Growth and Infrastructure Bill

Lord Pannick Excerpts

Wednesday 6th February 2013 Lords Chamber

Moved by

[Lord Pannick]

81D: Clause 27, page 34, line 15, at end insert—
“(d) the conditions regulating the agreement contained in subsection (12) are satisfied.”

[Lord Pannick]

My Lords, Amendments 81D and 92 are in my name and that of the noble Lord, Lord Adonis. They are in the first of a series of groups of amendments which address Clause 27. As your Lordships know, Clause 27 allows employers to buy off employment rights otherwise enjoyed by employees. Under this clause, employees can agree to receive shares worth at least £2,000, in return for which they will lose the right to claim unfair dismissal, the right to claim statutory redundancy pay, the right to request flexible working and the right to request time off for training.

What is so objectionable about Clause 27 is that these employment rights were conferred by Parliament over the past 50 years and have been protected by Governments—both Conservative and Labour—precisely because the inequality of bargaining power between employee and employer means that freedom of contract is quite insufficient to protect the employee or the prospective employee. Therefore, to allow these basic employment rights to be traded as some form of commodity frustrates the very purpose of these entitlements as an essential protection in the employment context.

The concept contained in Clause 27 is especially bizarre when there appears to be no demand whatever from employers for such protection and when responsible employers are introducing genuine share ownership schemes. I can think of only one precedent for Clause 27. It is in Genesis, chapter 25, where Jacob refuses to let his famished brother Esau eat some of the broth he has made until he sells him his rights as the first born. Esau agrees because he is famished and says, “What use is my birthright to me?”, compared to the mess of pottage of which he has immediate need. Your Lordships will come in due course to consider whether the correct response from your Lordships’ House to this mess of pottage is to reject it in its entirety—for all the reasons so powerfully outlined at Second Reading by the noble Lord, Lord Adonis, in particular.

Amendments 81D and 92 seek to ensure that if we are to have Clause 27 at all, the employee and the prospective employee must at the very least be given the minimum necessary protection to understand what it is that they are giving up. The minimum necessary protection that Amendments 81D and 92 would provide is that the statutory rights could be lost only if the agreement satisfied three essential conditions.

The first is that any agreement in this context must be in writing and must set out the rights being traded and the value of the shares that are to be received. One of the surprising features of Clause 27 is that it does not even require the agreement to be in writing—an invitation to subsequent litigation if ever I saw one. Secondly, the individual must receive legal advice on the consequences of the agreement from an independent lawyer. These matters are surely too important for Parliament to allow employees and prospective employees to give up those basic rights without the legal implications being fully explained to them. The third essential protection is that the individual must have received financial advice from an independent adviser—who must be a regulated person—as to the value and the prospects of the shares that he or she is about to receive and for which they are giving up those basic employment rights

The detail of Amendment 92 is modelled on Section 288 of the Trade Union and Labour Relations (Consolidation) Act 1992. Section 288 is a vital provision. It makes an agreement void if it purports to contract out of the employment rights that Parliament has conferred. At the moment, employees and employers simply cannot contract out of employment rights. Clause 27 conflicts with that basic and fundamental principle. However, Section 288 allows for compromise agreements to settle specific employment disputes in individual cases in employment tribunals. That is a very different concept and entirely acceptable in principle.

Section 288 states that one of those compromise agreements in the context of an individual employment dispute is valid only if it is in writing and if the employee who is settling the case has received independent advice on the terms of the agreement by which he or she is settling the claim—advice from a lawyer, a trade union official or an advice centre worker. Clause 27 involves an agreement much more fundamental in its implications for the individual, who is not just settling an individual employment claim in the tribunal but is generally giving up important employment rights for the future. Therefore, in the Clause 27 context—if we are to have Clause 27 at all—the procedural protection that Parliament confers on the employee must be at least as strong as that which Parliament itself has conferred on the employee who is settling a specific employment claim.

The Equality and Human Rights Commission has helpfully addressed that very issue. It has expressed concern that Clause 27 may indirectly and unlawfully discriminate, contrary to EU law, against those workers and prospective workers whose first language is not English, those with learning disabilities or young workers. Therefore, the commission says that a proper justification is required and that depends, in its view, on safeguards such as the receipt of informed and independent advice.

