Tribunals (Maximum Compensation Awards) Bill

Christopher Chope Excerpts

Friday 17th June 2011 Commons Chamber

[Mr Christopher Chope (Christchurch) (Con)]

I beg to move, That the Bill be now read a Second time.

This is a short Bill that would set a limit on compensation for awards for unfair or wrongful dismissal or discrimination arising out of employment and provides that that maximum limit should be £50,000. I propose this partly because I know that the Government are considering the matter, although they announced their review in May whereas my Bill was presented as long ago as 5 July 2010.

At the moment, there are strict limits on the awards that a tribunal can give in respect of claims for unfair dismissal arising from ordinary employment law. When the claim for unfair dismissal is based on discrimination, however, an unlimited amount of damages can be awarded. That is now leading to all sorts of farcical situations. The situation has been recognised by a group described by Mr Mark Leftly in The Independent on Sunday on 5 June as “an influential group” in the City,

“led by Sir Michael Snyder”

who have

“told ministers that employment law must be overhauled, with tribunal awards for discrimination cases capped at £50,000”—

the exact figure proposed in my Bill. The article goes on to say that

“an employee who successfully sues for discrimination, be it racial, sexual orientation or gender, can get unlimited awards. There is a growing belief that this has led to employees without genuine grievances making discrimination claims.”

People are making or threatening to make claims when they are faced with dismissal, saying that they will not go for the ordinary unfair dismissal but will base their claim on the fact that their dismissal has been on the grounds of racial discrimination or discrimination based on sex, gender or something similar. We are getting a two-tier system in which people threaten to sue in a tribunal for the much larger, open-ended awards that are available and my Bill would place a cap of £50,000 on all that.

[Mr David Hamilton (Midlothian) (Lab)]

In the interests of clarity, can the hon. Gentleman tell us how many such claims have been unsuccessful? That would give weight to the argument that people are claiming just for a chance of getting some money.

[Mr Chope]

I have the figures somewhere, but I do not have them to hand this instant because I have a lot of papers. I hope the hon. Gentleman will forgive me for not answering his question, but the figures that I saw show that many claims are unsuccessful or not pursued, quite often because they are the subject of a settlement. Quite often the settlement is between unequal parties. The claimant has nothing to lose by taking the case to a tribunal but the employer is faced with substantial legal costs, plus disruption to his business, in defending his position. Those claims can end up being settled out of court, as it is called. They would probably be regarded by the hon. Gentleman as unsuccessful claims, but they might have been taken to the tribunal had it not been for the imbalance of power between the applicant and the employer.

[Mr David Nuttall (Bury North) (Con)]

May I help my hon. Friend on that point? I suspect that no accurate figures are available because many of these claims are resolved before the application is put to the industrial tribunal. Although figures will be available for those withdrawn or settled after the industrial tribunal proceedings began, I suspect there will be many thousands of other cases that the public do not know about.

[Mr Chope]

To put the issue in context, I will quote briefly from some newspapers. On 24 October 2008, the MailOnline had the headline “Asian bank worker gets record £2.8m race discrimination payout”. On 10 September 2009, another headline read: “Sacked council manager wins £1 million age discrimination payout”,

and a report has come out in the past few days saying:

“Discrimination compensation payouts hit an all time high.

A recent annual survey of compensation awards in the Equal Opportunities Review has revealed that the amount being paid out by employers in discrimination cases has more than doubled in two years.”

[Mr Brian Binley (Northampton South) (Con)]

Does my hon. Friend recognise that there is a level below a claim which employers are quite concerned about? They are being threatened with being taken to a tribunal as a way of extracting money from them. Many employers are advised at local level to give in and not allow the case to go to a tribunal. In that respect, there is a certain element of the blackmailers charter about all this. I wondered whether my hon. Friend had thought about that and why he had not included it in his Bill.

[Mr Chope]

I am sure that I could have included it in the Bill, but it is implicit that having a lower maximum figure in the case of unfair dismissal and an absolute maximum figure—there is no maximum figure at present—in the case of discrimination cases will reduce the bargaining power in a situation such as that my hon. Friend outlined. He described it as blackmail. We know that companies can sometimes be threatened with being taken to a tribunal and subject to all sorts of allegations it will find difficult to answer, so they pay up to an aggrieved ex-employee.

[Diana Johnson (Kingston upon Hull North) (Lab)]

I wonder whether the hon. Gentleman has had an opportunity to look at the employment tribunal annual reports for 2007-08 to 2009-10. They set out the median compensation awarded in race, sex and disability discrimination cases. In 2009-10, the median for race discrimination was £5,392 and for sex discrimination it was £6,275, which are well short of the millions referred to in MailOnline.

[Mr Chope]

Obviously I cannot quarrel with the statistics that the hon. Lady quotes, but the issue is causing the coalition Government concern. That is why on 11 May the Department for Business, Innovation and Skills announced that the Government would look in detail at the case for reforming compensation for discrimination:

“Compensation levels for cases of discrimination are unlimited and employers worry that high awards may encourage people to take weak, speculative or vexatious cases in the hope of a large payout. This can lead to employers settling such cases before they reach a Tribunal.”

The Government therefore seem to think that there is a problem.

