Enterprise and Regulatory Reform Bill

Debate between Viscount Younger of Leckie and Baroness Turner of Camden

Tuesday 26th February 2013 Lords Chamber

[Viscount Younger of Leckie]

My Lords, Clause 11 attracted a great deal of debate in Grand Committee. Much of it was concerned with the proposal that judges should sit alone in the Employment Appeal Tribunal as a matter of course, where there is a divergence of opinion between the Government and noble Lords opposite. The concerns expressed by noble Lords then were similar to those raised when the Government brought forward measures last year to allow judges to sit alone to hear unfair dismissal cases in the employment tribunal. Those concerns centred on the loss of the contribution that lay members would make to determining what was fair and reasonable conduct by parties, based on their knowledge of social relationships in the workplace.

This clause relates not to employment tribunals but to the Employment Appeal Tribunal. As noble Lords will know, the EAT differs from the employment tribunal in that, unlike the tribunal, where cases will often involve matters of fact and require an assessment of reasonableness, appeals before the EAT are taken solely on points of law. The current practice is for the EAT panel that is hearing proceedings to be constituted such that it mirrors the composition of the tribunal from which the appeal arises—so, if the matter is heard by a judge sitting with two lay members in the employment tribunal, the EAT will sit with a judge and two members.

It is the narrower focus of the EAT on points of law that persuades us that lay members have a much less valuable role to play here than in the employment tribunal itself. As the noble Lord, Lord Young of Norwood Green, said in the debate on changing the composition of the employment tribunals for unfair dismissal, lay members,

“bring real knowledge and understanding of industrial situations … real experience in a wide range of industries and occupations”.—[Official Report, 28/3/12; cols. 1449-50.]

However, this is not a function or a requirement of the EAT.

I am sure that noble Lords will agree that it is incumbent on government to ensure that we use our resources—both judicial and lay member—wisely. The Government are committed to creating a tribunal system that not only is efficient for users but offers value for money for the taxpayer. Indeed, I remind noble Lords that the Equality Act covers a range of sectors, including service provision, property rights and education, and only one of these—work—is dealt with in the employment tribunal system. The remaining equality sectors are dealt with in the civil courts, where judges sit, and have always sat, alone.

There is, however, an issue on which we can agree, and that is in relation to the exercise of the Lord Chancellor’s order-making power. That will allow the Lord Chancellor to order that specified proceedings should be heard by a panel, rather than by a judge alone. However, as the noble Lord, Lord Young of Norwood Green, rightly observed in Grand Committee, the drafting of the Lord Chancellor’s power could allow an order to be made specifying the number zero. For example, the Lord Chancellor could by order provide that appeals in discrimination cases should be heard by a judge and zero employer-representative and zero worker-representative members. Such an order would therefore remove the judicial discretion that exists in the clause to direct that a panel should hear an appeal. While the Government currently have no plans to use the order-making power, we had never intended that any Lord Chancellor should be able to use the power in this way. Amendment 19 inserts into the clause a requirement for the Lord Chancellor to specify in any order whether the panel should consist of two or four appointed members.

The noble Lord, Lord Young of Norwood Green, also raised the further concern that the power as drafted does not specify that the panel should comprise an equal number of employer and worker representatives. Again, the Government have never intended that any Lord Chancellor should be able to constitute uneven panels. My noble friend Lord Marland recognised the genuine concerns raised by noble Lords and agreed to look again at the wording. Amendment 20 honours this commitment and amends Clause 11 to restrict the power so that any order made by the Lord Chancellor must provide for an equal number of employer-representative and worker-representative members. The provision in Amendment 20 would also apply where a judge gives a direction for a panel; the judge will need to direct an equal number of employer-representative and worker-representative members. As a result, lines 35 to 38 on page 7 of the Bill are no longer needed and Amendment 18 deletes that duplication. I beg to move.

[Baroness Turner of Camden]

My Lords, I listened with interest to the Minister; I was very much opposed to Clause 11 at Second Reading and I am still not at all happy about it. I have always believed that the involvement in procedures of lay members is a matter of much interest to us all. The workers who appear before tribunals have always been concerned that they should include lay members with some knowledge of working practices, particularly at appeal stage. The value of the involvement of lay members with knowledge of workplace procedures and conditions is widely respected. The individual claimant knows that the appeals tribunal contains people with a knowledge of employment relations and this gives the claimant confidence in the proceedings.

I do not know why the Government are proceeding along these lines, except that there is apparently an estimated saving. However, the saving is only between £120,000 and £130,000 a year, which is not all that much if it results in a loss of confidence in the proceedings. The value of lay members has been specifically recognised by the Court of Appeal. I have been approached by lay members who are very concerned that their services may be dispensed with. They referred me to the case of Balfour Beatty and Wilcox, where the contribution made by lay people has been directly acknowledged and congratulated.

