Employment Rights Bill

Lord Pannick Excerpts

Consideration of Commons amendments and / or reasons
Wednesday 10th December 2025 Lords Chamber

[Lord Londesborough (CB)]

My Lords, I am going to speak, in mercifully brief terms, about SMEs, but I will spare noble Lords the history of SMEs in the UK from 1910 to 2026.

My point, in relation to Motions B and B1, is that lifting the cap on unfair dismissal without warning and at this very late stage fundamentally undermines the claims of careful consultation with employers. My email inbox, like those of many others in this place, is awash with anger and indignation from SMEs in particular. The question they keep asking is: how can we trust this Government, coming as this does after punitive and disproportionate hits on employers’ national insurance contributions and inflation-busting increases in the minimum wage, who are sneaking in this clause on uncapped compensation? SMEs will not be persuaded by the data we have heard in this debate on medians and modes. Frankly, we are creating yet more uncertainty, piling up the risks of employing new staff and fuelling unemployment that much further. It is anti-entrepreneurial, anti-enterprise and, I fear, a job destroyer. In my view, it has no place in a free, growth-driven economy.

[Lord Pannick (CB)]

My Lords, there is one short point that the House should bear in mind in relation to Motion B1. There is already no cap on the award of compensation in employment tribunals for race discrimination, sex discrimination and disability discrimination cases. The House may therefore think that the concerns that have been expressed about the impact of the removal of the cap are perhaps rather exaggerated.

[Baroness Lloyd of Effra (Lab)]

My Lords, I thank all noble Lords for their contributions today. This continues the robust discussion that we have had throughout the passage of the Bill.

I come first to some of the constitutional points, or those that go to the way that we do business. As I outlined in my opening speech, the tripartite talks and the amendments resulting from them were context- and Bill-specific. They were really a demonstration of the way in which we listened very clearly to the views expressed in this House through many exchanges, which led to a very productive tripartite discussion. However, they are very context- and Bill-specific. The noble Lords, Lord Vaux and Lord Cromwell, will be familiar with discussions with the Leader of the House on how she and other Members would like to conduct business more regularly.

I will address some of the points made. Again, coming back to the nature of it all, these were discussions between business representative organisations, trade unions and the Government. Specifically on the question of the minutes, there are Civil Service contemporaneous notes of the meetings, but they have not been shared with participants or more widely. We think that it would be impolite and inappropriate to share the meeting notes without the agreement of those who attended the meetings. The Government’s statement and update on the Employment Rights Bill, released on 27 November, and the subsequent Written Ministerial Statement laid in both Houses provide the public summary and conclusion of that meeting. Although it was a slightly different process, we laid that Written Ministerial Statement as soon as we could to give as much clarity as possible to the House on the developments that were happening, which were, as I said before, in response to concerns raised here.

On the question of lifting or removing, that is indeed something that I have also given some thought to. The word “lift”—lifting embargoes; lifting bans—is used very commonly in that manner to mean “remove”. When asked this question in the other place, my colleague, Minister Dearden, confirmed the outcomes of the negotiations and said

“I was in the room as part of the negotiations … I can confirm that the compensation cap was discussed and agreed in the room”.—[Official Report, Commons, 8/12/25; col. 94.]

I was not in the room and I therefore give weight to the comments that she made on that.

To address the comments and interventions made by the noble Lord, Lord Vaux, and my noble friend Lord Barber, this is, in total, a pragmatic way forward. The opposition amendment would not enable us to move forward because it would remove the cap and replace it with the report. It is not something that can be encompassed, and we should continue with the package as negotiated; it is not consistent with the agreement that was reached and which we have brought to your Lordships and encapsulated in the Bill. I just underline that it is not something that we can accept.

Points have been made about the actual substance of the cap. The noble Lord who spoke just before me made the extremely pertinent point that there are already areas of the law that have uncapped areas, and we do not think that removing the cap will mean that compensatory awards will necessarily increase in the way that others have set out. Tribunals have well-established ways of calculating the compensation that might be awarded for particular types of losses resulting from unfair dismissal. As the figures cited today show, those methodologies lead to awards that are, on average, under £7,000. Employment tribunals will continue to focus on claimants’ actual losses when determining awards. I think that some of the fears are unwarranted but, in any case, we will publish the impact assessment and we will engage with business organisations continuously. The last month has shown how productive it can be to engage with business organisations and trade unions together to advance all the measures here. I think that I have dealt with all the points made by Members on the cap.

I come on to the political funds and the question of whether it is an active choice or whether we are trying to restrict people from making an active choice as to whether to contribute to a political fund. When joining a trade union, new members are taking an active choice to voluntarily join a collective organisation that has decided, via a democratic ballot of members, to establish a political fund. We do not see these as two distinct decisions—a decision to join a democratic organisation that has a political fund and a decision to opt in to a political fund—but one active decision. I remind noble Lords that all we are proposing to do is to restore the position as it was for 70 years—I will perhaps not give quite as much detail as my noble friend—before the Trade Union Act 2016 came into force. This simplifies the political funds process to ensure that a balance is struck between protecting trade unions from administrative burdens and ensuring that members continue to have a choice on whether they wish to contribute to a political fund.

Crucially, we agree with the noble Lord, Lord Burns, that members who, for whatever reason, choose not to contribute, should and will be able to do so easily and without detriment, and can exercise that right to opt out of contributing. We will continue to require trade unions to make new members aware of their right to opt out of the political fund. The unions will have to explain to members on the application form that opting out will not affect other aspects of their membership and they will not face any disadvantage. Members will be able to easily inform unions of their decision to opt in or out, including by post, email, completion of electronic form or by any other electronic means.

I was asked about the guidance or regulations in this area. The Secretary of State will be under a duty to issue the guidance within three months of the relevant section coming into force. This guidance will set out expectations as to how quickly unions should action opt-out notifications and will state that unions should, as a matter of best practice, give effect to opt-out notices at the earliest feasible opportunity. This will help to ensure that unions action the opt-out notices promptly. As I stated earlier—I can commit to this again—the guidance will also be clear that opting out must be properly available and practically possible for members who wish to exercise that right. We want to make sure that members are able to opt out in that way, and the guidance will be clear on how that is effected. On the question of the rebate, that will be effected at the earliest time possible once the opt-out notice has been given.

On the question of ballot thresholds, I noticed the attempt to recontextualise the recent year’s industrial action, but the fact is that a threshold of 50% has not led to less industrial action. All strike action recently has taken place with a turnout of more than the 50% threshold, so we do not think that this will inhibit good industrial relations. In fact, we think that the 50% level is unnecessary. It is inhibiting the democratic right of union members and unions to demonstrate their will. It does not take place in other areas—for example, local government or parliamentary elections. Therefore, we do not think it should continue. However, to reiterate, we will not repeal the 50% threshold until we have assessed the impact of e-balloting. The Secretary of State will have to have regard to the impact of that, and he will lay a Statement explaining what the effect of e-balloting is before the 50% threshold is rescinded.

To conclude, we now want to move forward with purpose, guided by our manifesto commitment to work constructively with stakeholders.