I see my hon. Friend the Minister for Immigration on the Front Bench—we could have done with his wisdom on asylum cases in the previous debate. I hope he will be able to bring some of that wisdom to bear on this subject in particular, as I had the opportunity to talk to an official from his Department who said that the Government were carrying out a review of the subject. The point that I made to my hon. Friend’s official was that that is all very well, but how will it deal with the rulings in the European Court of Justice. In the ECJ case Marshall v. Southampton and South-West Hampshire Area Health Authority (No.2) (1993) IRLR 445, the court decided that the cap that had previously been put on discrimination compensation did not provide an adequate remedy under European Community law.

[The Minister for Immigration (Damian Green)]

I am grateful to my hon. Friend for giving way so that I can confirm to him now, should the debate run out of time before I have chance to reply in full, which I very much look forward to doing, that the Government will be launching a public consultation on this specific matter later in the year. As he has already said, this is a matter that the Government are considering and receiving recommendations on, and we want the widest possible input into the public discussion of this important matter.

[Mr Chope]

I am grateful to my hon. Friend, but I thought that in the announcement on 11 May his colleague with responsibility for employment relations had announced the extension of the Government’s review of employment law into this area. The question I was trying to get an answer to was how compatible the Government’s aspiration to introduce a limit on compensatory awards was with the ECJ case to which I have just referred. The issue was drawn to my attention by staff in the House of Commons Library who wondered whether my Bill would cut across EU law, and that is why I have included clause 2, which states:

“This Act shall have effect and shall be construed by the courts of the United Kingdom as having effect notwithstanding the European Communities Act 1972”,

thereby reasserting the sovereignty of this Parliament to decide on such issues and not be subject to rulings from the ECJ interpreting European Union law.

Some firms of solicitors are already on to this point. I have a report from Lee Rogers, an associate at Weightmans solicitors, who says that the Government may face obstacles if they decide to impose such a cap. I really wanted to find out from my hon. Friend whether the Government recognised that this was a problem and, if so, how they would overcome it. There is no point in going out for consultation on something where the Government’s ability to manoeuvre is restricted by European Union law, unless the Government are saying that they will override that law. The fact that my hon. Friend does not seek to intervene again suggests to me that either the message that went through his office was misinterpreted, or that when he sought information from the responsible Minister he did not get a clear answer, so he has done the best that he can in his inimitable way from the Front Bench today with the problems that the Government obviously have on this issue. The public do not believe that compensation for discrimination should be in the hundreds of thousands of pounds; they think that is unreasonable.

People talk colloquially about something costing an arm and a leg, and I would not want to make this issue seem anything other than serious, but if somebody were to lose one leg below the knee, under the criminal injuries compensation scheme they would be entitled to £33,000. If they were to lose one arm and one leg, they would be entitled to far less compensation than is paid to people who bring successful claims for discrimination before an employment tribunal. We value the damage of hurt feelings from discrimination cases far more than the criminal injuries compensation scheme values the actual loss of a leg or an arm and that is absolutely ridiculous, so if the Government were able to bring in some amending legislation that would be very useful.

I also cannot understand why, if the Government are concerned about the level of compensation and tribunal awards, they allowed the ceiling for such awards to be raised in line with inflation in a recent statutory instrument. If they felt that the awards were already too high, why did they not rein them back and not increase their maximum level in line with inflation?

This is a simple, straightforward Bill, and I hope that it receives hon. Members’ support so that it can be discussed in Committee, and so that the Minister can be asked probing questions and answer those I have put to the House this afternoon.

--- Later in debate ---

[Diana Johnson (Kingston upon Hull North) (Lab)]

I stand to oppose the Bill. There was little hard evidence in the opening speech of the hon. Member for Christchurch (Mr Chope) for the Bill. The evidence available from employment tribunals on the levels of compensatory awards shows that they are nothing like the figures that he gave. Of course, there have been some high-profile cases in the papers, but the compensation awarded in the vast majority of tribunal cases is less than £10,000.

The Bill intends to limit compensation in wrongful dismissal, unfair dismissal and discrimination tribunal cases. Most people recognise that it is important to have employment regulation that is fair and treats employees properly. The Opposition do not believe that setting the arbitrary figure in the Bill of £50,000 as the maximum that can be awarded in compensation, without having a wider debate about the employment, legal and equalities issues, is the proper way to set employment policy. Issues such as compensation, fines and penalties for health and safety, rights on leave and dismissal, and many others should be dealt with in a far more integrated way.

As a constituency MP, I saw the Hull trawlermen suffer hugely from not having proper employment rights; they had no redundancy rights and had to fight for pensions. I am therefore very aware of the need for good, clear employment protection legislation. When I worked in law centres before I entered the House, I often acted for people who found themselves in great difficulties with employers who had not treated them fairly and properly.

Of course, before 1997, to get unfair dismissal protection one had to be in employment for two years and there was no statutory right to annual paid leave unless it was in one’s contract. From 1997, the Labour Government opted into the social chapter, brought in the right to paid annual leave, reduced the period for unfair dismissal protection to one year, brought in the statutory right to paternity leave and improved maternity leave. It would be a retrograde step to start to unpick the straightforward and basic employment protection rights we now have in this country.

I will return to the compensation levels that I referred to in my intervention. When we make laws in this country, we must do so based on evidence and consider carefully what that evidence shows. As I pointed out to the hon. Member for Christchurch, £4,903 was the median award in 2009-10 for unfair dismissal claims in tribunals. That is nowhere near the millions that he talked about.

[Mr Chope]

My Bill does not talk about medians, but would limit the excessive awards. She will be aware of a disability discrimination award of £729,347. My Bill would prevent that from happening again.