Employment Tribunals Act 1996 (Tribunal Composition) Order 2012

Lord Risby Excerpts

Monday 19th March 2012 Grand Committee

[Lord Hodgson of Astley Abbotts]

Clearly, it is an argument for good management. Identifying free riders is very important. Some people who promise quite a lot in the first few months are unable to sustain the work for various reasons. It is the performance appraisals cycle which sets deliverables and make it clear whether the person has delivered or whether the performance has, over time, drifted away and they have become a free rider. It is a sensitive interaction between what is practically laid down in the performance cycle and what management itself should be doing. There is no excuse for management not being prepared to grasp the nettle and make sure that any issue which clearly causes disaffection is tackled soon.

I turn to the employment tribunals order and the issue of whether a judge has the right to sit alone or can call for lay members. Based on my experience of the employment tribunals I have been involved with, the position has been that a judge has been able for the most part to undertake the work perfectly satisfactorily. I do not argue that this is always the case, but what does happen if you have three people sitting as opposed to one is that the time taken on the case is lengthened enormously.

Last year I was involved in a tragic case concerning an extremely talented man who had set up a small business in the video conferencing sector. I was not a director of the company but I had invested in it because I thought he was a rather talented bloke. Success had eluded him over a period of years and he had become increasingly irrational, and eventually the workforce of 10 to 15 people said to the directors, “It is either him or us. We cannot put up with him any longer”. The company had an internal conciliation process and I, along with another investor, was asked to sit down and talk to the chap. We did so, although it took four or five months to organise that. It was clear that he could accept no criticism of his performance because as soon as we said that, yes, the company had made some mistakes in the process but he was majorly at fault, he said, “Fine, I am going to an employment tribunal”.

It took a year to set up the tribunal, which had three people on it. There was really no dispute about the facts or anything else. This chap, for better or worse, very sadly could not accept that anything was wrong at all. A case that might have taken one or two days took six days, and it took three months for the judgment to be concluded. The result was, frankly, a tragedy. He lost his investment and eight or nine years of his life, during which he had spent all his time working on the business. I lost my small investment, which was a pity, but that was nothing compared with the 15 people who lost their jobs. One felt that the situation should have been capable of being grasped faster, and could have been dealt with more quickly, if it had been handled by one person, not three.

I would say to my noble friend that whereas the consultation document states that the objective is to,

“ensure that where parties do need to come to an employment tribunal, the process is as swift, user friendly and effective as possible”,

I know that there is no doubt that this case and many others that I hear about show that we are not as swift as we should be. If we are to have confidence in the system, we need swift justice because small businesses in particular find it extremely debilitating to have senior management devoted to preparing the case, sitting in on hearings, and in the mean time obviously having a disaffected employee.

I conclude by saying that I support the orders for the reasons I explained. They reflect my view of the changes that have taken place in recent years in both commercial and industrial practice, and they do so without weakening the safeguards we need to ensure that a proper equality of arms between employer and employee is maintained.

[Lord Risby]

My Lords, first, I apologise for arriving a few minutes late. In supporting the orders before us, I agree strongly with my noble friend Lord Cope. These are not issues that will change the industrial, commercial or employment landscape of the country, but they will certainly make a difference. I will refer to two articles in the papers today. One is by Mr Xavier Rolet, the chief executive of the London Stock Exchange. He points out that there are 4.8 million SMEs in this country, and asks us to “consider the impact” of what would happen if they were given an additional incentive to employ people—particularly young people, where we have a very big problem.

I was interested in the observation of the noble Lord, Lord Monks. Compared with many industrialised countries, we have a flexible labour market, but the truth is that in the eurozone, unemployment is running at 10.7 per cent while here in our country it is 8.4 per cent, which is still far too high. What is happening is that in terms of the UK’s global competitiveness, the World Bank now rates our labour market 35th in the world—down from 17th in 2007. Of course it is absolutely right that we should have proper, civilised protection for people in the workforce. There is no question about that. However, there is a question of balance.

Perhaps I may draw your Lordships’ attention to some issues for SMEs. I declare an interest as deputy chairman of a small business bureau. In the past few days I have spoken to a number of bureau members, to get their views on what we are discussing. I should add that in a previous life I ran businesses, both large and small, and so I know about the associated difficulties, particularly for smaller family businesses that employ between 10 and 30 people.

For SMEs, going to a tribunal is very time-consuming and stressful for both employers and employees. There is no question about that. However, as we heard from a number of noble Lords, for employers it can be a particularly difficult time. There is great anxiety in SMEs about taking on and retaining staff; I know that from experience. It comes on top of all the other issues such as access to bank funding, planning and management. Based on my discussions of the past few days, I suggest that if we can provide something that will give them a small additional opportunity to take on employees, we should support it. Certainly the CBI, the IoD and the British Chambers of Commerce said that the current arrangements were something of an inhibition to taking on additional staff.

It is certainly true that the world we inhabit at every level has become more litigious. For those people in a difficult economic environment, particularly in family businesses, this is a difficult time. That is why I support the orders. I will add simply that the CBI noted that SMEs accounted for 65 per cent of all new jobs created. Its view is that the extension to two years will be particularly beneficial to those without labour market experience. We all know about the tragedy of youth unemployment. As the economy recovers, if these proposals in some way encourage SMEs to feel that there are fewer disincentives to taking on young people in particular, I will support them—and I believe that they will.

I will turn briefly to the issue of tribunal composition. We need to remind ourselves of the discretion under the proposed arrangements. A full panel can exist in appropriate cases. I am not sure that it is appropriate for us to prescribe that that should be the case all the time. In fact, it is not. A principle was established by the previous Government, who decided to extend the scope of judge-only cases. Various surveys have taken place. In 2007 Michael Gibbons was appointed to review the circumstances under which employment judges could sit alone and add value for money.

Under the proposals, parties can consent to a judge hearing the case alone. There is no change there from the long-standing situation. The measures will put in the hands of the judge something that will give more flexibility. Some degree of judicial discretion, with defined criteria, will give judges an opportunity to decide, in consultation with those affected, whether to proceed on that basis. The order does not mandate the exclusion of panel members; it changes the basis for having them and will simplify the process.

I come back to my original point that we want a high level of protection in a civilised country. However, as the noble Lord, Lord Jones, said, we have a problem of international competitiveness. If it is possible through these measures in a small way to begin to deal with the terrific problem, in our country and the rest of Europe, of how to employ more people, I will certainly support them.