As it stands, Clause 11 should not be part of the Bill; there is no real good reason to depart from present practice. I accept that the Minister has already offered some modification, but I still believe it is necessary to involve lay people. They make a contribution to the procedures and are widely respected, by employees appearing before them and by employer organisations. I can see no reason for dispensing with them in the present procedures. I do not think that the savings involved are worth what may result in a total abandonment of the existing procedures which have served us well and which have the respect of the people who appear before them. We need more concessions from the Minister about what Clause 11 actually means and how it will operate.

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[Baroness Turner of Camden]

My Lords, I support what the noble Baroness has just said. It is very important that we should know what area of diversity, if we can call it that, or what issues would mean that it would be appropriate for a judge not to sit on his own but to have the support of lay people. I can think of a whole range of issues that it would be appropriate in such circumstances for lay people sitting on the appeal tribunal to deal with. Perhaps the Minister could indicate what those issues would be.

[Viscount Younger of Leckie]

It may be helpful, in answering the question for my noble friend Lady Brinton, to say that the guidance for employment judges to consider when deciding to sit alone, which I agree is important, is set out in the Employment Tribunals Act 1996. That is unchanged. It requires them to consider the likelihood of a dispute arising on the facts that suggests lay member involvement could be beneficial. It is for them to decide. Indeed, the likelihood of issues of law arising that would suggest that a judge sitting alone is sensible is another factor. He would need to take account of the views of the parties and what other proceedings might be heard concurrently. However, to answer the noble Baroness’s question in depth, I think it is best that I write to her and other noble Lords concerned over this particular issue on guidance.

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[Baroness Turner of Camden]

My Lords, I support my noble friend’s amendment to Clause 12. It would make it easier for employers to end employment by offering the individual a sum of money in return for a compromise agreement. The clause extends the “without prejudice” rule, which exists where a compromise agreement is offered as a means of ending an existing dispute. Any negotiations cannot then be considered by an employment tribunal. Clause 12 enables an employer to offer a sum of money and a compromise agreement in return for leaving employment when there is no pre-existing dispute. These negotiations will remain confidential and cannot be admitted as evidence before an industrial tribunal.

The TUC opposes these provisions as it believes that they will send a clear signal to employers that it is acceptable to sack employees without following a fair dismissal procedure. The provisions are also complex and can lead to legal wrangles, particularly where an employer has not acted properly in the negotiations and could be accused of discrimination. For these reasons, I support my noble friend.

[Viscount Younger of Leckie]

My Lords, this clause has been the subject of substantial debate in both Houses, and the noble Lord, Lord Young, has given notice of his intention to oppose it. I hope that I will be able to answer the concerns that have been raised. The clause forms part of a package of measures to facilitate the appropriate use of settlement agreements, encouraging the resolution of workplace disputes outside tribunals. Settlement agreements, or compromise agreements as they are currently known, offer a consensual and mutually beneficial outcome for both parties as distinct from the “no fault dismissal” idea, which we have been clear the Government are not taking forward. The clause does not affect an individual’s right to bring an unfair dismissal claim using other evidence or to bring other types of claim.

This legislative change builds on an existing system that has been successfully used for many years by many employers. It aims to provide additional certainty to enable a wider range of employers, particularly smaller businesses without in-house HR functions, to use settlement agreements with more confidence and in an appropriate way. We are clear about the importance of guidance for employers and individuals, an issue that has been the subject of substantive debate in both Houses. We have recently published our response to the Ending the Employment Relationship consultation on the principles to underpin the use of settlement agreements, and this will inform the development of substantive guidance that we will publish in support of the clause.

In response to concerns raised by all groups, we will include in a new statutory code an explanation of “improper behaviour” to ensure that employees understand the protection and employers are confident that they are acting appropriately when negotiating settlement. A draft statutory code is currently out for public consultation and the Government are working closely with businesses, ACAS and other stakeholders to ensure that the system is understood and can be easily and successfully used by employers and employees. This clause is part of a package of measures to better enable employers and employees to understand and use the existing system of settlement agreements as a mutually beneficial way of resolving workplace issues without resorting to a costly and distressing tribunal process. I therefore commend this clause to the House.

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[Viscount Younger of Leckie]

I thank the noble Lord, Lord Low, for suggesting that I intervene at this early stage in the debate and set out the effect of government Amendment 34. It would introduce the principle of vicarious liability into the whistleblowing protections. It has exactly the same purpose and effect as the noble Lord’s amendment. However, we feel that the drafting of the government amendment better achieves our shared objective and mirrors the provisions in the Equality Act on vicarious liability for discrimination. I look forward to further comments that the noble Lord, Lord Low, may make. I have noted some questions that he has raised, which I will attempt to address later in this debate.