I emphasise that Amendments 81D and 92 would not make Clause 27 acceptable. Clause 27 would remain a provision that knows the price of statutory employment rights but ignores the value of those rights. However, because the amendments would make Clause 27 marginally less objectionable, I beg to move.

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[Lord Pannick]

I am very grateful to the Minister and, indeed, to all noble Lords who contributed to this valuable and, as described by the Minister, lively debate. It confirmed, as many noble Lords suggested, that this is an ill thought out, divisive and unnecessary provision that ought to be put to sleep as soon as possible.

The Minister suggested that Clause 27 simply creates a choice, and asked what was wrong with creating choice? The whole point of employment rights is that they are needed because the bargaining power of the employee is so limited that statutory protection is required. The noble Lord, Lord Flight, suggested that these proposals might be appropriate for some types of employee in some types of employment. There are two difficulties with that defence. First, Clause 27 is entirely general in its terms; it is not confined to particular types of employment and particular types of protection. Secondly, the employees and the employers for whom the noble Lord, Lord Flight, suggests Clause 27 might be appropriate—entrepreneurial employees in high-tech companies—are not operating in a context where the rights to protection against unfair dismissal and redundancy are of particular significance. It does not inspire a great deal of confidence in Clause 27 that the best point that can be made in its defence is that it will not be used very often.

This amendment is about legal and financial advice, particularly legal advice. The noble Lord, Lord Flight, said that legal advice is not needed in this context because the legal implications are very clear. I have to say that they may be clear to the noble Lord, but I can assure him that the implications of signing away one’s basic employment law rights, and what one will receive in return, will not be clear to the ordinary working man and woman who may be invited to sign away these essential protections.

The Minister then said that there was nothing in Clause 27 that would prevent the employee seeking advice. As a judge said in the 19th century, it is rather like saying there is nothing to prevent the employee from staying overnight at the Ritz hotel. Statutory protection is required to ensure that in reality, advice is made available for those who will not otherwise obtain it. The Minister did not address this. I cannot understand why legal advice is—rightly—required by Section 288 of the Trade Union Act in the context of a compromise agreement, but is not required under this clause when the employee gives up his or her employment rights generally.

I hope the Government will listen to the noble Baronesses, Lady Brinton, Lady Turner of Camden and Lady Afshar, and to the noble Lords, Lord Vincent, Lord Martin, Lord Strasburger, Lord Morris of Handsworth and Lord James of Blackheath, all of whom speak from their different perspectives with an enormous range of experience. The Minister and noble Lords will know that there are many other noble Lords who are not here today who are equally concerned by Clause 27. I hope that the Government will listen and do what must be blindingly obvious that they ought to do, which is to withdraw Clause 27 so that we do not need to spend—I will not say “waste”, because it is not a waste of time—any more time on this on Report. In the mean time, I beg leave to withdraw the amendment.

Amendment 81D withdrawn.

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[Baroness Brinton]

My Lords, these two amendments are trying to achieve the same objective. I commend the noble Lord, Lord Adonis, on the wording of Amendment 82. My Amendment 90 echoes those sentiments. We have already discussed, in the previous group, the complex decision required of an individual being asked to become an employee-shareholder, who must take account of current employment rights versus the slim chance of future capital gains. However, there is a further and even more worrying aspect for one particular group of individuals: those who are currently unemployed and in receipt of jobseeker’s allowance.

What will happen to those offered a position in a company on the condition that they become an employee-shareholder and give up some of their rights? I am aware of people who find themselves being made redundant, through no fault of their own, not once but twice, or even more frequently. I am reminded of a friend in Luton who, following the closure of Vauxhall, moved from one company to another in the supply chain and was made redundant four times in the short space of a year. For people with that sort of history, the idea of giving up the right to future redundancy pay will be horrifying and would make the job extremely unattractive. This is not a run-of-the-mill job offer and I would be extremely concerned if an individual turned down a job and share ownership opportunity, and then discovered that his or her JSA was to be cut.

The Minister in another place said:

“The Government believe that jobseeker’s allowance claimants must actively seek and be available for work … and it is right that employee-shareholder jobs should be as much a part of that consideration as any other. If a claimant applies for an employee-shareholder job and is offered a position, they should normally accept the offer”.—[Official Report, Commons, 17/12./12; col. 649.]

