Code of Practice on Dismissal and Re-Engagement

Lord Browne of Ladyton Excerpts

Monday 25th March 2024 Lords Chamber

I do not wish to take up any more of your Lordships’ time by repeating arguments I have made many times before, so I will end on this point. Fire and rehire is deeply unpopular, with 70% of the Government’s own voters wanting to see the back of it. But this new code, if anything, actually legitimises this abusive practice and shows bad bosses how to get away with it, legally. In my opinion, enough is enough; it is time for change. When will this Tory Government finally fight back and stand up for ordinary workers who are being exploited day in, day out? Thankfully, Labour will take steps to end fire and rehire within the first 100 days of coming to power. I sincerely hope that that is the case, because working people at the sharp end cannot put up with this any longer. The sooner we get rid of it, the better.

[Lord Browne of Ladyton (Lab)]

My Lords, I am confident that the Minister will have read the Second Reading debate of my noble friend Lord Woodley’s Employment and Trade Union Rights (Dismissal and Re-engagement) Bill. I too do not intend to repeat the speech I made then, but I make no apology for repeating the most important points, because they were designed to expose whether the code will be the deterrent that the Government think it will be. I am personally extremely sceptical about that, for two very clear reasons, which I will repeat by way of explanation.

First, while this debate is ostensibly concerned with this somewhat anaemic code of practice, it engages much larger questions of access to justice, the balance of power between employers and workers, and, fundamentally, whether the code does what it purports to do and will shield workers from manifest injustice. Given that the introduction of this code was announced in response to P&O Ferries instituting mass redundancies in March 2022, I think it is legitimate to look back at what the Government said then. The then BEIS Minister, Paul Scully, explained the Government’s new commitment to introduce a statutory code of conduct. He did so in highly emotive and, one might say, colourful language. He described the practice of firing and rehiring as “deceitful” and “disgraceful”, labelled the actions of P&O “appalling” and “unscrupulous”, and vowed that the Government would “stand up for workers” against the flagrant disregard shown by companies that use sudden mass dismissal as a negotiating tactic.

Having raised these expectations, it is no wonder that there is manifest disappointment with the glacial emergence, over two years, of a code of practice that will impinge upon employers only at the point a case reaches tribunal. Testing whether or not that will be a deterrent is what I want to draw the Minister’s attention to. I did this in my contribution to the Second Reading debate, drawing attention to the issues of delay and the coming imposition of fees for tribunals. The Minister who responded to that debate, the noble Lord, Lord Johnson of Lainston, was unable to pick up on those points in his winding up of the debate and offered to write—and, true to his word, he did write. I thank him for attempting to ease my anxieties but I confess that his letter was not wholly successful. Indeed, it was the opposite: it raised the temperature of my anxieties.

The letter began by admitting that there remains a backlog of 32,000 cases in the tribunal system, asserting that reducing outstanding caseload is the key to bringing down wait times, before revealing that:

“Employment Tribunal timeliness data has not been published for some time due to the Employment Tribunal changing their case management system in 2021”.


That was three years ago. We have an assertion that bringing down wait times is essential, followed by a confession that, owing to a change in the case management system three years ago, we are today unable to gauge whether or not wait times are falling.

The viability of this code of practice is entirely contingent on a tribunal system that is effective and can prove timely redress. The fact that we currently, by the Government’s own admission, have no access to the data that would tell us whether it delivers timely redress is absurd, if the Government are to rely upon that as being the ultimate deterrent against this behaviour by the people they described with those very colourful adjectives.

The letter also engaged the question of the Government’s consultation on reintroducing fees at this time, of all times, for those who wish to bring a case before an employment tribunal. I thank the Minister for outlining, in his letter, the details of the help with fees remission scheme, but I remind your Lordships’ House that I raised the case of R (UNISON) v the Lord Chancellor in my speech on Second Reading. It is not mentioned at all in the letter, and I can understand why, because the judgment in this case was unambiguous. It concluded that levying fees was unlawful. It cited the Leggatt report, which specifically identified the absence of fees as one of the three key elements that made tribunals successful, and concluded that fees, however modest, have the effect of preventing access to justice. That was the principal point that I raised in that aspect of my speech, and it was just ignored in the letter I got back from the Government.

