Employment and Trade Union Rights (Dismissal and Re-engagement) Bill

Laura Farris Excerpts

Friday 22nd October 2021 Commons Chamber

[Laura Farris]

I was referring to what I consider to be the breadth of the proposed section 187B. I think, with respect, that it creates considerable scope for any employee who is faced with an instance of fire and rehire to challenge it through the employment tribunal. It creates, I think, an obvious and unsustainable tension with common law principles—the common law principles that underpin the entire law of redundancy.

[Clive Efford (Eltham) (Lab)]

Will the hon. Lady give way?

[Laura Farris]

I will just finish this point.

There could be circumstances in which an employer had made the decision to change the terms of employment, to reduce wages, and the employment tribunal, applying every single correct common law principle, would find the decision to have been fair, but if the employer had breached one element of the consultation requirements—had not put one document or one meeting note before the trade union representative—the dismissal would be found to be unfair.

[Clive Efford]

I have listened carefully to the hon. Lady, and I am very respectful of her knowledge of this particular issue, but nothing she has said today suggests to me that her arguments could not be better deployed in Committee. My hon. Friend the Member for Brent North (Barry Gardiner) asked Conservative Members to work with him to improve the Bill in Committee. I wonder why the hon. Lady is not taking that approach.

[Laura Farris]

I thank the hon. Gentleman for his intervention. I will continue to develop this point.

[Clive Efford]

The hon. Lady did not give me an answer.

[Laura Farris]

I hope that what I am going to say will answer the hon. Gentleman’s criticism.

There is another point that I cannot ignore. I invite every Member to turn to proposed section 187F, which deals with the proposed “Award of compensation” to be made by any employer who fails to comply with the proposed new consultation requirements. It states:

“ The amount of compensation awarded shall, subject to the following provisions, be such as the employment tribunal considers just and equitable in all the circumstances”.

That is exactly the same compensation measure that is used in whistleblowing and in discrimination law. It opens the door to uncapped compensation in the area of unfair dismissal, which has a cap, It therefore drives a coach and horses through the entire principle of compensation in unfair dismissal hearings. It would make fire and rehire the only form of unfair dismissal in which the employee could receive an uncapped compensatory award. If the employee had been dismissed for gross misconduct or for being bad at his or her job, the award would have been capped at 80 grand. That cannot be right.

What will all this do to the employer who is thinking about renegotiating terms of employment? The employer will be too nervous to do it, and will lay people off. Let us take the employer in the case of Garside & Laycock v. Booth 2011, who had proposed a 5% reduction in wages which every single balloted member of staff except one had accepted. Employers would not do that; they would lay off the whole workforce. Is it better or worse for people to take a less attractive variation in their terms of employment or to lose their jobs altogether?

[Barry Gardiner]

I am grateful to the hon. Lady for engaging so closely with the Bill. I think she knows she is over-egging it, because any tribunal would look at the situation in the round. The Bill is drafted as it is because it chimes with the legislation on redundancy. Again, to be technically proficient, the Bill has to merge with the other Acts.

[Laura Farris]

I am afraid the hon. Gentleman is incorrect. This concern was raised by my head of chambers and it is shared across the employment Bar. We cannot have a just and equitable jurisdiction in the law of unfair dismissal as it does not work.

The hon. Member for Feltham and Heston (Seema Malhotra) raised a point about the aviation sector. The conduct of British Airways was poor, but there is an important issue at stake. If in primary legislation the risks of fire and rehire are so great that employers are more inclined to lay people off, think what that would mean for airline pilots, for example. Airline pilots must fly within a two-year period to retain their flying licence. If they are sacked by British Airways at a time when the entire travel sector is struggling badly, they would be very unlikely to get a job and it could easily be two years. It is not just the loss of a job; it is the loss of an entire career. We need to tread very carefully when we consider primary legislation in the area of fire and rehire.

[Kevin Hollinrake]

My hon. Friend is making an excellent speech and some important points. She talks about the risk of moving to layoffs or redundancies, is there not also a danger that businesses will not recruit people in the first place or will not scale up because of the fear that employment legislation is so complex and is increasingly one-sided on behalf of workers? That would deter employment, which is the exact opposite of the situation we all want to see.

[Laura Farris]

We all know there is always a risk that we make employment relations so onerous that there is a temptation to engage consultants. What we are primarily looking at is employers that have larger, unionised workforces. I am not sure how many employers it would engage, but the short point is that Conservative Members want a solution that does not make an existing problem worse, drive redundancies or lead to more business failures. Fire and rehire must be a genuine option of last resort when a negotiated settlement cannot be reached, when the business is on the brink of insolvency and when the alternative is layoffs.

