Employment Tribunals Act 1996 (Tribunal Composition) Order 2012

Lord Jones of Birmingham Excerpts

Monday 19th March 2012 Grand Committee

[Lord Jones of Birmingham]

My Lords, as a Cross-Bench Peer I find myself, on this side of the Committee Room, looking across at the labour relations first XV. I feel like a full-back at Twickenham who has just shouted “Mine” with the sun in his eyes and the All Blacks coming towards him. Perhaps I may start by paying tribute to the noble Baroness, Lady Donaghy. When I was director-general of the CBI she was the chair of ACAS, and she did an incredibly good job. It is just a shame that we will probably disagree in the next five minutes.

The noble Baroness put it extremely well when she said that this was a political football. The Conservatives will vote for one year and Labour will vote for two years, as sure as the sun comes up in the morning. I am here to put neither case. I am not even here solely to put the business case, although I am sure that one or two noble Lords opposite will expect me to do so. However, if we in this country are to get ourselves out of the economic mess that was caused by so many contributory forces, we must trade our way out. We must generate jobs and wealth so that we make profits and pay tax, in order to reduce the deficit, build schools and hospitals and pay public sector workers what they deserve.

To do that, we must do two things more than anything else. We must be the acknowledged location of choice in the developed world for inward investment, and we must get smaller businesses in particular to take on one more person. Those two things on their own will generate a great deal of the wealth and the jobs that we need. For too long—I hope that the problems of the past two or three years have brought this into focus—successive Governments of both parties, as well as European legislation, have worked hard to help people in work keep their job, and have not concentrated enough on getting those who are out of work into it.

Whenever one talks to inward investors—Americans, Germans, Japanese; it matters not—they give one reason for coming here in greater numbers than anywhere else in Europe. We are number one by a mile—in the whole of the developed world we are number two only to America—because of what the noble Lord, Lord Monks, referred to as the flexible labour market. It does not mean that our workforce is the most productive, and certainly not that it is the best trained. In fact, those are both tragedies on which the noble Lord and I have often agreed. However, at the end of the day our reputation is that it is easier to deal here with mistakes of recruitment and the need to be mobile and light on our feet when it comes to maximising investment. It has to be easier on that basis to let people go.

Employers at that end of the game do not want to let people go because it costs a lot of money to recruit them. It costs even more money to train them. The noble Baroness, Lady Prosser, asked why managers in big companies are not well trained enough in the employment relations side of life. At the top end, especially with the overseas investors, you find that they are. They do not work on the basis of wanting to recruit people and thinking, “Well, I can get rid of them if it doesn’t work”. What they want is this aura, this feeling in the nation that we have a flexible labour market, of which only one little bit is this concept of an extension of more than one year. I do not want to get into the two years or one year because it smacks of tribalism. But these employers want the concept of being able to sort things out after a longer period than one year.

The noble and learned Lord, Lord Scott, has a point when he asks why someone who has been let go cannot at least receive written reasons as to why. That has nothing whatever to do with whether the period of time should be two years, 10 years or six months. A person is perfectly entitled to know why they have been dismissed both as a reference and as a reason for understanding. People do not like bad news but they prefer it to no news. In that respect, perhaps the Minister could go back and sharpen his pencil on that point.

One end of the labour market is about attracting inward investment; for example, Tata Motors is building a new engine plant in Wolverhampton, adding 1,000 jobs in a factory on a greenfield site. You will not see that in France, Germany or Italy. You would be lucky to see it in America. One of the reasons—although not the only reason by a mile—is the feeling that there is a flexible labour market, which includes being able to let people go.

Let me take the Committee to the other end of the labour market spectrum. Noble Lords who come from the Labour movement and the TUC will probably identify more with this and will find more fertile, efficient grounds on which to attack the proposition. The proposition is: can we get smaller businesses to employ just one more person and can we get smaller businesses to be this engine of employment growth in the nation? This proposal is dealing with making employers feel that they have the chance and the opportunity to make a mistake but will not fall foul of two or three issues that they are scared of every day.

