Enterprise and Regulatory Reform Bill

Lord Lester of Herne Hill Excerpts

Wednesday 14th November 2012 Lords Chamber

[Lord Lester of Herne Hill]

My Lords, I will focus only on the equality provisions. I welcome Clause 74, which adds a new and significant power enabling employment tribunals to require defaulting employers to provide equal pay audits. I also support the removal by Clause 56 of some provisions relating to the Equality and Human Rights Commission that were included in the Equality Act 2006. At the time, we on these Benches supported the previous Government in their inclusion, but experience has shown that these vague and aspirational provisions have blurred the commission’s focus. Their removal will not impair the commission’s core functions or jeopardise its well deserved “A” status at the UN, but should enhance its effectiveness.

I cannot support Clause 57, which would abolish the existing liability for third party harassment of employees and applicants, and I cannot support Clause 58, which would abolish the procedure for obtaining information for proceedings. These changes are regressive and damaging to the rights of vulnerable minorities. They impair access to justice and efforts to avoid unnecessary litigation, and undermine the very essence of the principle of equality before the law and the equal protection of the law. They were introduced by the Government in the Commons too late to receive adequate scrutiny.

As regards Clause 74 and equal pay audits, the continuing problem of sex discrimination against women in the unequal pay they receive for doing equal work with men has been well documented again and again, decade after decade, as has the tortuous complexity of the law on this subject. We were unable to persuade the previous Government to introduce effective measures to secure equal pay for men and women, including provisions on the lines of my own Equality Bill for workforce reviews and pay equity plans by designated employers.

Clause 74 enables a Minister to make regulations requiring employment tribunals to order employers to carry out equal pay audits where they have found them to have breached equal pay law or to have discriminated because of sex in non-contractual pay, such as discretionary bonuses. Regulations made under this power will rightly be subject to the affirmative resolution procedure. The exercise of the power should not, I submit, be dependent on a finding of unlawful conduct. Equal pay audits should be regarded as essential elements in good employment practices rather than as punitive sanctions on defaulting employers. The public sector equality duty may result in encouraging effective voluntary measures to tackle sex discrimination in pay. I hope the Minister will be able to confirm that this is the Government’s understanding of the position. I should be grateful if the Government would also consider whether Clause 74 should be widened to apply not only to employment tribunals but to the courts, since they, too, have jurisdiction in equal pay cases.

Clause 56 repeals Section 3 of the Equality Act 2006, which sets out the commission’s general duty. It repeals Section 10, which imposes a duty on the commission to promote good relations between members of different groups. It repeals Section 27, which enables the commission to arrange to provide conciliation in non-employment disputes, and it amends Section 12 by reducing the frequency with which the commission has to publish a report from three to five years. The commission’s briefing of September 2012 explained:

“The Commission concludes that these changes are unlikely to have a significant adverse impact on its work”.

I agree with that assessment and should explain the reasons why.

The commission will continue to have all functions relating to equality and diversity, as well as promoting understanding or the importance of human rights, encouraging good practice in relation to human rights, promoting awareness, understanding and protection of human rights and encouraging public authorities to comply with Section 6 of the Human Rights Act. The commission will remain obliged to have particular regard to the importance of exercising the powers conferred in relation to the convention rights. It will monitor the effectiveness of the equality and human rights enactments. It will publish information, undertake research and training, give advice and guidance, issue codes of practice, conduct inquiries and investigations, issue unlawful act notices, require the preparation of action plans, give legal assistance, and have the capacity to institute or to intervene in legal proceedings, whether for judicial review or otherwise. It will still assess compliance with public sector duties and be able to issue compliance notices.

None of these powers and duties will be affected by Clause 56, and the commission will be stronger and more effective as a result, led by its excellent new chair, the noble Baroness, Lady O’Neill, and professionally managed under a new chief executive, Mark Hammond, who has been in post since July 2011, and his board. The statutory guarantees of the commission’s independence from unnecessary government interference will remain, notably the obligation for the Secretary of State to have regard to the desirability of ensuring that the commission is under as few constraints as reasonably possible in determining its activities, its timetables and its priorities. There is the obligation also for the Government to pay to the commission such sums as appear to the Secretary of State,

“reasonably sufficient for the purpose of enabling the Commission to perform its functions”.

Apart from the lamentable state of the law on equal pay, British equality legislation is the finest anywhere. It is essential that the commission should be a strong and effective public authority rather than a poorly managed and politicised NGO, a commission carrying out its demanding public functions with a clear strategy and skilled professional staff. It has underperformed since it was set up, and the Joint Committee on Human Rights on which I serve has been critical of its record. By removing vague and unnecessary duties and powers, the Bill will focus the commission’s legislative mandate on its core equality and human rights functions. The commission needs a board with strong business and corporate governance skills to provide strategic leadership. It needs to work more in partnership with others so that it is greater than the sum of its parts. The JCHR may wish to take on a greater role in scrutinising the commission’s business plan. This was suggested by the noble Baroness, Lady O’Neill, in her pre-appointment hearing with the JCHR and would have the virtue of increasing the profile and transparency of the commission’s work for Parliament.