[Baroness Turner of Camden]

My Lords, briefly, I have tabled Amendment 30 in this group because the TUC wrote to me and pointed out, among other things, that if you left the Bill as it stood, with the protected disclosure being limited to something in the public interest, that could well be construed to mean that a worker would not be protected if he or she made a disclosure affecting the provisions on health and safety at work. The TUC wanted to make sure that a worker would be protected if he made a disclosure in regard to the health and safety and general interests of the workforce; that is the intention of my amendment. However, when I looked at the amendment moved by the noble Lord, Lord Low, it seemed to me that it covered practically everything, including that which I was intending to cover in my amendment. Therefore, it had been my intention not to move my amendment and to say that, instead, I supported Amendment 29 absolutely and completely. That is still my position.

Growth and Infrastructure Bill

Debate between Viscount Younger of Leckie and Baroness Turner of Camden

Wednesday 6th February 2013 Lords Chamber

[Viscount Younger of Leckie]

I believe that I have answered my noble friend’s questions, and it is possible that I would not satisfy him, even if I gave him the same answer.

[Baroness Turner of Camden]

The Minister has just said that it is not clear whether an employee shareholder is an employee. I remind him of the advice that we have received from the Equality and Human Rights Commission, which looked at this situation in some detail. It came to the view that an individual who is an employee shareholder was nevertheless a worker, so workers’ rights would normally be applied to that individual. The Government have tried to get over that by saying that because this is all voluntary, the employee voluntarily gives up their rights. During the course of our recent discussion, it has become clear that that is certainly not voluntary. In a situation in which people face either unemployment or the possibility of loss of employment support from the state, it is not really very voluntary, is it?

[Viscount Younger of Leckie]

It may help the noble Baroness if I state again that the employee shareholder agreement between the employer and employee is a specific new contract for a new employment status. However, if, for example, the employer has not fulfilled the basic criteria for ensuring that the employee is properly included and for meeting the criteria for that employee to be an employee shareholder, there is a default position whereby the employee shareholder would revert to being an employee or worker, whatever is applicable. There is a safeguard in place for them.

Enterprise and Regulatory Reform Bill

Debate between Viscount Younger of Leckie and Baroness Turner of Camden

Thursday 31st January 2013 Grand Committee

[Baroness Turner of Camden]

My Lords, I support my noble friend on this amendment. I sat through the earlier discussions which were not within my particular area of involvement but this certainly is. Of course, transparency is very important in employment relations. My noble friend has just said that my party has no problem with high pay, but we all have problems with low pay. Taxpayers have problems with low pay because it involves the Government paying out welfare. That is the sort of problem that shareholders should be forced to face from time to time, and would be bound to do so under the terms of this amendment. Therefore, I hope that the Government will understand that this is in line with good practice, that it operates throughout the best part of English commerce and industry and that it is something that we should have in the Bill. I hope that the Government will feel inclined to support it.

[Viscount Younger of Leckie]

My Lords, noble Lords are very familiar with the arguments in favour of action on directors’ remuneration in quoted companies. In my opening remarks, I will be echoing many of the sentiments expressed by the noble Lord, Lord Mitchell, and particularly picking up on the transparency aspect, as expressed by the noble Baroness, Lady Turner.

Over the past decade, directors’ pay packages have risen on average by 13% per year, while the value of many of the companies they run has remained broadly static and workers’ wages have risen at a much slower rate. Business and investors recognise that this disconnect between pay and performance is damaging and not in the long-term interests of the economy. As Sir Roger Carr, president of the CBI has said:

“Now is the time to be more transparent, more responsible and more accountable”.

It is not government’s role to micromanage company pay, but there are actions that we can take to address what is a clear market failure.

Eighteen months ago, the Government initiated a broad, national debate on this issue. This has encouraged shareholders to become more engaged as owners of companies during the so-called shareholder spring. In 2012, several firms saw their remuneration reports voted down, including big companies such as Aviva and WPP. We have also seen many companies taking the initiative and engaging constructively in response. This is an important step for encouraging more responsible paysetting.

The Government’s reforms will build on this, and promote better engagement between companies and shareholders. By giving shareholders clearer information about what directors are paid and binding votes on pay policy, shareholders will be better equipped to hold companies to account. Business and shareholders agree that this comprehensive package of reforms strikes the right balance. It will promote a stronger link between directors’ pay and company performance but avoid placing unnecessary or inappropriate burdens on companies. The head of the Association of British Insurers has said that these proposals,

“are practical, workable and should help tackle excessive executive pay”.

