Small Business, Enterprise and Employment Bill

Baroness Neville-Rolfe Excerpts

Monday 26th January 2015 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)]

My Lords, the power in Clause 144 is just one of a number of changes the Government are making to improve the whistleblowing framework. In particular, we are acting in this Bill to ensure that prescribed persons—mainly regulators—report annually on whistleblowing. The purpose of this is to make the existing process, which of course is provided for in the Employment Rights Act 1996, transparent and more effective. I think it is an important provision.

I know that the noble Lord, Lord Wills, is very passionate about this subject. I valued the meeting we had to discuss his very wide-ranging amendments and understand the issues around whistleblowing right across the piece. I reassure him that his desire to improve the way whistleblowing is handled is shared by this Government.

I am grateful to the noble Lord, Lord Low of Dalston, for his comments, including his emphasis on openness, which is, of course, a feature of this clause, and I commend the noble Baroness, Lady Mobarik, on her first intervention in this Committee and for a typically acute question, which I hope I will be able to answer.

This is an important debate. The Government are determined to protect and encourage whistleblowers. Indeed, I take this opportunity to congratulate the whistleblowers at Mid Staffordshire NHS in particular, but others too, on their courage—in the words of the noble Lord, Lord Young. Attitudes must change, as the noble Lord, Lord Wills, has highlighted, quoting the Prime Minister. That is why we are making a number of statutory and non-statutory changes in this Parliament to change the culture and improve and promote the whistleblowing framework. I believe that these changes, mainly outside the Bill, should be given the chance to take effect, and perhaps I can highlight them as I go through and comment on the various amendments.

I will begin, if I may, with Amendment 68. The Government agree that a code of practice and guidance for employers would help to promote the whistleblowing framework. This is why we are currently working with key stakeholders to create improved guidance and a non-statutory code of practice. We intend to publish these before the end of this Parliament. I strongly believe that educating employers on the benefits that whistleblowing can bring to an organisation will contribute to a positive cultural change in the way whistleblowing disclosures are handled.

Until now, the Government have expected the legal framework alone to drive behavioural change by encouraging employers to embrace whistleblowing, but clearly, from the evidence that we have, not least the examples that the noble Lord presented, the law alone is not having this effect. This is why the Government are taking steps to provide detailed guidance setting out how the law should be interpreted. We will keep this under review, and if this is not bringing about the change that we expect to see, we will consider introducing a statutory code of practice.

Amendments 64 and 65 look to amend the definition of a worker to include students in the healthcare sector and job applicants. This is a good call, and I can confirm that as a result of the Government’s call for evidence of 2013, we are making a change to bring student nurses and student midwives into the scope of the whistleblowing framework. It is the Government’s intention for this to be in place by 6 April. The statutory instrument has been laid before Parliament, and I believe there is a debate in the other place on 3 February.

The Government wish to extend the definition of “worker” further to include all students within the healthcare profession, although further work must first take place to design a legislative solution that works for the different professions within this sector. The different regulators in the healthcare sector have varying arrangements for registering professionals and training people, all of which needs to be taken into account. The noble Lord, Lord Wills, encouraged us to cover all healthcare students in the scope of PIDA. I can say that the Department of Health is beginning discussions with the relevant professional bodies about this work, and I am happy to undertake to keep him informed of progress, if that would be helpful.

Amendment 65 would extend the definition of “worker” to cover job applicants as a way to prevent whistleblowers being blacklisted and struggling to find new employment. The Government agree that those who have previously blown the whistle should not be disadvantaged when seeking new employment opportunities. That is why we are in the process of identifying the most suitable solution to address this issue, but it is a complex area, and we must ensure that any legislation would not have unintended consequences, such as creating an unfair burden on employers to prove either that they did not know that a person was a previous whistleblower or, if they did, that whistleblowing was not the reason for not hiring them. These kinds of scenarios could make recruitment processes unfair, burdensome or bureaucratic, and we have to see what we can do to get around that.

We must also ensure that employers are not unfairly exposed to the risk of tribunal claims from job applicants: for example, if they had no knowledge that an unsuccessful job applicant had previously blown the whistle, but found themselves drawn into an employment tribunal case, having been accused of causing detriment to a whistleblower.

I appreciate noble Lords’ input to suggested drafting of the legislation through this amendment, but there is work to be done to get this right and it will take time, beyond this Parliament, to reach a suitable solution. It would not be right to add this half-cooked work to a Bill designed primarily to help small business and not to introduce new burdens for employers. If this work is to get the support we need, we have to get it right.

Amendments 63 and 67 look to provide clarity to whistleblowers on gagging clauses, which I believe can be achieved without new legislation. The Government have made very clear that gagging clauses are completely unenforceable when there is a public interest concern to disclose. The new comprehensive guidance for whistleblowers, which I have mentioned, will emphasise that settlement or severance agreements do not prevent ex-employees from raising public interest disclosures. This is set out in Section 43J of the Employment Rights Act, so it is a speedy solution.

The noble Lord, Lord Wills, and I discussed the lessons of the useful report published by the NAO in 2013, which was also mentioned by the noble Lord, Lord Young. Although this confirmed, as he acknowledged, that gagging clauses do not prevent workers from raising legitimate public interest concerns, it also showed that the workplace culture, or lack of information, often leaves the worker feeling gagged. I accept that point, so the Government are introducing a number of measures aimed at changing cultural attitudes to whistleblowing. This should help to ensure that workplace environments do not leave workers feeling that they are unable to make a disclosure.