The commission has a well deserved UN “A”-rated status as a national human rights institution. The UN High Commissioner for Human Rights and the chair of the International Coordinating Committee have expressed concern about, among other things, the cuts made to the commission’s budget. As part of the 2010 spending review, the coalition Government announced plans to reduce the commission’s budget from a baseline of £55 million to £26.8 million by 2014-15. The Government announced a comprehensive review of the commission’s budget in May 2012 to examine the level of funding that is reasonably sufficient for the commission to perform effectively its core functions as a national expert on equality and human rights issues, a strategic enforcer of the law and a guardian of human rights.

The commission is not alone. The JCHR and devolved institutions also play a vital role, as do Parliament and the independent judiciary.

We look forward to the outcome of the review of the commission’s budget. The commission’s independence is well protected by the statutory scheme, but it is also important that it is accountable to the Government and Parliament for the way in which it uses taxpayers’ money. I hope that the JCHR and other bodies with human rights functions will have a greater opportunity to understand, challenge and scrutinise how that money is put to best use. I emphasise that nothing in the Bill or the current review should jeopardise the Commission's “A” status; on the contrary, it should go from strength to strength.

I turn finally to the two provisions with which I disagree: the abolition of the questionnaire procedure and the removal of liability for third-party harassment. The questionnaire procedure has been in place since the 1970s, when it was included in the Sex Discrimination and Race Relations Acts, and later in legislation to combat disability, religious, sexual-orientation and age discrimination. It was introduced to enable would-be claimants, lacking legal assistance, to decide whether to pursue their claims through costly and time-consuming legal proceedings or by means of a simple statutory procedure. It was designed to help the individual who considers that she or he may have been unlawfully discriminated against to decide whether to institute proceedings and, if so, to present the case in the most effective manner. It has worked well in practice and no independent equality expert has ever criticised its operation. Its abolition would impair access to justice and result in unnecessary litigation.

At a time when senior judges, including the Lord Chief Justice, as well as leading academics and lawyers are warning that the growth of DIY litigants is clogging up the civil justice system, it is wholly misconceived and without common sense or good political judgment to abolish a useful way of helping many vulnerable people—women, the disabled, ethnic and religious minorities, gays and lesbians, and the elderly—to be protected against discrimination and to decide whether to have recourse to our courts and employment tribunals to seek remedies. Clause 58 is not based on evidence. I hope that it will be removed during the Bill’s passage.

Section 40 of the Equality Act 2010 made it unlawful for an employer to harass employees and people applying for employment. It also made the employer liable for the harassment of its employees by third parties, such as customers or clients, over whom the employer does not have direct control. Liability arises only when harassment has occurred on at least two previous occasions, and where the employer is aware that it has taken place and has not taken reasonable steps to prevent it happening again.

Section 40 was designed to replicate the effect of provisions in the Sex Discrimination Act 1975 as regards harassment by employers, and to extend to the other protected characteristics—apart from marriage and civil partnership, and pregnancy and maternity—the position in relation to employer liability for sexual harassment under the Sex Discrimination Act. The Explanatory Notes on Section 40 gave the example where a shop assistant with a strong Nigerian accent tells her manager that she is upset and humiliated by a customer who regularly uses the shop and each time makes derogatory remarks about Africans in her hearing. If her manager did nothing to prevent it happening again, he would be liable for racial harassment.

I should be grateful if the Minister would explain whether he agrees that this is a fair, balanced and proportionate provision, and, if he disagrees, in what respects it is any way oppressive or unfair. The consultation paper stated that the introduction of Section 40 had given rise to concern that businesses, especially small businesses, would find it difficult to comply with. But it gave no evidence to support this concern and, had that been the problem, the Government could have introduced, and could still introduce, an exemption for small businesses. It also stated that it had no evidence to suggest that the third-party harassment provisions were serving a practical purpose or were an appropriate or proportionate way of dealing with this kind of misconduct. The previous Government considered that there was sufficient evidence and carefully confined Section 40 to really flagrant cases. The official Opposition did not then oppose Section 40, or suggest that there was insufficient evidence to justify its inclusion. The Equality Act has been in force for only a short time.