One issue is of their own making. The noble Baroness, Lady Prosser, is absolutely right. The training qualification in management can be pretty poor. One of the reasons for that, as I heard here, is that on Monday, they are the finance director; on Tuesday, they are the sales director; on Wednesday, they are trying to clean the stairs; on Thursday, they clean the loos; and on Friday they go to see the kids. All that is seen as something that other people do until it lands on their desk because they have not gone through the right process and have not done it properly, and find that they have got a letter from the employment lawyer.

This proposal does not excuse in the slightest an effort that should be made by this Government, the CBI, the chambers of commerce, the Federation of Small Businesses and the local enterprise partnerships. Just like the CBI, the TUC finds it difficult but when it can it should reach into these places. There is no excuse for poor management of people at whatever level of employment or duration of employment. Small businesses fear that they are going to be caught up in something. Therefore, the default position comes in, which is that they will not employ someone. That is not always the case, but it is sometimes.

The second issue is the spectre hanging over the small business job market of constructive dismissal. So often the small businesses that these days I advise or champion tell the nightmare stories of people who handed in their notice; then, on the day before the three months or six months or whatever it was, the letter came in from the lawyer saying, “This person is going to say they were constructively dismissed. By the way, it is going to wrap you up in an employment tribunal. It is going to take your resource, time, effort and money. Tell you what, it could all go away now for a thousand quid”. I saw loads of letters like that, all without prejudice.

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[Lord Monks]

It was a grimace.

[Lord Jones of Birmingham]

“Not on my watch, guv’nor”. I was not at the CBI when that fight went on. That was the bailiwick of the noble Lord, Lord Turner, not mine. I always said, and I stand by this today, that it was a good thing to do, but the wage should never be set so high that people felt they could not afford it or it was inflationary. Because it has always been implemented very wisely, it has never had those two problems. We were fortunate that the economy had that Goldilocks aspect to it for many years after it was introduced. Many an alarmist employer would have said, “This will be the end of life as we know it”, but certainly not this one.

I am not saying that if this measure is not introduced, inward investors will not invest or small businesses will stop employing. We are not in that alarmist territory at all. All I am saying is that making it more flexible will create some jobs. We must start looking after those out of work and getting them into work, instead of only looking after those in work.

I am in favour of judges sitting alone, but only with the caveat that it is discretionary, that it will not always apply and that it will be left in the hands of the judge to decide every day. We have to get as much value for money as possible out of the system; we must not delay, obfuscate or obstruct. I would like to think that most cases will be heard with two lay people sitting with the judge. I think that will happen a lot and I am pleased that it will. But the judge should be given discretion. I will not fall for the argument that for some reason employment law is so special, specialised and expertise-driven that judges are not qualified to do this on their own. To my knowledge, most judges are not murderers, and yet they preside over murder trials without experts on either side. This is a special field, but so are many others.

Over the past 15 years we have lived through the continuing encroachment of employment legislation. I would love to know what the increase in employment tribunal hearings has been in the past 10 years. I do not know what it is, so I hope the Minister can provide me with that information. How many of those tribunals have involved people in the first or second year of their employment? I would love to know that. However, whatever those figures are, I know that a greater number of employment cases never get to a tribunal as the parties settle. The noble Lord, Lord Monks, said that good employers who have a good case will win at a tribunal. He is right, but the problem is the employer never gets there for anyone to find out. It is in a business’s interests to settle as that stops it committing further resources, time and money to the case. That smacks of blackmail and of saying, “We won’t let the system work no matter how well meaning it is because it is in the interests of wealth creation to get rid of a case”. You thereby create a compensation culture, which is surely what we have to avoid at a time when we need to get some wonderfully skilled people into the world of work for the first time in their lives. If this provision goes just a little way down the path of doing that, it may not be an answer to a maiden’s prayer but it will help us look after those who are out of work a bit better.

[Baroness Gibson of Market Rasen]

My Lords, I do not have the expertise in this area that many of my colleagues on this side of the Committee have. However, I am a former trade union official, as many noble Lords know, and therefore I am very interested in employment legislation. I should declare an interest in that my husband is a member of an employment tribunal. Indeed, he serves on the central London tribunal. I know that the Minister was lucky enough to go to that tribunal and meet members of it last week.