The amendment requires that companies report on high and low pay outside the board. The issue of high pay below board level is most prevalent in the financial services industry because poorly designed remuneration structures can incentivise excessive risk-taking—a point alluded to by the noble Lord, Lord Mitchell. The Government are committed to improving remuneration disclosure in banks and achieved progress on disclosure below board level as part of Project Merlin. At the same time, Europe has proposed bringing in its own disclosure rules. We await the outcome of these negotiations before deciding on how to proceed with any domestic proposals for disclosure below board level at banks. The Government will argue strongly for the right outcome and remain committed to ensuring that the UK has a transparent and comprehensive remuneration disclosure regime for all companies, including the financial services sector.

However, we do not believe that high pay below board level is a major issue in other sectors. Through our consultations with investors, we learned that there is no demand for such a disclosure, which, if adopted, would place an unnecessary regulatory burden on companies.

Regarding the pay of employees more generally and how directors’ pay compares to that of lower-paid workers, the Government recognise that this is an issue of concern for shareholders, employees and the public in general. We want remuneration committees to consider the broader context when setting top pay. That is why, under government proposals, companies will have to say more about how they have taken into account pay of employees at all levels, and publish the percentage increase in pay of the chief executive officer compared to that of the workforce.

Last year, we published a draft of the regulations that will implement these proposals. These regulations will determine the content of remuneration reports in future. We invited people to comment on the draft regulations and a copy is available in the House Library. Noble Lords will have the opportunity to debate this matter thoroughly later this year when these regulations are brought forward.

Amendment 58BB would mandate that regulations prescribing the content of directors’ remuneration reports must require companies to disclose information about fees paid to remuneration and recruitment consultants in respect of directors’ remuneration. Noble Lords will be aware that the Secretary of State already has the power to require companies to disclose this type of information in the directors’ remuneration report and that we have published draft regulations that would give effect to this. Under these proposals, companies would be required to explain how consultants have been appointed, what services they have provided and how much they have been paid. By way of an update for the noble Lord, Lord Mitchell, we invited comments on these draft regulations and are currently considering the responses.

The noble Lord, Lord Mitchell, rightly drew attention to pay in banks, which I alluded to in my remarks. However, it is worth re-emphasising that high pay outside the boardroom is most prevalent in financial services, and we want to see greater scrutiny of how senior executives in large banks are incentivised because their behaviour can have a material impact on a firm’s risk profile. That is why we have committed to extending pay disclosure in large banks to highly paid non-board executives. This would mean that the UK had the most transparent bank pay of any major financial centre, but we do not propose to apply this in other sectors, as mentioned earlier, where it is less relevant. We consulted on this and found that there was no demand from investors for this extra information. Indeed, it would be an unnecessary extra reporting burden on companies.

I thank the noble Lord for raising this issue, but I suggest that the amendment is unnecessary, given that the Government already have the power to do this and have proposed considerable action in this area. I therefore ask the noble Lord to withdraw the amendment.

Enterprise and Regulatory Reform Bill

Debate between Viscount Younger of Leckie and Baroness Turner of Camden

Monday 14th January 2013 Grand Committee

[Viscount Younger of Leckie]

I have certainly noted the point that the noble Lord has made. I was clearly of the understanding that that was the reason but I will certainly revert and check, given the dates that I have just received from him.

[Baroness Turner of Camden]

In responding to the Minister, I begin by thanking everybody who has participated. We had an excellent debate, drawn from a lot of experience and expertise. It really has been very good indeed, and I am very grateful to everybody who has contributed. However, I am sure that the Minister will not be surprised to learn that I do not accept very much of what he has got to say. I still think that Clause 61 should not become law. I cannot understand why he says that it will help good employers. A good employer is helped by the existing legislation, and if the Government are concerned to improve health and safety at work arrangements, then they should be supporting the Health and Safety Executive instead of diminishing its resources. If they think they need to do more on health and safety, the HSE is highly respected and ought to have more resources, rather than fewer—which is what the Government’s present policy seems to be.

I really do not accept a great deal of what the Minister has said today. I cannot understand why he is going on about compensation culture. I have made some contributions about my experience in that situation when I worked for an insurance company. We have been talking about claims by employees which often take years to settle, particularly if it is a death; frankly, what sort of compensation culture is that? There is a case for looking at aspects of our legislation, but certainly not via this clause, which takes away some of the support that people currently have in the area of health and safety at work.

I am not at all in favour of what the Minister has said. Of course, in Committee we do not have votes. However, I can assure the Minister that this will be back again at Report, because a number of us feel very strongly about it. I certainly do and I am sure that my noble friends do as well. He has not heard the last of this. In the mean time, I do not press this question.