I turn to Amendment 62. The whistleblowing framework is in place to protect those who have blown the whistle: for example, the investment banker who has reported fraudulent practice in his bank or the construction worker who has exposed health and safety laws being ignored. Those who have been dismissed for any reason other than making a public interest disclosure and believe it to be unfair would need to seek redress under unfair dismissal provisions. From the research the Government carried out in 2013, through a call for evidence, this has not come up as an area for concern. Therefore, the Government consider that there is no case for this new legislation at present. However, if noble Lords feel there are issues in this area that need to be addressed, I would be keen to know, and to have examples, so that we can look at them.

Amendment 66 proposes to include “allegations” within the meaning of a disclosure of information. The Government agree with the Employment Appeal Tribunal decision in 2009, in the case of Cavendish Munro Professional Risks Management Ltd v Geduld, that the legislation should protect individuals who make a disclosure conveying information, not those who simply raise an allegation or expression of concern. For example, a worker stating simply that they had concerns that an employer did not follow health and safety laws would be making an allegation. If that same worker explained the reasons and facts—such as a door being wedged open, putting people at risk in the event of a fire—this would meet the criteria for it to be a public interest disclosure. This is quite a small change.

Amendments 68ZA to 68ZF would provide for a whistleblowing ombudsman and set out provisions as to how this would operate. I am grateful to the noble Lord for giving the Committee the opportunity to debate this. Its purpose would be to investigate failures in dealing with whistleblowing. However, I fear that if the ombudsman were drawn into investigating all issues reported by whistleblowers, its remit would be unmanageably broad. It would potentially span all issues covered by the many regulators as well as all criminal activity that the police would investigate. The equivalent US office is huge, and given the remit this would be a major undertaking, but as the noble Lord helpfully made clear, this is a probing amendment. I also noted the concerns of the noble Lord, Lord Stoneham, about doing things speedily. This is right and relevant.

In his powerful speech on his amendments, the noble Lord, Lord Wills, set out details of the functions that an ombudsman of this nature would have and provided a good checklist. Annual reporting and best-practice guidance were on that list. As I have already said in response to the noble Baroness, Lady Mobarik, the Government are already putting these measures into effect.

However, the Government recognise that one of the main issues that people have with the whistleblowing legislation is that it is not designed to address the issue reported by the whistleblower; it is designed mainly to address the employment dispute that might arise as a result of someone blowing the whistle. The noble Lord and I discussed this.

I am glad to say that the measure in this Bill will go some way to help ensure that the issue that is reported by the whistleblower is dealt with. Clause 144 introduces a duty on regulators and professional bodies that are listed as prescribed persons to report annually on the whistleblowing disclosures made to them. I believe that this will improve transparency in the way that disclosures are handled. Of course, culture matters, too—in fact, it probably matters more than anything, as Mid Staffordshire showed us—which is why we are well advanced on our national code.

I understand the noble Lord’s concerns and appreciate the work that has gone into preparing for this discussion, which is why I have tried to respond at length. We are making progress. We need to change the culture around whistleblowing, especially in the public sector, which seems to be behind best practice externally.

We are working across government and with external stakeholders to make sure that we get our guidance on whistleblowing right. Those stakeholders include Public Concern at Work, with which I know the noble Lord has worked closely to understand the concerns of those who blow the whistle. I hope that in the circumstances the noble Lord will agree not to press his amendments.

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[Baroness Neville-Rolfe]

My Lords, I thank noble Lords for their amendments. I believe we share the same aim—that of ensuring the best outcomes for individuals who have been through an employment tribunal, and ensuring that they receive their awards. Our research indicates that, without enforcement, only 40% of awards are paid within six months. That is clearly scandalous. Our financial penalty clause is intended to incentivise prompt payment of employment tribunal awards and to prevent employers ignoring judgments by employment tribunals. It applies to all tribunals, awards and settlements conciliated by ACAS. Employers who have not paid the award will receive a warning notice from the enforcement officer. By paying the award in full, promptly, they will avoid a penalty. However, if they do not pay in full, they will be hit with a penalty of 50% of the award. If they continue not to pay, or to pay only part of the award, they can receive further penalties, each of 50% of the unpaid amount, as well as incurring interest on the outstanding award. We consider that encouraging prompt payment in this way is an effective way of dealing with a problem that we agree exists.

Before I return to the amendment, I will respond to the point made by the noble Lord, Lord Young, about employment tribunal fees. It is reasonable to move away from funding being provided largely by the taxpayer towards a more balanced process, whereby the £74 million cost of administering claims to the employment tribunal system are met in part by those who use the system and benefit from it. However, it is important to emphasise that the Government have been very careful to ensure that fee waivers are available for those people of limited means in order that they are not excluded from seeking redress through tribunals. As the noble Lord, Lord Stoneham, has already mentioned, helpfully, the Government—

[Lord Young of Norwood Green]

I hear what the Minister says, but surely there ought to be some concern—as I think the noble Lord, Lord Stoneham, mentioned—about a situation where, in some regions of England, the number of employment tribunals has dropped by 80%? Surely that is not an indication that 80% of claims were vexatious. Does she really not have any concern in this situation that fees are deterring people from bringing what could be completely fair and justifiable cases before an employment tribunal? The evidence we hear from trade unions, which are normally the buffer between the employee and employer, is that that is exactly what is happening.