Presumably the coalition Government accept, as did the Labour Government, that harassment because of gender, sexuality, disability or age is a serious social evil that needs to be tackled effectively. That requires third-party harassment to be unlawful. As the Discrimination Law Association noted in responding to the consultation, the other possible remedies suggested by the Government do not offer the same protection to employees vulnerable to third-party harassment including women, ethnic minorities, disabled people, members of minority religions, gay men and lesbians, transsexuals and older workers. I hope that the House will agree to remove Clauses 57 and 58. The Equality Act 2010 is a great British statute of which we should be proud. We should protect it in the interests of everyone, including employers and their workers.

--- Later in debate ---

[Baroness Thornton]

My Lords, I am very pleased to participate in this Second Reading debate and to be part of my noble friend’s Bill team. We will try to do something useful with what is a pretty terrible Bill. Having worked on the Public Bodies Bill and the health Bill, there is quite a lot of competition for that prize with this Government. As other noble Lords said, the Bill is incoherent. It provides no compelling vision, no consistent message and no connected approach across government to drive growth. That is a shame.

I will concentrate on Clauses 56, 57 and 58, which are no less than a systematic undermining of the UK’s entire equalities infrastructure for what appears to be no reason other than dogma and political spite, which I hope at least the junior partners in the coalition will not support. The clauses relating to the Equality and Human Rights Commission—as even Vince Cable admitted—have no significant impact on business growth. The Government’s own impact assessment states that either they will have a negative impact or they will add nothing to the main purpose of the Bill. So why are they here? There is no tangible, quantifiable, empirical evidence linking the measures put forward in Clauses 56, 57 and 58 to business growth.

Clause 56 covers changes to the Equality and Human Rights Commission’s statutory powers and duties. I beg to differ from what I thought was the rather complacent view of the noble Lord, Lord Lester, about the dangers that face this body. The Bill seeks to amend Part 1 of the Equality Act 2006, which sets out the Equality and Human Rights Commission’s statutory powers and duties. It repeals Section 3, which sets out the general duty of the commission. It repeals Section 10, which imposes a duty on the commission to promote good relations between members of different groups. It repeals Section 19, which gives the commission powers in association with Section 10. It repeals Section 27, which enables the commission to make arrangements for the provision of conciliation in certain non-employment related disputes, and it amends Section 12, which requires the commission to monitor and report every three years on its progress. It reduces from three to five years the frequency with which the commission is required to publish a report on its progress.

These legislative changes should not be considered in isolation. In addition to the proposal to amend the legislative basis of the EHRC, the Government are undertaking a range of actions that seriously threaten the commission’s independence and effectiveness. By 2014-15, the EHRC will have had its budget cut by 62%. It will have lost 72% of its staff compared to when it was established in 2007. These are disproportionate cuts. They will make the EHRC about the same size as the former Disability Rights Commission—just one of the three equality commissions that it replaced.

In addition, the new framework document between the EHRC and the Home Office pays little heed to Part 4 of the Equality Act 2006, which states:

“The Minister shall have regard to the desirability of ensuring that the Commission is under as few constraints as reasonably possible in determining … its activities … its timetables, and … its priorities”.

This has drawn concern from the chair of the ICC, who stated that the new framework document significantly limits the EHRC’s freedom,

“to determine priorities without undue influence by the Government”.

The EHRC works to reduce inequality, eliminate discrimination and strengthen good relations between people. Undertaking these functions effectively requires proper funding of the EHRC, and the retention of its full legal remit and independence. I do not say that the EHRC needs to be funded—in case the Minister is under any illusions—as it currently is. Of course it has to play its part, as do all other government departments. However, the figures that I cited—

[Lord Lester of Herne Hill]

As the noble Baroness accused me of complacency, perhaps I could ask her to confirm that nothing in these changes will affect the guarantees of independence that together we wrote into the 2006 Act—some of which she referred to—nor the functions on enforcement that I quoted in my speech. The changes deal only with aspirational matters.

[Baroness Thornton]

I think that the noble Lord is quite wrong, and I will go on to say why. According to the Paris principles, a national human rights institute needs to enjoy financial autonomy that will enable it to determine its priorities and activities. General observation 2.6 on adequate funding, issued by the sub-committee on accreditation of the International Coordinating Committee of National Human Rights Institutions, states:

“Financial systems should be such that the NHRI has complete financial autonomy. This should be a separate budget line over which it has absolute management and control”.

The actions of the Government are undermining the EHRC’s celebrated A status. Is their intention to preside over the downgrading of our national equalities and human rights body so that we can join Sri Lanka, Kazakhstan and the Congo, for example, with a B status, for whatever reasons those countries may have a B status—it could be that they do not have a body or that their body is not independent of their Government—instead of being part of the A status group, which includes most of the western world?