It is this quote from the Minister that underlies the concern that the noble Lord, Lord Adonis, has laid out in some detail. I echo that because we have to see the guidance and information to make it exactly clear where the boundaries lie. I will not go back through the timescale of this, but it is essential that all sides of the House—all sides of the House have concerns about this clause—have time to consider the very serious implications for jobseeker’s allowance for people who are sent off for that type of post.

In addition, some people may send off hundreds of job applications but receive only one reply; some may get one interview; some may even get one offer. A job offer for shares-for-rights is a job: do the Government seriously think that someone will turn it down after months of searching? Many people cannot pick and choose jobs, even if they are worried about the reduction in rights, especially in the current climate, with many businesses folding. I cite Paul Callaghan from the legal fund Taylor Wessing, who suggests that shares-for-rights contracts will be optional to the extent that eating and drinking are optional.

The amendment would write into the Bill a statement that makes it absolutely clear that the Department for Work and Pensions and Jobcentre Plus will not penalise an individual who makes the difficult choice to turn down a job. Should they accept it, they must have access to the same legal and financial opinion that we discussed under the previous group of amendments. That needs to be written into the Bill to ensure that protection and to provide Jobcentre Plus with clear and unequivocal direction.

[Lord Pannick]

My Lords, I share the concerns expressed by the noble Lord, Lord Adonis, and the noble Baroness, Lady Brinton, about the absence of the guidance that the Government are eventually to publish. The whole point of Committee on a Bill is that we can debate in detail the implications of the Government’s proposals. By not publishing the guidance at this stage, the Government are preventing the Committee discussing the essential detail of their proposals. For my part, I do not find it satisfactory, even if the noble Viscount produces answers this afternoon. It should have been done in time for noble Lords to debate the matter today.

In the absence of any guidance, we can proceed only on the basis that Clause 27 does not at all protect the prospective employee from being denied welfare benefits if he or she refuses to take up a job offer which involves the absence of employment rights. Even if there were adequate guidance, I share the view of the noble Baroness, Lady Brinton, that guidance is in principle inadequate. The Bill must state clearly the legal position in order to protect the prospective employee.

Clause 27 is bad enough in its implications for employees, as we explained in a previous debate. It is even worse for the prospective employee. Under Clause 27, the employer can refuse to offer employment to applicants who decline to enter into one of these agreements giving up statutory employment rights. The irony is that the worse the job market, the more willing prospective employees will inevitably be to take the job, even if employment rights are lost. However, the poorer the job market, the greater the employee’s need for the statutory protection against unfair dismissal and redundancy that the employee will be giving up. It is a vicious circle indeed.

Amendment 82 and the amendment of the noble Baroness, Lady Brinton, each address a particular vice of Clause 27 in that respect. The vice is clear. It is that the prospective employee who wishes to maintain his or her statutory employment rights—during the previous debate, the noble Viscount emphasised that this is a matter of choice—and refuses to be bought off, is at risk of losing welfare benefits. That is indefensible for a simple reason. Clause 27 can only be based on a theory of equal bargaining power. It is a wholly unrealistic theory, but that is the theory. That is the fig leaf which shelters the substance of Clause 27. Even the fig leaf—the theory of equal bargaining power—is removed by the fact that the prospective employee’s bargaining power is wholly removed if he or she is going to lose welfare benefits if he or she does not agree to take the job in the absence of the statutory protection of employment rights. Therefore, the absence of protection against losing welfare benefits for the job applicant inevitably means that, in practice, Clause 27 does not simply provide for a choice, it imposes an obligation.

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[Viscount Younger of Leckie]

I would like to pick up only one of the points made by my noble friend. It is important, and I am sure that the officials are working hard on this, to ensure that the guidance that is offered is simple, and that there is a way that those involved who need to go to the guidance can do so quickly and effectively, despite the fact that it is 3,000 pages long.

[Lord Pannick]

Does the Minister agree that the simplest way for the guidance to address the matter would be for it to state in one sentence that it was reasonable for the prospective employee to refuse to accept a job because he or she did not wish to give up statutory employment protection rights? Is that what the guidance is going to say or is it not?

