Tribunals (Maximum Compensation Awards) Bill

Diana Johnson Excerpts

Friday 17th June 2011 Commons Chamber

[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.

--- 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.

--- Later in debate ---

[Diana Johnson]

Obviously, I cannot comment on the circumstances of that case. The tribunal or court that dealt with it would have considered all the issues that arose. Some dreadful discrimination cases are brought before the tribunals and courts, and tribunals do their best to make just and equitable awards that fit the circumstances that are brought before them. I dispute the idea that everybody who goes before a tribunal is awarded a huge amount of money. When people are awarded very high compensation payments, there may well be very good reasons.

May I also say to the hon. Member for Christchurch that I believe he has got the law wrong in a number of ways, particularly on wrongful dismissal? He wants to limit payments that can be made for that, but often people’s contracts of employment contain clear rights to notice. If he wants to limit those rights, he may find that he is in breach of contract. That may apply to some high earners.

I want the Minister to have an opportunity to contribute, so I will cut my comments short, but I wish to point out that at the moment there is a limit of about £68,000 on unfair dismissal compensation payments. My hon. Friend the Member for Manchester Central (Tony Lloyd) made that point. When awarding compensation for unfair dismissal, the tribunal has to make clear judgments about the immediate loss of earnings that the person has experienced, their future loss of earnings, the expenses that they have incurred, the loss of statutory rights and the loss of pension rights. At the moment, tribunals consider the range of losses to an individual and make a judgment based on that, but there is a cap of about £68,000 on the compensation.

I am interested to hear what the Minister has to say about the particular issues of sex, race and disability discrimination claims. We know from the Marshall case that European law states that it is not possible to have an upper limit for those claims, because damages should be awarded for the losses sustained.

[Mr Nuttall]

Will the hon. Lady give way?

[Diana Johnson]

I am very keen to hear from the Minister, but I will give way.

[Mr Nuttall]

Is it not the case that since the decision to which the hon. Lady refers, EU directive 2006/54/EC has recast the legal position so that there is a prohibition on the fixing of a prior upper limit to restrict compensation, and a provision that the “effective, proportionate and dissuasive” remedy should be given? I believe that a cap of £50,000 would be dissuasive.

[Diana Johnson]

That is obviously where the hon. Gentleman and the Labour party disagree. We do not think it is right to have such a cap. I would be interested to hear the Minister’s view about the European dimension to imposing a cap on sex, race and disability discrimination compensation. On the basis of what I have said this afternoon, the Opposition oppose the Bill.