I wish to make two small points. My husband has served on an employment tribunal for a number of years and I have heard about the cases in which he has been involved and have reached my own judgment on what we ought to be doing in the future. Some of what is being proposed is bothering me. I am well aware that when employment tribunals were first introduced there were industrial relations problems in this country. One of the reasons for bringing in employment tribunals was the hope that they would be a more informal way of sorting out the difficulties that arose in industrial relations issues on both sides of industry. By and large, I think they have worked very well over the years. Unfortunately, we may now be heading in the other direction, and that worries me. Two points worry me particularly. The first follows on from what the noble Lord, Lord Jones, said about job creation. Obviously, I am in favour of job creation, particularly given the position the country is in at the moment. The noble Lord talked about small businesses. My background is in small business. My father and both sets of grandparents had small businesses so I am well aware of the difficulties that can arise when taking on even one extra employee.

I am a little surprised about this measure because last October the Government produced their own statistics which showed that only 6 per cent of small and medium-sized enterprises said that employment legislation was a problem in relation to taking on staff. I understand that about 1,100 businesses were consulted. This means that 94 per cent did not say that employment legislation was high on their agenda in terms of difficulties. There were other problems higher up the agenda. I am rather surprised that this issue is being brought up five months later as something that is definitely stopping SMEs taking on even one extra employee. That is something which, as the noble Lord, Lord Jones, said, I would support.

My second point concerns the expertise of those serving on employment tribunals. We in this House have all come here because of our background and expertise in different areas. It is exactly the same with those who serve on tribunals. It is not just important that a judge sits with one lay person from each side of industry to discuss issues and listen to the evidence put before them; the expertise also comes out when they get together in chambers behind closed doors to discuss what they have heard. I have spoken to judges and I know that they value employment tribunal members from both sides of industry. They value the advice of the lay members and they pick up things which, if they sat alone—whether they are a man or a woman—they would not pick up. I cannot see how one person sitting alone would be better than three people in these circumstances. Perhaps the Minister will give a little more detail on why the Government think that one person alone would be better than three.

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[Lord Jones of Birmingham]

Perhaps I may make two points. I was reminded by what the noble Lord said that I had omitted to declare my interests. If noble Lords refer to the Register, they will see that I am a director of many companies that would benefit from this measure. I am sorry that I did not mention that at the beginning. Secondly, I apologise to the chairman and the Minister as I have a very long-standing private engagement at 6.15 pm quite a few miles from here and I am already very late. I am sorry that I will not be able to listen to the Minister’s reply, but I shall read Hansard tomorrow with great interest.

[Baroness Drake]

My Lords, the Register of Lords’ Interests will show my 25 years’ membership of either the employment tribunal or the Employment Appeal Tribunal, so I declare that interest. I particularly want to speak to the issue of employment tribunal judges sitting alone on unfair dismissal cases because this measure has nothing to do with debates about job creation. The arguments on job creation are around the qualifying period for when entitlement to protection against unfair dismissal kicks in.

The impact assessment shows that lay members were paid a total of £9.78 million in 2009-10, so the measure that we are discussing is hardly a huge cost-saving exercise, and nor can it be a driver of the employment practices of small to medium-sized enterprises. I worry about the implications of moving towards an industrial jury system whereby employment tribunal judges increasingly sit alone in the heavyweight area of unfair dismissal. The impact assessment states that employment judges are competent to deal with the more “fact heavy” unfair dismissal cases. I fully recognise the competence of employment tribunal judges—their competence is not the issue, and I do not think that it is up for debate.

The noble Lord, Lord Jones of Birmingham, said that an employment judge could sit alone at a hearing because judges do so in murder trials. However, these are not criminal law cases, and the standards of evidence are not those of criminal law cases. That is the point. Employment tribunals are industrial tribunals based on the concept of a reasonable balance of probabilities and on all sorts of other concepts that have grown out of a judicial system that is focused on industry, not crime. The concept of industrial juries should not lose that importance. If one looks at the Employment Appeal Tribunal, the view is taken that employment tribunals have heard the facts and seen the relevant people, and that the decision taken is that of an industrial jury. Those decisions are not overturned lightly. There should be a compelling reason for interfering with an industrial jury decision. However, if it increasingly becomes the practice for judges to sit alone, the decisions will not be those of an industrial jury. The concept of an industrial jury, with practitioners from industry hearing industrial cases on a certain premise, will start to bring its own problems which may not be beneficial to employers.