[Viscount Younger of Leckie]

I have not seen the guidance but I do not believe that it will say that.

There are two further safeguards for jobseeker allowance claimants. Should a claimant refuse to apply for a job after mandation, a sanction will be imposed only if the claimant does not have good reason. A decision-maker within DWP will be responsible for making that determination. In reaching a determination, they will take into account the claimant’s circumstances, the specific job and the terms and conditions on offer. Again, the Government will supplement the DWP decision-makers’ guidance around any particular issues with the employee shareholder scheme that need to be considered.

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[Viscount Younger of Leckie]

I can only reply to the noble Lord that I am not in a position to explain the guidance because I have not seen it because it is being revised. That is the only answer that I can give at the moment.

[Lord Pannick]

I am grateful to the Minister for his patience in giving way. Will he deal with this point? If the guidance does not make it clear that the prospective employee is entitled to refuse a job offer because that offer involves sacrificing employment protection rights, the prospective employee does not have a choice. The defence that the Minister has put forward to Clause 27 is therefore simply inapplicable.

[Viscount Younger of Leckie]

On that particular point, it is important again to emphasise that each case involving an employee shareholder or a would-be employee shareholder will be looked at on a case-by-case basis. I hope that I have set out the process by which that will be undertaken by the jobcentre in negotiation and discussion with the potential employee shareholder. That is where we are at the moment. However, the guidance—which, I repeat, is coming—will go much further towards setting out the details and indeed the guidance for that process to work.

The Government do not believe that the right way of providing the protection sought by the noble Baroness, Lady Brinton, and the noble Lords, Lord Adonis and Lord Pannick, is through amending this clause. As I mentioned earlier, the jobseeker’s allowance system works on a case-by-case basis, with all decisions made on the merit of the case. The system is sufficiently flexible and robust, and jobseeker allowance decision-makers, with the support and guidance which we have committed to providing, will be able to understand the new employment status. With these reassurances, I hope that the noble Baroness, Lady Brinton, and the noble Lords, Lord Adonis and Lord Pannick, will not press their amendments.

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[Lord Deben]

The noble Baroness, Lady Turner, speaks from her seat, but she has put forward some opinions that I have not heard since 1945. I am not on that side but I still do not see this. I hope that the Government will help those of us who are naturally on their side to get out of this miasma—this difficulty of understanding the connection of the two halves. I have great sympathy with the question asked earlier by the noble Baroness, Lady Warnock. What is the connection and how will it improve things, one by one? I am very ready to be converted but at the moment I am finding it rather difficult.

[Lord Pannick]

The noble Lord, Lord Deben, posed a series of questions about the benefits of Clause 27. Perhaps I may add to the burdens on the Minister, who is playing a very straight bat—he would be a credit to the cricket team of the noble Lord, Lord Strasburger. I will put these questions to the Minister in the hope that he can explain whether the Government have taken account of two very troubling legal consequences that will follow from the current contents of Clause 27 and which are relevant to the amendments in my name and that of the noble Lord, Lord Adonis.

First, some of the rights that the employee or prospective employee is being invited to sell are concerned with issues that are particularly sensitive in anti-discrimination law. There is the right to request flexible working, which is obviously of particular importance to working mothers—as is the eight-week notice period that would be imposed for the return to work after maternity leave. These are very sensitive matters. It is inevitable that employers who seek to rely on an agreement which purports to override rights in this context will face legal challenges under EU law, the expense of which will far exceed the amounts that they would pay to employees for giving up those rights. Have the Government taken that into account in deciding on the merits or otherwise of Clause 27?

I would be grateful if the Minister would comment also on a second legal implication. If the law allows for the sale of unfair dismissal and redundancy rights, it is inevitable that aggrieved employees, when they are dismissed or made redundant at some stage in future, will not go quietly. Having sold their unfair dismissal and redundancy rights, they will formulate their grievances by reference to whatever legal avenue has not been sold. Nothing in Clause 27 affects—and because of EU law nothing in Clause 27 could affect—their rights of protection under anti-discrimination law. So instead of claiming unfair dismissal, or seeking compensation for redundancy, the aggrieved employee will contend that the dismissal or redundancy was based on a prohibited ground. Therefore, my second question to the Minister is whether the Government have really taken into account that any employer that enters into one of these agreements—and it seems highly unlikely that there will be many of them—will not be protecting themselves against the litigation that will result when an employee is dismissed or made redundant in future.