[Baroness Neville-Rolfe]

My Lords, I am glad that the noble Lord intervened to register his concerns, which to some extent I share. That is why the Government have committed to reviewing the introduction of fees. We are considering the scope and timing of the review, and will bring forward our plans in due course. We need to understand what is going on here, of course, but I was trying to make a general point about trying to improve things. The provisions in the Bill are another example of our efforts to do just that—to ensure that there are fair results and that people who are given awards receive them in due time.

I turn to each of the amendments, acknowledging the spirit of them, but obviously, as is usually my wont, looking to make sure that we do not have any perverse effects. I will start with Amendment 68ZG, which is designed to include costs in the calculation of the money that is considered to be owed for the purposes of the penalty. It is worth noting that “costs” or, sometimes, “preparation time” awards—where people are not paying for attorneys—are made in only a tiny proportion of cases. Costs awards are not related to the compensation for the breach of employment rights—for example, in a case of discrimination—but to the way in which one of the parties has behaved during the tribunal process. A good example would be the deliberate, repeated late disclosure of documents. Indeed, last year only 242 costs orders were made to claimants—in the context of more than 42,000 claims. The Government do not believe that adding costs to the calculation will add a significant additional incentive to pay. But I am sympathetic to the noble Lord’s intention and will consider further whether we need to make a change ahead of Report.

Turning to Amendment 68ZH, we are clear that a penalty regime must incentivise prompt payment in full and not inadvertently reduce the likelihood of individuals gaining their full award. Allowing the penalty to be used to offset the award, as proposed in the amendment, would not, we fear, incentivise prompt payment of the award in full, which is our objective. The point of the penalty is to act as a deterrent and a sanction for non-payment. Conflating money owed to the claimant with a civil penalty would cause confusion and might raise questions about which liability had been met when money was paid. We believe it would be better to keep the civil penalty separate from the money owed to the individual. The clause already encourages an employer to make full and prompt payment to avoid a penalty altogether. As I have explained, the only way in which an employer can avoid a penalty is to pay up in full once they receive a warning notice. This seems to be the most effective approach.

Amendment 68ZJ seeks to introduce a naming scheme. As the noble Lord will be aware, there is already a scheme for the national minimum wage. We are considering naming as part of the Government’s overall approach to increasing the full and prompt payment of tribunal awards. We need to carefully consider the options to ensure that we find the most effective response. I would be happy to update noble Lords on our thinking ahead of Report.

Turning to Amendments 68ZK to 68ZM, I reassure the noble Lord that unpaid awards are already recoverable through the county court, or the sheriff court in Scotland, as they are treated as judgment debts. There is also a fast-track scheme in England and Wales where a court enforcement officer can pursue the money on the claimant’s behalf. Furthermore, interest accrues on those unpaid tribunal awards at 8% per annum. So there is an incentive to pay promptly and in full.

Finally, in response to Amendment 68ZMA, I hope I can provide further reassurance. As I have outlined, there are already a range of mechanisms by which an individual is able to enforce their tribunal award. In addition, under Clause 145, a government-appointed agent will impose penalties for non-payment. The penalty scheme we are introducing through this clause offers an alternative, cost-free way to ensure that the claimant gets the money they are owed. Therefore, the Government do not consider that there is a need to set up a further mechanism at this stage, but we shall continue to monitor the situation following implementation of the new penalty provision.

I hope that my explanations, including about our wider plans, have provided reassurance to the noble Lord and that he will be content to withdraw the amendment.

[Lord Low of Dalston]

Before the noble Lord, Lord Young, replies, I wonder if I might be permitted to say a word or two about Amendment 62ZMA. I am afraid I was not quick enough on the draw before the Minister rose to reply. I thought that more noble Lords would intervene on some of the earlier amendments so I missed my cue.

Since I am speaking slightly out of turn, I will not make all the points that I might have made in support of the amendment. I am very grateful to have heard what the Minister had to say but there is a considerable amount of concern about the effectiveness of regimes for enforcing the payment of awards. A number of suggestions have been made for addressing this problem. I wonder if the Minister might be prepared to meet me before Report to talk through some of the options and to see if we cannot slightly firm up the provisions that are already there and find a formula or mechanism which might be slightly more likely to deliver results than what is in place at the moment and, indeed, what is proposed by the Minister.

[Baroness Neville-Rolfe]

My Lords, I am grateful to the noble Lord, Lord Low, for his comments. I would of course be delighted to host a meeting and go through these important issues—what we are doing, what we are not doing and how to find the best way forward in this important area so that the penalties work and the awards are paid.

[Lord Young of Norwood Green]

My Lords, I thank the Minister for her comprehensive reply. Are we satisfied? No, I do not think we are entirely, although I welcome the suggestion from the noble Lord, Lord Low, of a meeting; that is a useful and practical possible way forward. The research carried out in 2009 by the Ministry of Justice, which administers the system, showed that 49% of those employment tribunal awards—almost half—went unpaid in the first instance before any enforcement action was taken through the county court system. If it were 4% or 9%, we might say, “Okay, it’s not doing too badly”. Each case represents an individual who has fought their way through all those hurdles, got through to the employment tribunal and won an award but, no matter what the penalties are, they do not yet seem to be convincing the majority of employers. It is even worse in Scotland.

We still have real cause for concern. I have raised the fact that we have seen a dramatic decrease in people being prepared to go to a tribunal, and this seems to be adding insult to injury when they actually do go there. Nearly half the employers are able to say, “We can ignore it. We’re not bothered. We’ll see if we can weary the individual to the point where they won’t continue”. I am sure that some will not go through the county court because by that time they will have had enough. That is our concern.

