that, I turn to my Amendment 127, which is intended to provide my noble friend the Minister and the Secretary of State with a mechanism to promote and encourage collective bargaining on a sector-wide basis without prescribing in detail the model to be deployed. It would be used when needed and would not compel the Government to put it into operation. I will not repeat the arguments about collective bargaining that I developed in Committee over the course of three speeches, but I think I may be permitted to summarise the gist of those arguments in six points.

First, the Bill makes commendable reforms to the legal machinery to establish collective bargaining between trade unions and a single employer, but there is no mechanism in the Bill or anywhere else for multi-employer collective agreements or sector-wide collective agreements.

Secondly, sectoral collective bargaining was the norm for the United Kingdom from 1918 until 1990. It established a coverage of over 80% of British workers between 1945 and the late 1980s. The percentage of workers covered by collective agreement has now declined to 25%. That means that three-quarters of our workforce are employed on “take it or leave it” terms, without any possibility of negotiating anything better than that which the employer offers.

Thirdly, 80% collective bargaining coverage is curiously—or coincidentally—the level now set for the 27 member states of the European Union, after two decades during which the EU undermined sectoral collective bargaining. That policy was reversed in 2024 by means of a directive. Collective bargaining is now advocated by the OECD, since 2017, the IMF and, of course, the ILO.

Fourthly, Labour’s Green Paper, A New Deal for Working People; its subsequent publication on making work pay, implementing the new deal for working people; Labour’s election manifesto; and the King’s Speech all endorsed the extension of collective bargaining.

Fifthly, I come to the benefits of sectoral collective bargaining, which need spelling out again. There are at least eight benefits, as I identify them. The first is that sectoral collective bargaining increases wages. Let us recall that the real value of wages has risen only 0.5% in the past 20 years. Secondly, a rise in wages increases demand in the economy—demand for the goods and services produced by employers. Thirdly, collective bargaining contracts the differentials that have emerged: the gender pay gap, the ethnic-minority pay gap, the disability pay gap and so on. Fourthly, by increasing wages, collective bargaining diminishes the need for state benefits by way of subsidy to low wages. Let us not forget that 31% of those in receipt of universal credit are in work, which gives an indication of the lowness of wages in this country. Fifthly, increasing wages increases the Government’s tax take, which diminishes the need to find money elsewhere. Sixthly, sectoral collective bargaining prevents employers undercutting each other on labour costs. Seventhly, the other side of that coin is that it encourages employers to compete on productivity, investment, efficiency and innovation. Eighthly—this is an important point—it achieves a form of democracy at work. It gives workers a say in the terms and conditions on which they work.

I said there were six points, and the sixth and final point is one of particular interest to me as a lawyer. It is the observation that the rule of law plays a part here. The rule of law, Lord Bingham’s eighth principle, is that states must abide by the treaties they have ratified. That principle has been endorsed in almost every speech I have heard my noble and learned friend Lord Hermer KC, the Attorney-General, give since his appointment to that office. This is significant because International Labour Organization Convention No. 98 and Article 6.2 of the European Social Charter 1961 impose the duty on ratifying states, which includes the United Kingdom, not just to permit collective bargaining but to promote and encourage it. The Bill was the opportunity to promote and encourage collective bargaining at sectoral level, but it does nothing to do so in any sector of the economy.

Employment Rights Bill

Debate between Lord Hendy and Lord Sharpe of Epsom

Committee stage
Thursday 5th June 2025 Lords Chamber

[Lord Sharpe of Epsom (Con)]

Can I seek a point of clarification on the noble Lord’s clarification, which I am very grateful for? Was his argument that extending and future-proofing—I think those were his words—this for the self-employed is because he feels that there will be more self-employed people as a consequence of this Bill?

[Lord Hendy (Lab)]

No, not at all. Growing self-employment has been a trend for the last 20 years, which has perhaps accelerated a bit in the last 10 years. The worry is that school employers may adopt the device of allocating work to the self-employed, rather than to employed persons. If that is the case, there ought to be room for the negotiating body to deal with that issue and the consequences of it. I beg leave to withdraw my amendment.