I understand the fees coming under consideration are appreciably lower than they were previously, but they will certainly not encourage victims of fire and rehire to have recourse to the tribunal system and may well act as a further discouragement. This is yet another case of the Government telling us that they understand the existence of an injustice, assuring us that their heart is in the right place and they are seeking to right a wrong, but then again balking at doing the needful. We are all familiar with the cases of Tesco, Jacobs Douwe Egberts and Carnival and the other cases that seem to be appearing by the day, some of which the noble Lord, Lord Woodley, referred to, and the way in which employers and others weaponise the power advantage they have and exploit their workers. Rather than institute a non-legally binding code of practice that tells employers what they already know, I believe a more fitting course of action would be to enshrine good practice into law and offer clear redress to workers when they are victims of injustice.

[Lord Hendy (Lab)]

My Lords, I share the regrets expressed by my noble friends. I intend to address the second element in the regret amendment put down by my noble friend Lord Woodley, and that relates to the International Labour Organization, which your Lordships will recall is a tripartite body, consisting of Governments, employers and workers. The United Kingdom was a founding member in 1919; it was the first signatory of the fundamental convention on freedom of association—convention 87—in 1949; it is a member of the governing body; and it is represented on the Committee on Freedom of Association.

The relevance of that is that, on 8 November last year, the governing body approved the 404th report of the Committee on Freedom of Association, which reported on the P&O Ferries saga of St Patrick’s Day 2022. Your Lordships will recall that 786 seafarers were dismissed on that date and only 100 were subsequently reinstated. The other jobs were given to agency staff. The Committee on Freedom of Association, as approved by the governing body, made three substantive recommendations, none of which, so far as I can see, is reflected in the code of practice.

The first recommendation related to collective bargaining. The committee said that it

“urges the Government, with the social partners, to ensure mutual respect for the commitment undertaken in collective agreements, which is an important element of the right to bargain collectively and should be upheld in order to establish labour relations on stable and firm ground”.

In many of the instances of fire and rehire mentioned by my noble friend Lord Woodley, there have been established collective agreements and established collective bargaining. That was the case with P&O Ferries, where collective agreements stretching back nearly 100 years were flouted.

--- Later in debate ---

[Lord Offord of Garvel (Con)]

I thank all noble Lords who have participated in this debate. I hope to clarify some key points that were mentioned. I will first turn to the regret amendment tabled by the noble Lord, Lord Woodley. I know that the noble Lord is a champion of protecting and enhancing worker’ rights, but the Government do not believe that his suggested amendment to the code would be appropriate.

The amendment suggests adding measures from his Private Member’s Bill on dismissal and re-engagement and from a report from the International Labour Organization. The measures contained in the noble Lord’s Bill would, in effect, ban dismissal and re-engagement. That is because the Bill would remove the ground of “some other substantial reason” for an employer to justify a dismissal in a dismissal and re-engagement scenario. Almost all cases of dismissal and re-engagement rely on this ground as potentially a fair reason. Therefore, this would, in effect, ban the use of dismissal and re-engagement.

As I said earlier, it would not be appropriate to impose an outright ban on dismissal and re-engagement. There are some situations in which dismissal and re-engagement have a valid role. Companies that are, for example, going through difficult economic times or a change in their business model may need the flexibility to use this option to save as many jobs as possible.

In regard to the International Labour Organization’s Committee on Freedom of Association’s definitive report 404, as raised by the noble Lord, Lord Hendy, I would like to clarify that the UK is committed to all ILO conventions that we have ratified, including Convention 87 on the freedom of association and protection of the right to organise, and Convention 98 on the right to organise and collective bargaining. We are carefully considering the Committee on Freedom of Association’s recommendations and will provide information to the ILO in due course.

Turning to the point made by the noble Lord, Lord Woodley, about P&O Ferries, echoed by the noble Lords, Lord Fox and Lord Leong, as we said at the time, the treatment of staff by P&O Ferries was disgraceful and was called out as such from this Dispatch Box. It fell short of the high standards we expect in this country, and which most businesses uphold. The company deliberately chose to ignore statutory consultation requirements. P&O Ferries broke the law by dismissing its workers with no warning, having made prior arrangements to bring in agency staff to replace them. What P&O Ferries did was “fire”, and not “fire and rehire”. The company dismissed staff with no notice or consultation. I understand that it was not seeking to renegotiate its employees’ terms and conditions, so the code would not have applied.