[Baroness Neville-Rolfe]

My Lords, I reiterate that I also feel that the current situation is scandalous—I think that is the word I used—and the question is how we can best find measures that will solve the problem and bring the rate of payment in such areas much closer to what one might expect in other areas of the law. I hope that our meeting might assist with that.

[Lord Young of Norwood Green]

I think that I have made the necessary points, and I beg leave to withdraw the amendment.

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[Lord Young of Norwood Green]

My Lords, we suggest that this new clause be inserted into the Bill. In the case of non-compliance, we believe it is justified that,

“any relevant remuneration the worker would have received in respect of holiday pay or other leave pay”,

ought to be included as part of the national minimum wage assessment. I beg to move.

[Baroness Neville-Rolfe]

I thank the noble Lord for his amendment and, indeed, for his succinct introduction, which I do not think I can quite match in responding to the amendment, which introduces a new clause to include holiday and other leave pay within the calculation of the minimum wage.

The Government do not consider that the amendment is necessary. That is because under the Working Time Regulations, a worker is entitled to a week’s pay for each week of leave, and there are already routes of redress if these payments are not made. A worker who believes that they have been underpaid can make a claim to an employment tribunal. This claim has to be submitted via ACAS, which will first offer early conciliation. Where holiday pay has not been paid, workers have a choice as to how they may claim the money they are owed. They can bring an action against their employer under Regulation 30 of the Working Time Regulations or they can bring an action for unlawful deduction of wages under Section 23 of the Employment Rights Act.

Both claims are brought in the employment tribunal. Where the worker is entitled to other leave pay which forms part of his or her wages, he or she will be able to claim any underpayments through an action for unlawful deduction under the Employment Rights Act. In addition, the early conciliation system allows for disputes over pay to be resolved before recourse is made to the tribunal, so without litigation. If a worker believes that he or she has not received the correct holiday pay, he or she can contact ACAS, which I am sure will be very helpful and will offer early conciliation. If that is not successful, a worker can take a claim to an employment tribunal. ACAS offers helpful guidance on holiday pay on its website.

The Government firmly believe that the holiday pay arrangements currently in place are sufficient and there is no evidence to suggest that enforcement in relation to holiday pay should be extended to the National Minimum Wage Act. I did, however, pick up the point from the earlier discussion that perhaps people do not always know what the routes for information and redress are. In writing to noble Lords, as I promised to do on the earlier amendment, I would be happy also to set out the arrangements on holiday pay so that people have a full understanding.

I hope that the noble Lord has found my explanation of the avenues that exist reassuring and will therefore agree to withdraw his amendment.

[Lord Young of Norwood Green]

I have listened carefully to the Minister’s response. We think there is a connection in that employers who fail to pay the minimum wage are often also in this situation, where they do not respect full holiday pay and leave entitlements. We will take into account the response and consider whether to come back to this on Report. In those circumstances, I beg leave to withdraw the amendment.

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[Lord Mitchell (Lab)]

My Lords, I support my noble friend Lady Donaghy’s probing amendment. I have to make a declaration of interests. I am chairman of a company called Instant Impact. The principal business of that company is the recruitment of graduates from universities, which is obviously close to what we are discussing today.

“The condition of your birth does not determine the outcome of your life”.

Those are not my words, but those of an unlikely source, US Republican Congressman Paul Ryan, a staunch right-winger and not one we would expect to support the nanny state. Who among us could disagree with that?

Of course, in the Labour Party, we believe passionately that everyone should have an equal chance to succeed, no matter what his or her background may be, but the Conservative and Liberal Democrat parties are wedded to the same mantra: whatever our birth may be, each of us should have the same opportunity.

When most of us were young and seeking our first jobs, it really did not matter whether we had worked as interns. Indeed, the term barely existed. Sadly, all that mattered was where the candidate went to school and, more importantly, where the candidate went to university. In my case, Ealing Technical College probably did not stack up too highly. A good degree was a help, but not a necessity. A gentleman’s third-class honours was still acceptable with a wink and a rueful smile. That was true then, but no longer.

Today, the CV has become a rite of passage. It must be fine-tuned and honed, with not so much the right school, but certainly the right university and, without question, the right level of honours degree. The soft factors also count: sporting activity, cultural pursuits and charities supported. In a highly competitive world, whatever makes you stand out and interesting will help you to land the job you want. These days, young people need to include job experience on their CVs. They need to show that they have worked for a series of organisations and that they have become well rounded individuals. One of the ways that they do that is by becoming interns.

To the wealthy and well connected, getting their sons and daughters into suitable internships is relatively easy. I bet that many of us in the Room today have address books that other people would kill for. We have access to everyone who counts and, even if we do not, we have no problem in working the network to make sure that we get our children or grandchildren through the door. Some of us are able to fund our children if they do not get paid for their internship. After all, we can argue that it is the final part of their education and goes with the territory.

As a result, whole swathes of our economy are riddled with unpaid interns. The media, fashion, advertising and the new social media companies recruit unpaid interns at will, simply because they can. As has been said, how many Members of Parliament or Peers in our own Palace of Westminster have unpaid interns working in their offices or their constituencies? I do not know the answer but I would bet that the number is much higher than most of us suspect.