[Gavin Newlands (Paisley and Renfrewshire North) (SNP)]

I am grateful to the hon. Lady for the conversations we had when I proposed legislation on this issue last year. She says that, had fire and rehire been banned, British Airways might have just made people redundant, and she cites the example of pilots. This has happened already, and Ryanair negotiated temporary changes. Why would British Airways not have done the same, had it not been allowed to fire and rehire?

[Laura Farris]

I will return to that point when I address British Airways in a bit more detail.

As I have said to the Minister, we need more than ACAS guidance. I want to see the rules on dismissal and re-engagement set out in an ACAS code of practice, with financial sanctions to back them up. Parliament specifically envisaged the possibility of doing this when it passed the Trade Union and Labour Relations (Consolidation) Act 1992. Section 207 gives the Secretary of State the power to introduce a code of practice in respect of anything in that Act. Parliament also considered and welcomed the possibility that the Secretary of State would have the power to impose legal teeth. Section 207A addresses the possibility that any compensation can be increased by up to 25% if the employer does not comply with an ACAS code of practice.

We know that ACAS codes of practice can be effective. The hon. Member for Middlesbrough (Andy McDonald) is an employment lawyer and will know that when we think about, for example, the ACAS codes of practice on disciplinaries or grievance procedures, it is vanishingly rare to get into an employment tribunal nowadays and find that the employer was oblivious to those codes of practice. Why do employers know about them? Because there is risk—financial risk. If they go down in the employment tribunal, there could be an uplift on compensation, and they want to avoid that, so we know that it is has the right effect.

What should the code of practice say? We have some of the answers already. The BEIS call for evidence, which was published through ACAS, gives us some clues. I think practitioners made such suggestions very well, including, in relation to paragraph 56 of that report, that employers should provide an analysis of whether changes are anticipated to last for more or less than five years with evidence to substantiate that answer, and, in relation to paragraph 76, that they should provide evidence of reasonable alternatives they have explored and evidence of their financial position.

Another point comes out of the excellent work of the Transport Committee, and I want to pay tribute to the very impressive session it had with Willie Walsh on 11 May 2020. Anyone who has read the transcript will recall that he was asked repeatedly by the Chair, my hon. Friend the Member for Bexhill and Battle (Huw Merriman), whether, if British Airways returned to full profitability, he would restore workers’ wages to their previous levels, and he declined to confirm that he would do so. That created huge exposure for British Airways, and I do not think it is any surprise that, when Alex Cruz appeared before the Select Committee six months later, he gave a rather different explanation.

BEIS would then have the opportunity to require employers to set the criteria that they would exercise in deciding when to restore workers’ pay. I think it would enable the Government to give guidance on this distinct category of dismissals, how they should be treated and what the employment tribunal should be looking for. My final point on this is that it would give the Government real teeth, and it would incentivise employers to do the right thing and give employees more power to enforce their existing rights.

The point has been made, but most of the employers we have cited in this House are considering fire and rehire in relation to large proportions of their workforce. With British Airways, 12,000 people were at risk. If every single one of those people could get an uplift in a compensatory award of 10% to 25%, then—let us be realistic—that might be £10,000 or £20,000 times 12,000. That creates a huge incentive for the employer to do the right thing, because there will be a very significant financial penalty if they fail. That will mean that consultations are entered into with legal advice, which is a good thing, as well as with an open mind and an open spirit.

By the way, consultation is not a meaningless word, as all hon. Members will know. When it is approached in the right spirit, it can often lead to alternatives to the thing that is most feared by the employee. That is the suggestion that I have made to Ministers.

[Sam Tarry (Ilford South) (Lab)]

I was one of the members of that Select Committee, and I remember there was very much cross-party agreement that it was such a disgrace for that to happen that the company should not carry the British flag. The point is that the parent company, IAG, had profits in the region of £3.5 billion-plus, there in stages, that it could have used. IAG’s agenda—and this is why I am concerned that what the hon. Member is suggesting may not go very far in discouraging companies—was about driving profits, not about saving the jobs and livelihoods of people, particularly women in their 50s and those towards the end of their careers. It was a restructuring brought in under the guise of fire and rehire.

[Laura Farris]

The hon. Member makes an excellent point, and I just want to pick up on what he said. He points to the fact that the parent company had substantive profits, and that point was made by the Unite representatives who contacted me. I do not think that that case would have survived the employment tribunal in its early stages, as I do not think that it would have crossed the threshold of a sound, genuine business reason. I think the reason why Alex Cruz appeared before your Committee five or six months later and spoke very differently about his plans for pilots, cabin crew and everybody else was because the company was on thin ice, and I think some damaging concessions were made in that session. I think you are right, but I do not think that my solution fails to capture it.

