Terms and Conditions of Employment

John Hayes Excerpts

Tuesday 14th May 2024 Commons Chamber

[Justin Madders (Ellesmere Port and Neston) (Lab)]

Let me begin by referring to my entries in the Register of Members’ Financial Interests.

I am grateful to the Minister for introducing the debate, and for making the necessary amendments to primary legislation so soon after the code of practice was approved. It has taken us more than two years, but today we see the first actual legislative change to tackle the blight of dismissal and re-engagement—or fire and rehire, as it is more commonly known. We will not oppose today’s motion, but we are clear that the order does not go anywhere near far enough towards ending this cruel practice, or meet the promises made by the Government.

During the two years since we witnessed those disgraceful scenes at P&O, it has continued to benefit from taxpayers’ cash through Government contracts, and fire and rehire hasusb continued to toxify our industrial relations landscape. While the P&O Ferries case itself did not entirely constitute fire and rehire, it bore many of the hallmarks of the practice and exposed the gaping holes in our law—holes that continue to be exploited; in the wake of the pandemic, there has been a jump in the number of instances of employers choosing to fire and rehire workers.

According to research conducted by the Chartered Institute of Personnel and Development, between August 2021 and 2023, the proportion of firms that conducted fire and rehire almost doubled. What was once a seldom-used device has become a mainstream practice, and part of the wider pattern of growing insecurity at work. In short, it has become a first choice, rather than a last resort. A TUC investigation found that about 38,000 employers were still using fire and rehire as a tactic. However, when we were finally given the code that we were promised would tackle this Dickensian practice, we found instead a vague, weak and disappointing document that would not actually prevent another case as egregious as P&O. On that basis alone, the Government have failed to keep the promise that they made more than two years ago.

The element that many people found most offensive about the P&O case, which today’s motion seeks to address, is the fact that the P&O management were able to look at the sanctions for which they were potentially liable and then decide whether or not they wanted to abide by the law. In effect, the cost of breaking the law was considered to be just another business overhead to be factored into decision making, and, as we saw, the management decided that those sanctions were not a strong enough deterrent to prevent rule-breaking. In its response to the consultation, ACAS said that a 25% penalty

“may not always present a significant deterrent when calculated against the financial costs and risks of an alternative approach.”

[Sir John Hayes (South Holland and The Deepings) (Con)]

I raised exactly those concerns at the time in relation to P&O. The hon. Gentleman is making a powerful argument—and, incidentally, I congratulate the Minister on the motion—but the critical factor is the size of the business involved. A very large business can absorb all kinds of costs that a small local firm cannot. That has been the change, and the regulations that we put in place need to reflect that change, because otherwise those large businesses will behave with impunity.

[Justin Madders]

I will refer to other comments made by ACAS in response to the consultation, which I think will pick up some of the right hon. Gentleman’s observations.

We now have a clear indication that unscrupulous employers cannot get away scot-free with breaking the law, but there are concerns that a 25% uplift will not be enough to deter bad employers who are determined to do what they feel is necessary. Once P&O had calculated the maximum penalty that it could face in compensation for each employee, it priced that into its decision. In effect, it was able to treat the law on consultation—a law that is there to protect workers’ jobs and their dignity—as optional. Today’s motion means that breaking the law will remain an option; it just might be a slightly more expensive one now.

Laws are only as strong as their enforcement. We believe that sanctions should reflect the egregiousness of the transgression. If an employer decides to break the law, the sanction should not be capped, but instead should be decided on the basis of the facts. That would mean that any employers who were tempted to brazenly flout their legal obligations, having calculated the cost of breaking the law, would no longer be able to do so, because the cost of the sanction could, in the most serious cases, be much higher than the cost of complying with the law. Smaller transgressions would be treated accordingly by a tribunal. As things stand, the most egregious abuses have a cost ceiling, so those with ill intent can still price in the cost of acting unlawfully.

In its response to the consultation, ACAS said that there were

“grounds for considering whether additional or alternative financial disincentives might help…the government’s policy objectives”,

including

“greater uplifts of awards where this is just and equitable”

or

“where there are especially egregious breaches of the Code.”

It also suggested—this is relevant to the intervention from the right hon. Member for South Holland and The Deepings (Sir John Hayes)—that when deciding appropriate awards, courts and tribunals might be required to consider, for example, whether the employer ought to have known better than to breach the code, the degree of legal advice readily available to it, and its financial resources. We agree with those suggestions. The arrogant, uncaring and deliberate trampling of workers’ rights requires a stronger message from this place that those actions will no longer be tolerated. Bad employers should not be able to buy their way out of doing the right thing, but instead we see the status quo preserved.

Thankfully, many good employers understand the importance of working collaboratively with unions. We commend those employers, and we know that they already go above and beyond the legal requirements, but there is no evidence that the 25% uplift is likely to prove a deterrent to those who do not. The Government do not know how often the compensatory uplift is used in other areas of employment law where there is a similar penalty for transgressing a code of practice, which prompts us to ask on what basis it has been decided that this measure will be effective in preventing employers from failing to follow the code of practice.

We welcome the fact that the order extends the scope of compensation to any situation in which a protective award under section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 is applicable. I understand that to mean that more traditional redundancy situations will be covered, but there are limitations. There must be 20 or more employees at the same establishment for the obligations to be activated, which means that many smaller employers—and, probably more pertinently, many more employers whose workforce may be spread across many different settings, retail being an obvious example—can still be excluded. The measure also only protects “employees”, which means that some of the most insecure workers in the labour market will not benefit one jot; and, of course, the Government intend to reintroduce employment tribunal fees, which, as we know from experience, inhibit people from enforcing their rights.

The regulations also provide for a 25% reduction in compensation when an employee unreasonably fails to comply with the code of practice. During last month’s debate on the code, I asked the Minister what elements of the P&O case, or indeed any recent mass redundancy exercise, had led him to believe that such provisions were necessary. I am afraid that I did not receive a satisfactory response then, so I will ask the question again. Is it not the case that nothing in recent high-profile examples of fire and rehire redundancy has made it necessary to give tribunals the power to take away compensation from employees?

We will not oppose the motion, because it is a step, albeit a small one, in the right direction, but let me make it absolutely clear that what is before us will not prevent another case as egregious as that of P&O. It has taken us two years to reach this point—two years in which we have seen growing insecurity at work, and have come no closer to providing the protections that workers in this country deserve. When the Government committed themselves to responding to the outrage of P&O, there was a moment of consensus across the business world, across the political spectrum and indeed across the whole country that this disgraceful practice should be consigned to the history books. Epitomising that consensus, the then Business Secretary, the right hon. Member for Welwyn Hatfield (Grant Shapps), said:

“we will not allow this to happen again…where new laws are needed, we will create them…where legal loopholes are cynically exploited, we will close them, and...where employment rights are too weak, we will strengthen them.”—[Official Report, 30 March 2022; Vol. 711, c. 840.]

Those legal loopholes remain as open as they did two years ago, and there is nothing, absolutely nothing, to prevent the outrage of P&O happening again. That is yet another example of the long list of wrongs that will need a Labour Government to put them right. It is time to end the race to the bottom. It is time to end fire and rehire.