What happens if your parents do not have the contacts or are simply unable to fund you while you are working for nothing? I hope that the Government accept my noble friend’s amendment because we need more information about whether people are being exploited. If they are, I hope that the Minister will commit to looking at a four-week limit, as suggested by Intern Aware. I should like to hear the Minister’s views on this. I hope that she does not suggest—as the noble Lord, Lord Popat, did, when the noble Lord, Lord Storey, asked a Question in the House a few weeks ago—that we should refer to the Government’s Graduate Talent Pool for an answer. I have never heard of it and nor has anyone else I know. It really does not feature on the intern recruitment side. I also ask her not to suggest that HMRC has the powers to intervene and that it can hunt down any offenders. It is stretched to capacity, and anyhow it has other fish to fry.

There are many organisations that support the four-week limit. Axa, a major insurance company, says that a four-week limit to unpaid internships will ensure a fair opportunity for everyone. Ernst & Young says that young people deserve to be paid for the work that they do on internships, and if they do not, it is reprehensible. The wonderful Charlie Mullins, the founder of Pimlico Plumbers, a small business—which is not so small these days—says that it is completely reprehensible for companies to expect interns to work without pay. The ACCA has asked for an end to unpaid internships. RIBA expels members who use unpaid interns. UK Music says that interns should always be paid at least the national minimum wage. Lastly, the Times said in a recent editorial that the,

“abolition of unpaid internships is worthy and desirable”.

Under current national minimum wage law, an intern is entitled to pay only if they are working under a contract; of course, for a contract to exist it needs consideration. That means that if an intern receives nothing except expenses from their employer, the national minimum wage will not apply. The worst employers are exploiting this loophole and, under the law as it currently stands, there is little that can be done. The dice are loaded against those who cannot afford to take unpaid internships. The solution is not to discourage rich people from helping their children but to do a lot more to help clever kids who do not have wealthy parents.

[Baroness Neville-Rolfe]

My Lords, I thank the noble Baroness, Lady Donaghy, for raising this issue and giving us the opportunity to have a debate. She brings great knowledge and experience of all employment matters, notably as a former chair of ACAS and now from her work at the CIPD.

Internships can and do provide valuable opportunities for young people taking their first step in the labour market, and we wish to encourage them. Speaking for myself, last July I had the very happy experience of taking an intern from a modest social background here in the House of Lords, and over the years I took a good number of interns when I worked in retail, as part of sixth-form studies or college vocational assignments. I tried to take people who might not otherwise get a chance to come in and get work experience; that is a great thing that employers, and indeed the public sector, can do.

The term “internship” is of course a relatively new concept—and, I am afraid, like so much else, a bit of an Americanism. As has been said, there is no definition of internships in UK legislation. Individuals undertaking an internship may be workers, employees or volunteers, depending on the reality of the situation and not their job title or what an employer decides should be set out in a contract.

The flexibility of our labour market is a source of pride and there are currently more people in work than ever. In the past year alone the number of people in work rose by 512,000, so employment is now at a record 30.8 million, providing valuable opportunities to young people. Of this remarkable growth, eight out of 10 were employees and eight out of 10 were in full-time jobs. In a labour market as flexible as the UK’s, there are a multitude of possible employment relationships that suit the employer and the individual, and this has to include short-term placements, internships and work experience. There is no single test to determine whether a contract of employment exists and whether an individual is an employee. Only an employment tribunal can determine whether a contract of employment exists. I appreciate that sometimes this can be confusing and unhelpful. Last October, my right honourable friend the Secretary of State announced a review of employment status—rightly, I think—to ensure that these issues are considered. We hope that the review will conclude in March.

The noble Baroness’s amendment asks the Government to publish a report which would assess the growth of internships over the past five years, their incidence by sector, their average length and the subsequent career choices of interns. We are not convinced that it makes sense to write the requirement for a report into the Bill. Internship and work experience policy is a matter for the Government to consider as part of their normal work on employment policy. As I have said, we are looking at the issue in the context of a review of employment status, conscious of the need to preserve good practice in relation to work experience, where it exists.

I understand the concerns raised about pay and social mobility, and that some young people will not know about the opportunities or be able to find internships. I assure noble Lords that the Government are keen to work with employers and young people to ensure access to high-quality graduate opportunities and that is why we fund the Graduate Talent Pool service—which more people have probably heard of now, as a result of the Question in the House answered by my noble friend Lord Popat and because of the discussions on this Bill. The service is free to employers and graduates and provides information on all aspects of internships.

My noble friend Lord Storey asked about volunteers. Genuine volunteers who are not workers and who willingly give their time for free are exempt from the national minimum wage. The Government’s Social Mobility Business Compact seeks to influence business to remove barriers to social mobility and to promote open and fair access to opportunities. This is what the noble Lord, Lord Watson, and my noble friend Lord Storey seem to be seeking. There are a number of strands to this, including work experience and paid internship opportunities. We are involving education providers—schools, colleges and universities —so that they build up links with business and other employers, including charities, which is another important area.

There is an issue about the entitlement to the minimum wage and I should explain that an intern’s entitlement depends on their employment status. If the intern is an employee or a worker, they are entitled to at least the national minimum wage from day one, and all other rights attached to their employment status. If the intern is a volunteer, they are not entitled to the national minimum wage but can receive reasonable out-of-pocket expenses. This may be the only way that people can get work experience. I worry that regulation could be perverse in its effect, especially with small businesses which probably cannot afford the great schemes we have been talking about that are provided by the big accountancy and insurance companies and so on. It is quite a complex subject.

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[Lord Mitchell]

One word I did not hear—and I was listening very carefully—was “exploitation”. The feeling many of us have on this issue is that young people who are desperate to make sure that their CVs look good so that they can say that they have had the right experience are prepared to be exploited to make sure that their CV looks good. Many employers out there prey on them, and in many cases those situations where people are not paid can last for long periods of time. More than anything else, we want to address that.