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. I remind the hon. Lady not to use the word “you”.

[Laura Farris]

I do not think that my proposal is at odds with what the hon. Member suggests.

Just briefly, because I am coming to the end—[Hon. Members: “No.”] I would like to focus the remainder of my remarks on the detailed work that has gone into clause 1 and the extended duty to consult, which is proposed to go into the Trade Union and Labour Relations (Consolidation) Act as new section 187A. One of the things I think is most surprising about this, despite the fact that it is obviously very persuasive at first blush, is that it immediately takes the trade union, the employee and the employer into their very first meeting talking about fire and rehire. When I spoke to my constituents and the Unite representatives who were looking after them, the thing that had been the most stressful was that they had gone into these meetings and found that from the very start, dismissal was already being mentioned as an option. It was, “You will take this pay cut, otherwise we will sack you and get you back.” That seems to exacerbate the problem, rather than improve it.

The law in this area is not working. When I speak to employers about why they have been raising fire and rehire so early, they always cite section 188 consultation obligations, the “in good time” requirement under that, and the genuine fear that they will be hit with a punitive protective award if they have not put all their cards on the table at the start. A much more sensible route would be to take the heat out of these negotiations and make fire and rehire a last resort that only comes in when all other options have been explored.

That is why we should have specific language in a code of practice. It could say something like, “An employer who begins a section 188 consultation only after it has attempted to negotiate a change in terms and conditions consensually will be regarded as beginning that consultation in good time.” Alternatively, it could say, “Where an employer is attempting to negotiate new terms and conditions before any fire and rehire process, that amounts to special circumstances that rendered it reasonably practicable not to comply with section 188.”

[Geraint Davies]

The hon. Member is making some very interesting points. Given that she agrees with the spirit of the Bill, does she agree that fire and rehire should be a last resort? She is looking at this matter in detail. Does she agree that it would be better looked at in Committee? We appreciate that this area is complicated and she is a great expert in it, but would it not be better for her to be forensically evaluating this Bill with good time with my hon. Friend the Member for Brent North (Barry Gardiner) and others in Committee?

[Laura Farris]

I thank the hon. Gentleman for his intervention. I know that the hon. Member for Edinburgh West (Christine Jardine) wanted to intervene.

[Christine Jardine (Edinburgh West) (LD)]

The hon. Lady is making some excellent points and, like the hon. Member for Swansea West (Geraint Davies), I feel they might be better made in Committee. Does the hon. Lady agree that part of the motivation for the Bill is not to do away with the practice completely? It says that fire and rehire or change of contracts in exceptional circumstances can be done with negotiation, consultations and so on. The motivation was that several major companies appeared to be using the current crisis as something to hide behind and institute unfair fire and rehire practices at a time of already mounting stress and emotional trauma for a lot of people.

--- Later in debate ---

[Laura Farris]

Thank you, Madam Deputy Speaker. I will take those first two points in succession. The first was about whether these issues are not better raised in Committee. The answer, respectfully, is no, because I do not think an area as technically difficult as this belongs in primary legislation, and I have explained why the Bill is at odds with the Trade Union and Labour Relations (Consolidation) Act 1992, the intentions of Parliament when that Act was passed and the existing web of laws at section 98 of the Employment Rights Act 1996 dealing with unfair dismissal. The issues covered in the Bill belong in a code of practice backed up with financial penalties, rather than in primary legislation.

To take the point made by the hon. Member for Edinburgh West (Christine Jardine), I of course accept the stress that people were subjected to, and all the work that Members on the Government side of the House are doing is directed at minimising that, but the solution we are considering and discussing must not give employers leeway to abuse employment rights. We have been thinking about that just as much.

It is precisely because I do not think employees should have a gun to their head at the start of consultations that I cannot support clause 1 of the Bill, which requires employers to lay all their cards on the table on the issue of fire and rehire from the start. Rather than demanding full disclosure from day one, we should be much more sensitive to the legitimate desires of businesses to remedy defects before they have to reveal they are on the verge of failure, given what that might mean for their business at a stage before they would wish to disclose it.

[Barry Gardiner]

I agree that it really important to take the heat out of the situation at the very beginning. The hon. Lady is absolutely right—I mentioned it myself—about the importance of not having section 188 on the table immediately. That is why, starting at line 20, the Bill says:

“The employer shall consult with a view to reaching an agreement to avoid decisions being taken to terminate contracts of employment, or to introduce changes in work organisation or in contractual relations.”