Section 3 of the Equality Act requires the EHRC to encourage and support a society based on freedom from prejudice and discrimination, individual human rights, respect for the dignity and worth of each individual, equal opportunity to participate in society and a mutual respect between groups based on understanding, valuing diversity and a shared respect for human rights. Section 3 provides a guiding vision for the EHRC that unifies equality and human rights, which we discussed in 2006. While it is recognised that improvements are needed in the governance and management of the EHRC, confusing that with changing its legislative-provided remit is unjustifiable. Time should be allowed for the newly-appointed chair to implement the changes she wishes to make before the purpose of the organisation is undermined.

Vince Cable admits that there is no business advantage to be gained from removing Section 3 and terms it simply a piece of “legislative tidying-up”. However, there is a significant risk that removing Section 3 will prove to be a substantial loss. Professor Sir Bob Hepple QC, who I know has been a partner in crime of the noble Lord, Lord Lester, over many years, says that it has the potential to leave the Equality Act rudderless. Can the Minister explain exactly what getting rid of this general duty will do to encourage enterprise and grow the economy, or even what part of this duty puts a bureaucratic burden on business?

As to Section 10 of the Equality Act, which covers the duty to promote good relations, I can only assume that someone got out of the wrong side of the bed in a bad temper to draft this legislation to repeal the EHRC’s duty to promote good relations between members of different groups. That duty has been used in the past to include guidance on tackling political extremism in local elections, the kick racism out of football campaign and work carried out to improve social cohesion following the riots and troubles in Northern Ireland cities in 2001. Without this duty, the EHRC will be concerned only with regulating the vertical relations between organisations and individuals, rather than being able to undertake initiatives aimed at and positively influencing wider public attitudes and improving relations between individuals and groups. We need to keep all of this duty in the original legislation. As I have said, this legislation poses a threat and may lead to the removal of our A-grade status, which is a very serious matter.

I believe that we are at one across the House—many of us are with the noble Lord, Lord Lester—on Clauses 57 and 58. The Government seek to repeal Section 40 of the Equality Act 2010, which makes an employer liable for the repeated harassment of its employees by third parties, including customers, clients and service users. The noble Lord, Lord Lester, eloquently and adequately explained what that means and gave a very good example. There are many more examples, which I am sure will emerge in Committee.

While it may be true that there has been only one case of third-party harassment ruled on by an employment tribunal, it is also true that only four years have passed since the commencement of the provision and repealing it now would surely be premature. The TUC asserts that the introduction of Section 40 in the Equality Act has already led to a step change among employers, with actions undertaken to make it clear to service users that the harassment of their staff would not be tolerated. However—this is something which, I hope, will appeal to the Minister—there may be hidden costs to business of not prioritising action against third- party harassment. Harassment can have a significant effect on the mental and physical health of a workforce and be a major cause of work-related stress affecting performance and absence levels. I would also like to ask the Minister if repealing this provision would leave the UK in breach of EU law—the equal treatment directive 2002/73/EC which refers to the duty of employers to take measures to combat all forms of sexual discrimination, in particular preventive measures against harassment and sexual harassment in the workforce. I should also say that in the Government’s red tape challenge, there was no publicly available evidence of concerns being raised about this issue. When the Government consulted on third-party harassment, of all those who were asked, the vast majority, 71%, said that they opposed the repeal.

I turn now to Clause 58. Again, the noble Lord, Lord Lester, is quite right. Section 138 of the Equality Act 2010 means that a person who thinks that they may have been unlawfully discriminated against, harassed or victimised can obtain information from the person, employer or service provider they think has acted unlawfully against them. I think that the noble Lord, Lord Lester, was one of the authors of this legislation 40 years ago, so why the Government would want to remove it, I do not know. It is completely counterproductive. Some 80% of those who responded to this opposed the abolition of the questionnaire procedure, and there is no evidence to support the Government’s claim. In fact, case law makes it clear that businesses and other respondents find this to be a valuable way of dealing with issues before they reach the law or tribunals because they establish the facts and clarify the issues which are in contention. Indeed, the Government’s own impact assessment failed to provide any empirical support for removing this regulatory burden on businesses. I ask the Minister seriously to reconsider this part of the Bill as we proceed.

The Bill falls far short of the visionary legislation that the Government suggested. It is several Bills rolled into one, which is why a team of us will be dealing with those bits that form parts of our briefs. It has been labelled an enterprise Bill, but I do not think that that is the case. The Government are seeking to make fundamental changes not only to the employment rights of every person in this country, but to change the remit of the body charged with promoting a society free from discrimination. As a result of the changes proposed in Clauses 56, 57 and 58, this House should have very real concerns about the impact they will have on the most vulnerable in our society and, indeed, on our nation’s international credibility.