[Baroness Neville-Rolfe]

I thank the noble Lord for that further clarification. There is a lot of common ground here. We need to address certain issues and, clearly, we are all keen to stamp out exploitation.

[Baroness Donaghy]

My Lords, I am very grateful to noble Lords who have taken part in the debate. I thank the noble Lord, Lord Storey, for his comments. Of course, there is no intention to interfere with the perfectly well known volunteer system or with anything to do with sandwich courses in universities. I think we all know what we mean when we talk about these cases, but we are not very strong on analysis, and we need to pin that down.

My noble friends have certainly pointed to the exploitation issue—that somebody can be very willing because of the future opportunities that an internship can give them. Because their family can support them they might grit their teeth and say, “Well, let’s put up with this for a few months, because it will open doors that otherwise will never be opened”. It is still exploitation. The vast majority of people that I am talking about do not even get through the front door; they do not even get through the door to enable themselves to become disgruntled, so that they can go for enforcement or to various websites to ask about it. They are outside this semi-privileged circle. That is the issue that I want to pinpoint.

[Baroness Neville-Rolfe]

It certainly has not been my experience—and I used to work outside London—that all internships are a gilded circle. Internships and work experience are quite broadly based in the cities of Britain, which is a very good thing. I am keen that that should continue in big firms and small firms, in the public sector and in the voluntary sector. We have to be careful that we do not take steps which, with the best will in the world, have a perverse effect, so it is right that we should debate these issues. Like the noble Baroness, I have a lot of passion to make these things work and to encourage more opportunities for more people.

[Baroness Donaghy]

I thank the Minister for that comment. I think that we are not too far apart on the need to identify and be more objective about what we are talking about. I am referring all the time in this amendment to unpaid internships. As I have said, I think that there is an element of exploitation. Perhaps any report or further discussion that we might have could look at some time limits that are acceptable. I am grateful for the Minister’s comprehensive reply. I will look at that in more detail but at this stage beg leave to withdraw the amendment.

--- Later in debate ---

[Baroness Donaghy]

I want to say a brief word about this because I must admit that I have a personal dislike of the phrase “zero-hours contracts”. Casual labour has existed for a very long time. It has had different names and different fashions have been followed. I think we are all aiming to ensure that while we do not completely get rid of a flexible labour market, basic employment rights are available to those who have spent any significant length of time in a particular job. We know what we are talking about here, do we not? There is the story of the burger operative—or whatever they are called—who was told that he was not working when not serving a customer. His pay was therefore suspended so that he was receiving pay only when he was serving customers. The argument then was, “Of course, the franchisee went beyond his remit”. That is a marvellous excuse made by some national brands; they can blame a local manager for doing something when the tone has probably been set at national level.

This could be extended to all sorts of other areas by saying, “You are not actually working”. I know that the noble Lord, Lord Stoneham of Droxford, used to work for the National Union of Railwaymen. I wonder if the same would apply to a train driver who is not driving his train while stopped at a signal, and therefore should perhaps not be paid until such time as the signal is green. That was how ridiculous some of these practices were on the ground. To go back to the reality of the casual world of work, as we know it in this country, those practices are not really funny. They are quite serious examples of exploitation so I make no apology for supporting my noble friend Lord Young on these amendments, if only to try to get to a situation where we are paring back all these gimmicky phrases and looking at people’s basic employment rights.

[Baroness Neville-Rolfe]

I thank the noble Lord, Lord Young, for these amendments and for the debate we have had on this part of the Bill, which went slightly wider than the amendments. I ought to say that Labour did nothing about zero-hours contracts for 13 years. The number of them went up by 75% between 2004 and 2009. What we have done is to carry out a review into these contracts, so that we can deal with any abuse. As a result, we are banning the type of contracts which mean that employees are not allowed to work for any other employer, while still allowing people such as students to benefit from the flexibility that they offer.

We introduced Clause 148 to deal with this mischief and I am glad to hear the noble Lord’s support for it and my noble friend Lord Stoneham’s perceptive analysis. The noble Baroness, Lady Donaghy, rightly tried to improve our English and not talk about zero-hours contracts. It may be that like one of the terms we were struggling with earlier, the term is an Americanism. Wikipedia does not give its origin but I will hunt it down.

At present, an individual subject to exclusivity terms in their zero-hours contract cannot seek work elsewhere, regardless of whether the employer offers only occasional, minimal, or even no hours of work. Exclusivity terms are unfair for the individual who, as a result, is prevented from boosting their income or building on their work experience. Frankly, it is also damaging to the economy because it prevents people from reaching their full employment potential.

As my noble friend Lady Harding made clear at Second Reading, from her own experience of running a supermarket in Yeovil, zero-hours contracts are an important element of a flexible, vibrant labour market, and they work for employers and individuals alike. I even heard the shadow Business Secretary agreeing that sometimes people quite like to use them. However, I think that we also agree that people working under such a contract must get a fair deal.

The ban on exclusivity terms in zero-hours contracts, as set out in the clause, is straightforward. From the moment the clause commences, individuals can simply ignore an exclusivity clause and work for another employer as well if they wish. There is no process, no admin and no need to discuss this with the employer—I am not sure that people understand this—and any attempt by the employer to stop a second or third arrangement would be unenforceable. This is a major change and a reduction in employer flexibility, but one that we believe is right.