The concept of an industrial jury is very important for another reason—fairness. Many claimants see a panel of three people when they appear before the employment tribunal—somebody from the employer’s side, somebody from the employee side and the judge. If the tribunal finds against the claimant, the impact of that decision is very powerful because everybody on that tribunal has found against him or her: but if the tribunal judge is sitting alone, the claimant is less likely to feel satisfied with the decision. I suggest that the claimant is more likely to want to argue with the judge and to pursue an appeal. The claimant will not receive the same powerful message as when an industrial jury makes its finding.

I turn to the concept of swift justice—what employers and particularly SMEs want. I will put the alternative proposition, which is that if you interfere with the integrity of the industrial jury concept in unfair dismissals, the number of appeals that will flow from that might well increase. The impact assessment states—on the basis of anecdotal rather than hard evidence—that when it comes to appeals made against the findings of a judge sitting alone as against those of a full panel,

“there is no significant difference between lodgement or success rates”.

However, we are moving to unfair dismissal cases with judges sitting alone, not the narrower issues that are weighted heavily towards payment disputes where judges currently sit alone. We are moving to the heart of activity in industry—disputes over whether a dismissal was fair or not—and taking away the industrial jury concept. There may well be a significant increase in the number of appeals. I must say, as a former trade union official, that if an industrial jury goes against you, you pause. I suspect that if an employment tribunal chairman sitting alone makes a decision, the disposition to go to appeal will be much greater. That is because you would be much more confident about disputing the findings of fact by an employment tribunal chairman sitting alone.

Unfair dismissal is a much more contested and emotional territory. The sense of getting a fair hearing in court is very important in terms of influencing the behaviour of claimants. The Government are unquestionably going to reduce employment rights through increasing the period before there is protection against dismissal to two years, and probably through more changes to employment rights that will come in the area of redundancy compensation. They are also looking to promote further the flexible labour market. It strikes me as unwise and counter-productive to seriously tamper at this point with the industrial jury concept. At the same time as people are getting anxious about the quality and availability of employment rights, the Government are taking away from the key area of unfair dismissal the guaranteed right of access to a tripartite industrial jury. That is a big risk for the sake of saving £9.78 million. I would not take it.

It says in the impact assessment—although I cannot find exactly where—that if claimants are not happy about a judge sitting alone hearing their case, they can put their reasoning to the judge as to why there should be a full panel. Some claimants who come before a tribunal are barely capable of prosecuting their own case, particularly if they are lowly paid or if English is not their first language. The idea that they can mobilise a set of arguments in support of why they should have a full panel as opposed to a judge is laughable. Equally, claimants who are unrepresented and put their own case, even if they are not in low-paid jobs and English is their first language, will be anxious and will not feel confident about legal procedures. They probably will have no idea of how to mobilise a set of criteria on whether their case should be heard by a judge alone or a jury sitting as a panel of three.

On the argument that there will still be judicial discretion as to whether a tribunal judge should sit alone or with lay members, the tribunal judges will be under their own pressures. They will be under pressure to keep costs down and to get the throughput of cases. I suspect that a tribunal judge who allows too many full-panel sittings will be called by the regional chairman and asked why his productivity statistics are lower than other people’s.

I worry seriously that at the same time as employment rights are being reduced—we may well see them further reduced—the concept of the industrial jury is under attack. One cannot have a concept of an industrial jury unless two lay members representing the two participating sides of industry are also representatives on those tribunals. Anybody with experience of dealing with unfair dismissal cases knows how, in the majority of cases, they can be very fact heavy, very contested, very emotional and very influenced by what is reasonable or normal practice in that industrial context. An intellectually brilliant employment tribunal judge may not have an understanding of what is ongoing or normal industrial practice in a particular industry.