[Baroness Brinton]

Clause 27 requires employees to give up a range of rights. Many of these rights are ones that the Beecroft report recommended should be removed from employees more generally. The Secretary of State, Vince Cable, hit out at Beecroft’s unfair proposals. He said:

“One of Mr Beecroft’s recommendations was a suggestion to bring in no-fault dismissal. In my daily conversations with businesses, this has very rarely been raised with me as a barrier to growth. Businesses are much more concerned about access to finance or weak demand than they are about this issue”.

Given that the clause is in the Growth and Infrastructure Bill and that the Secretary of State does not believe that giving up the right to claim unfair dismissal is a barrier to growth, why should we ask workers to give it up under this new status? In fact, Mr Cable went even further and stated that it would be counterproductive. He said:

“At a time when workers are proving to be flexible in difficult economic conditions it would almost certainly be counterproductive to increase fear of dismissal”.

I never thought that I would support Mr Beecroft, but he recommended a compensated no-fault dismissal. The Government are going one step further and do not even provide compensation for no-fault dismissal under the employee shareholder status. Given how controversial Mr Beecroft’s proposals were in the first place, and the Secretary of State’s protest, does this not give us further reason for the removal of subsections (2)(c) and (d)? Beecroft also recommended the removal of the right to request flexible working—another of his recommendations that the Government are trying, perhaps, to sneak in by the back door through this status for certain employees. However, I have to say that this directly contradicts the coalition agreement and the mid-term review, which states that the Government will extend,

“the right to flexible working to all employees”.

How can the Government fulfil that pledge when they will be removing the right from employee shareholders?

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[Viscount Younger of Leckie]

It may help the noble Baroness if I state again that the employee shareholder agreement between the employer and employee is a specific new contract for a new employment status. However, if, for example, the employer has not fulfilled the basic criteria for ensuring that the employee is properly included and for meeting the criteria for that employee to be an employee shareholder, there is a default position whereby the employee shareholder would revert to being an employee or worker, whatever is applicable. There is a safeguard in place for them.

[Lord Pannick]

The noble Viscount said a few moments ago that it is the Government’s estimate that up to 6,000 companies might wish to take advantage of Clause 27. Would he kindly undertake to publish before Report the evidence upon which that assessment has been made?

[Viscount Younger of Leckie]

I would be delighted to furnish the noble Lord with whatever information I can find, but I remind him—he may well know the statistic—that the total estimated number of businesses in the UK is 4,794,000. Therefore, breaking down the figure to 6,000 perhaps re-emphasises that this employee shareholder status is not for every company. It is aimed at a particular type of company, and it is important to round off this debate by emphasising that this is not as big a deal as some noble Lords are making it out to be.

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[Lord Pannick]

My Lords, I agree with all that has been said by the noble Lord, Lord Adonis. Clause 27 is wrong in principle. It contains inadequate safeguards both in relation to the loss of welfare benefits for those prospective employees who do not wish to give up their statutory employment rights, and also in respect of the need for legal and financial advice for those who are prepared to give up those rights. Clause 27 will also be expensive to the Treasury if there is a take-up, or there is going to be very limited demand. I note that the noble Viscount has attempted to provide the evidence on which the Government estimate that 6,000 companies may be interested in Clause 27. I look forward to seeing that material. I, too, very much hope that the Government will listen to the debates that we have had this afternoon, and take the wise step of withdrawing Clause 27 before we come to consider it again at Report.

[Lord Flight]

My Lords, although I welcome the suggestion that the Chancellor might allow there to be no income tax on grants of up to £2,000, as I understand it, the spirit of the provision is more about the go-getter employee shareholders. I would suggest that if there is income tax on amounts over £2,000, this scheme will not get anywhere because the amount of tax that people pay will be quite disproportionate to the risk they are taking on their equity and to the values—as the noble Lord, Lord Pannick, pointed out—of what they are giving up. It is important to sort out by the time we return on Report precisely what the income tax position will be.