The noble Lord said that some of those employees were fired and rehired. I thank him for bringing that to my attention. I am not familiar with the detail of their personal circumstances, but speaking generally, if an employer seeks to renegotiate terms and expects that it may dismiss an employee and rehire them or another employee to effect the changes, then it would be bound by the code. The Government have taken action in response to what P&O Ferries did. This includes legislating through the Seafarers’ Wages Act 2023 and the ongoing Insolvency Service civil investigation.

A number of noble Lords raised the deterrent effect of the code and, as I said, the code of practice is a proportionate response, balancing protections for employees with business flexibility. An employment tribunal could increase an employee’s compensation by up to 25% where an employer unreasonably fails to comply with the code. The Government will bring forward legislation so that the 25% compensation uplift also applies to the protective award, where employers have not complied with the collective consultation obligations and have unreasonably failed to comply with the code. The noble Lord, Lord Woodley, asked for an update on this legislative change that will increase the deterrent effect of the code. Subject to parliamentary time, the Government intend to bring this forward this summer.

The noble Lord, Lord Leong, asked when the code would apply to an employee. The code will apply from the first day of an employee’s employment, though it will be subject to qualifying periods in individual claims.

Having heard the debate, I think there is perhaps just a philosophical difference on how we proceed in these matters. This Government believe that our workforce and labour laws are in an advanced and sophisticated state. We have record employment in this country: 33 million out of a population of 66 million working. We have just increased the national minimum wage at twice the rate of inflation over the last 25 years, and only 5% of our workforce is on the national minimum wage. Now that they have reached that level, they can be considered to have been taken out of low pay if that is defined as two-thirds of median hourly wages. They are now at that level, and therefore, within our labour force, our laws are working flexibly.

In my role as Minister for Exports, I travel the length and breadth of the country, and I meet companies of all shapes and sizes. The one observation I will make to this House is that post Covid, there has been a reassessment of the value of labour in this country. The labour force is now one of the most valuable parts of any company’s make-up and capability. There are labour shortages, and good labour is scarce. I would argue, perhaps, that there has never been a better time to be an employee, because of the ability to receive higher wages for good skills that are at a premium, and companies want to have those employees within their businesses. In this situation, and thinking as an employer, I can imagine that it would be only in exceptional circumstances, where we were trying to keep our employees together and keep our company on the road, that we would have such a discussion. It would be absolutely as a last resort.

To take the point raised by the noble Lord, Lord Browne, about there being no teeth and waiting times in the tribunal system, I acknowledge that there are perhaps backlogs in that system, but this is a process that no employer wishes to get caught up in, considering the amount of time and cost it would take when we want to have our employees happy and working and producing effectively for the benefit of all the stakeholders within the company. Just as a matter of philosophy, we would say that this is an exceptional situation. The TUC says that it estimates that only 3% of employers have ever gone down the road of fire and hire. As we said in the code quite clearly, it is not toIn conclusion, I would argue that the Government are taking robust and appropriate action in this area. A statutory code of practice is a proportionate response to dealing with controversial fire-and-rehire practices. The code will address this practice, aiming to ensure it is only ever used as a last resort, and that employees are properly consulted and treated fairly. It clarifies and gives legal force to accepted standards about how employers should behave when seeking to change employees’ terms and conditions. Subject to parliamentary approval, the code will be in force later this summer. The House should be left in no doubt that the Government will always continue to stand behind workers and stamp out unscrupulous practices when they occur.

[Lord Browne of Ladyton (Lab)]

Does the Minister have a response to my question about the coincidence of the Government consulting on imposing fees on those who seek to apply to an employment tribunal in the face of the case of UNISON v Lord Chancellor, where fees were held to be unlawful because they impeded access to justice? This issue was not addressed in the letter that the noble Lord, Lord Johnson of Lainston, sent to me. It was in my speech at Second Reading. Do the Government have a position on that? Is it just a coincidence that this is happening at the same time as employment tribunals are being given the ability to impose an extra 25% of financial penalties on employers who fire and rehire as part of the code of practice?

[Lord Offord of Garvel (Con)]

As the noble Lord knows, one can read Hansard as well as one can, but not being in the Chamber to hear his eloquent argument of the case makes me slightly deficient in this response. I am disappointed that my noble friend was unable to write more comprehensively on the matter. Perhaps I can follow up with a second letter in that regard.