The precise point that the hon. Lady has made is there on the face of the Bill.

[Laura Farris]

The hon. Gentleman knows that proposed new section 187B(2) says:

“The information to be disclosed is all information relating to the employer's undertaking”.

It would be almost impossible for an employer to comply with that without its having to put on the table the fact that it is considering dismissal in the first instance.

I hope that, if my speech has strayed into technical issues of industrial relations law, that reveals how difficult this question is and how any attempt to impose primary legislation runs significant risks of unintended consequences that would be much worse for workers’ rights and job losses. We on the Conservative Benches depart from the Opposition in that we think there is strength and flexibility in existing employment law, but we also think that it could do with being robustly reinforced through potential financial penalties. I hope the hon. Member for Brent North is reassured that we take this issue as seriously as he does. We are also thinking hard about it, and I am confident that we will deliver for workers’ rights.

--- Later in debate ---

[Imran Hussain]

Thank you very much, Madam Deputy Speaker.

For those who seek to minimise the scale of fire and rehire, let us remember—the point was made earlier—that one in 10 workers, around 3 million people across the country, of whom a worrying proportion are young or from an ethnic minority background, face having their pay cut or their rights stripped away, or losing their job. What is most alarming is that fire and rehire is being used not by smaller companies but by big national names such as British Airways, British Gas, Tesco, Clarks, Argos and Weetabix, to name a few. All of them are established companies. Many saw bumper sales during lockdown. Workers at these companies, whether in the warehouse, in the factory, on the shop floor or in HGV cabs are also the workers who kept us moving during the pandemic.

Some companies threatening their staff with fire and rehire, such as Tesco and British Airways, even received Government handouts during the pandemic, only to take the money and then show their staff the door. That is scandalous. Rather than helping working people, the Government have subsidised their dismissal during the worst health and economic crisis in a generation. This is a national disgrace.

[Laura Farris]

Is not it the reality that it is not that big employers are unscrupulous or evil, as opposed to small employers? The truth is that it is only larger employers who are bound by the obligations under the Trade Union and Labour Relations (Consolidation) Act 1992 and it is only they who are consulting with larger numbers, so, inevitably, the focus will be on large employers.

[Imran Hussain]

I agree in part with the hon. Lady’s point. The issue here is this. She made her points earlier. I accept that there are good employers and there are those who perhaps are not behaving in the manner that they should. Referring to one of her previous points, the issue is this: those employers that are acting in a just, proper and proportionate manner are actually worse off because they are being undercut by unscrupulous employers that are not acting in the manner that they should. The size is perhaps for illustration purposes, but I do take some of her points.

Faced with such scandalous and disgraceful behaviour by employers, the Government should have stepped in as fire and rehire spread through our economy like wildfire, but they did not. Instead, it has only been the Labour movement, trade unions and staff coming together to organise in the workplace that stopped the use of fire and rehire at places such as British Airways, Go North West and Heathrow. It was not Ministers and it was not the Government.

Let me make this point clear. The campaigns and victories of our proud trade unions fighting against fire and rehire, fighting against bad bosses, and fighting for their members and working people right across the country—whether it be Unite, GMB, Unison, the Union of Shop, Distributive and Allied Workers, Community or others—shows that, despite this Government’s every effort to diminish and grind them down, there is still power in the union.

--- Later in debate ---

[Kevin Hollinrake]

The hon. Lady makes a good point, but all these matters are covered under employment law. Whether on wrongful dismissal, unfair dismissal—constructive dismissal—or redundancies, an employer has to follow due process.

[Laura Farris]

rose—

[Kevin Hollinrake]

My hon. Friend may be able to enlighten us better than I can.

[Laura Farris]

To pick up on the point about redundancy payments and that being a suitable alternative, does my hon. Friend agree that of course a business in financial trouble could dismiss in any case for “some other substantial reason”, which would not lead to a redundancy payment? It is all there in section 98(1)(b) of the Employment Rights Act 1996, and it would leave an employee as badly off as somebody who is subject to fire and rehire.

[Kevin Hollinrake]

I defer to my hon. Friend, who knows far more about this issue than I ever would. The principle behind our discussion is making sure that, where the question is a business’s survival, it can get through a very difficult time. There is no doubt that last year many businesses and many sectors were in a situation where there were question marks about their very existence, so in those times they must have the opportunity to sit down with their workforce and restructure, where that is the only way forward.