Amendment 68ZU seeks to provide a route of redress for zero-hours workers who need to enforce their rights, allowing for regulations to set out the details. The clause already provides for an order-making power that will allow for this.

Amendment 68ZW seeks to make the use of that order-making power mandatory. However, given the fact that routes of redress will be delivered through the order-making power, I am sure that the Committee will agree that in this case the amendment is unnecessary. The Government will have to bring forward regulations; otherwise, the ban on exclusivity terms in zero-hours contracts will have no meaning. For this reason, I do not believe that we need to make this amendment. The regulations that will be possible under the order-making power will also be able to address the issue of redress that is covered in detail in Amendment 68ZAB; that is, that an employment tribunal will have the power to consider claims related to the exclusivity ban, including providing remedies to the individual and issuing penalties to the employer. The Government recently consulted on using the order-making power. We are currently finalising the details with a view to publishing the government response shortly on how we plan to tackle avoidance.

Amendment 68ZZ suggests that the definition of an exclusivity term is too narrow. However, the Government have looked at this and consider the description in new Section 27A(3) of the Employment Rights Act 1996, which will be inserted by Clause 148, to be sufficiently broad. It covers any provision in a zero-hours contract that prohibits working for others, as well as terms that require an individual to seek permission from their employer to do so.

I believe that our approach will deal sensibly and effectively with both avoidance of the ban and routes of redress for individuals on a zero-hours contract who suffer a detriment. I hope that on this basis the noble Lord will agree to withdraw the amendment.

[Lord Young of Norwood Green]

The Minister indicates that the Government have had some consultation and regulations will be published. I wonder if she will give some timescale for those.

[Baroness Neville-Rolfe]

My Lords, we shall be publishing them shortly.

[Lord Young of Norwood Green]

Prior to Report?

[Baroness Neville-Rolfe]

I will take that point away and do my best.

[Lord Young of Norwood Green]

Right. Obviously, as we said earlier, we welcome this measure. We are probing a bit to see whether or not the controls that the Minister referred to and the powers of the Secretary of State are sufficient. We will take into account the points that she made in her response, and we will consider whether we need to return to these issues on Report. In the mean time, I beg leave to withdraw the amendment.

--- Later in debate ---

It seems right that if you remain on ZHCs, you should, if a shift is cancelled at short notice, be given compensation for loss of earnings, travel expenses and, possibly, childcare. Of course, employment tribunals must be able to require exploitative employers to conform. We need proper contracts to corral the cowboys. The sadness is that so many of those cowboys are high street names which we have held in high regard—no longer.

[Baroness Neville-Rolfe]

My Lords, I am grateful to noble Lords for their amendments and the opportunity further to debate aspects of zero-hours contracts. I am also grateful for the clarification by the noble Lord, Lord Young, that he does not want to get rid of all flexibility. I was also very glad that the noble Baroness, Lady Hollis, joined our discussion. Her three case studies demonstrate the need for Clause 148.

As I set out in our previous debate, the Government recently consulted on the matter of avoidance and routes of redress, including powers to go to employment tribunals and seek compensation. I am pleased to reassure the Committee that that is already possible under Section 27B in Clause 148.

Amendment 68ZX would require employers to offer fixed-hours contracts once an individual has worked regular hours as determined by regulations. The noble Baroness, Lady Hollis, mentioned six months. Before I respond, let us reflect on how those with zero-hours contracts feel about their employment. The CIPD survey published in November 2013 found that many individuals chose to work on a zero-hours contract and were found to be more content than those in permanent employment. I accept that there will be hard cases but these are overall comments. Zero-hours workers, when compared to the average UK employee, are just as satisfied with their job, happier with their work-life balance and less likely to think that they are treated unfairly.

To respond to the point made by the noble Baroness, Lady Hollis, fluctuating demand is not predictable. My noble friend Lady Harding told us about that at Second Reading from her experience. Even the noble Baroness acknowledged that there are sectors of the workforce and individuals—students, those in IT, the recently retired, and many others—who are happy with zero-hours contracts, and, of course, happier to have a job than not to have a job. Imposing restrictive criteria over how a zero-hours worker can be employed may have the perverse effect of discouraging employers from creating jobs at all.

I appreciate that that is not the noble Lords’ intention, but I know that the Committee will understand the risk of unintended consequences, because it is something that we consider a lot when we are trying to legislate in this House. There is a clear risk that employers will simply let people go, or offer no work at the end of a qualifying period to avoid converting the contract to fixed hours. It would also be very difficult to define what is meant by “regular hours” in all those different industries.

The Government have already made some changes in this area. The flexible working regulations were amended in June 2014 to ensure that any employee can request flexible working. That is just as relevant to someone on a zero-hours contract as it is to a permanent member of staff. If a zero-hours worker is an employee and can show 26 weeks’ continuous service, they can make a request for formalised hours or a particular shift pattern.

Amendment 68ZX also requires a right for zero-hours workers to be provided with financial compensation. As I understand it, that power is already provided for in the clause.

[Baroness Hollis of Heigham]

The Minister says that people are satisfied with that. I was just checking my statistics from the CIPD, in which only one in five older people prefer the contract that is being offered them; the other four-fifths would like regular hours. The problem is that you cannot run a second job alongside a first—which is the point of Clause 148, which we all welcome—unless you know what your hours in the first job will be. It is very simple. Unless you have the ability to turn it into a reliable, regular, predictable contract, with the exceptions that we all agree may well be necessary—in IT, arts events, so on and so forth—the freedom you are giving in Clause 148 will be partly illusory. You cannot do it.

[Baroness Neville-Rolfe]

I thank the noble Baroness for her clarification. This is not an easy area. I also note that she made a number of good points about bad employer practices. I will mention something we are doing that may help on all these points. We have already encouraged business groups and unions to develop codes of practice. Those need to be sector-specific and industry-led, as we think that creates the most impact. A one-size-fits-all solution from the centre will not work, for exactly the reasons that we are debating this afternoon. The guidance would include, for example, in what circumstances a zero-hours contract is appropriate and where it is not, and the kind of considerations mentioned by the noble Baroness will be relevant.

Amendment 68ZX also seeks powers for employment tribunals to enforce their own judgments. Well established court-based enforcement options are already available to enforce employment tribunal awards, such as the fast-track system or county court in England and Wales and the sheriff courts in Scotland. The primary function of the employment tribunal is of course to provide a forum in which parties can resolve their disputes and obtain a judgment. The employment tribunal does not have responsibility for the enforcement of the awards it makes to individuals. Tribunal-led enforcement of its own awards would represent a fundamental departure from the normal principles of civil justice and enforcement. If the enforcement of employment tribunal awards for zero-hours claims became a tribunal-led affair, many other employment tribunal and civil court users would begin to question why the tribunal or court did not pursue or enforce its judgments or awards.

Amendment 68ZAC suggests that zero-hours workers should be provided with information about their basic terms and conditions within two months of their start date. I agree that employers should provide their staff with clear terms and conditions, and I reassure noble Lords that employees are already entitled to a written—or, I think and hope, online—statement of the particulars of their employment arrangement. That entitlement applies to individuals on a zero-hours contract if their employment status is that of an “employee”. However, the Government acknowledge that there is a wider issue about whether all workers, regardless of their employment status, should be entitled to a written statement. That is being considered as part of the review of employment status, including the risks, impact and opportunities involved in any new arrangements, which I mentioned when we were discussing interns. Officials will report to Ministers on the outcomes in March.

The noble Baroness, Lady Hollis, also talked about the interlink between zero-hours contracts and jobseeker’s allowance or universal credit. Universal credit was of course designed to be responsive to fluctuations in earnings—it is different in that way, and to my mind better—so, for people who are working, financial support will be reduced at a consistent and predictable rate. In weeks where a claimant has lower or no income from their zero-hours contract, universal credit payments would increase.

[Baroness Hollis of Heigham]

The point is that if you are going to be paid only at the end of the month, what do you live on in the mean time? Just to make it clear, your universal credit payment will be paid in arrears at the end of the month. However, you learn only at the end of the second week that you do not have the income. Although I absolutely agree that UC will reflect the total earnings over the total month, what do you live on in weeks two and three?

[Baroness Neville-Rolfe]

The noble Baroness makes a point that bears on the universal credit payment system in the round. I think that the clause is actually helpful, compared to the status quo, if we make these changes on zero hours. I am advised that universal credit is paid in real time, so if the claimant informs the system in real time, they will get the money. I must apologise that I am not a welfare expert, I am a Business Minister.

[Baroness Hollis of Heigham]

Whether it is the handwriting or whatever, it is certainly the case that UC will be based on real-time information, but the payment will be made at the end of a month in arrears. Therefore you have the problem of income-smoothing when you have unpredictable hours, and we know that the hours of 75% of people on ZHCs vary every week. That is why, going back to Clause 148, I ask how you can run a second job with unpredictable hours if your first job has unpredictable hours. Your two employers may want you at the same time, but neither employer may want you at another hour.

[Baroness Neville-Rolfe]

The noble Baroness makes a good point. In a sense, that is a problem for employers, who could previously have a zero-hours arrangement that was exclusive. As I explained in opening, we have decided that that should not be the case in future. I am sure that the new arrangements will take some thinking about and settling in but, as far as I am concerned, if you are on a zero-hours contract, you can offer your services to—I do not know—two fashion magazines rather than just one. That is an excellent move forward. In any event, many people on zero-hours contracts who benefit so much from them, especially those in the categories that we were talking about, are not looking for universal credit, as the noble Baroness acknowledged.

I have probably taken this as far as I can this evening. I have tried to set out why we are proposing this, and I hope that the noble Lord will feel able to withdraw his amendment.

[Lord Young of Norwood Green]

I was interested when the Minister said that one of our amendments, seeking compensation if shifts were cancelled at short notice, was catered for in the Bill. I had another careful look and I presume that she is referring to new subsection (5)(c) on page 138, which states rather broadly:

“requiring employers to pay compensation to zero hours workers”.

It does not state in what circumstances. I would welcome some clarification. If that is not possible today, it is still an important issue that requires an answer in writing.

[Baroness Neville-Rolfe]

I thank the noble Lord for raising the issue. I was going to deal with it in my response, but decided not to because of the complexities. I can give him some comfort but the best thing is to consider the questions that he has asked and write to him and copy that to other noble Lords, because this is obviously an important issue.

[Lord Young of Norwood Green]

I think the noble Baroness for her response. It has been an interesting debate. I thank my noble friend Lady Hollis for her usual forensic analysis. We will need to consider our response in the light of the Minister’s answers. Although we do not necessarily have an agreement on this, we are seeking to improve the Bill. We are not seeking to abolish flexibility or all zero-hours contracts but we seek to create a fairer scenario for workers employed in those circumstances. With those caveats, I beg leave to withdraw the amendment.