Employment Tribunals Act 1996 (Tribunal Composition) Order 2012

Lord Scott of Foscote Excerpts

Wednesday 28th March 2012 Lords Chamber

[Lord Risby]

My Lords, the question we have to ask ourselves is whether in any way the one-year qualifying period is a barrier to hiring. That is an essential part of what is before us today. We can all agree that small businesses face significant challenges, a weak economic environment and difficulties in accessing credit. At the heart of this discussion is youth unemployment, which is a huge difficulty right across Europe. Almost all European countries are suffering from very high levels. Small businesses—acorn businesses—being able to hire people, young people in particular, must be an ambition for all us who want to see the economy do well.

We have all had representations from a range of organisations. The thing is to encourage employers to make that leap and take on additional staff. Among those representations there was something from the British Chambers of Commerce that I thought was particularly interesting and instructive. It was about issues facing sole traders—those who have not yet taken on additional employees. It says:

“In the UK, over 3.6 million individuals are classed as ‘enterprises with no employees’. Not all of these people want or have the potential to expand their business and become an employer, but some do. The key questions are how many of these companies are interested in employing people, how we can identify them and how we can encourage them to take the huge leap needed to become an employer.

The first action must be to reduce the size of the leap required. Throughout our survey work, individuals said they would prefer to use freelancers to assist them rather than take on employees. So, in many cases, it is not a question of whether there is enough demand out there for the business to sustain another worker. The issue is whether the individual wishes to take on the obligations and risks inherent in employing their first staff member”.

All of us who have been involved in small businesses or tried to build up businesses know that that is a very pertinent question.

If we look at the main concerns of businesses in the current environment, pension requirements, dismissal rules and sickness absence feature very strongly. The British Chambers of Commerce says:

“The second biggest barrier is the dismissal process, and it is interesting that it is seen as a significant or total barrier by more than double the respondents that feel that way about the recruitment process. 27% of businesspeople believe that dismissal is a significant or total barrier to recruiting a first employee”.

This is an important point. We must make sure that in a civilised society there is just and fair redress against bad employers. However, I believe that the extension to two years would be welcome to the business community as part of restoring business confidence—something we all aspire to.

I will touch on the issue of tribunals. We already have a precedent for the arrangements that have been set out by the Minister. Judicial discretion prevails; there is no automatic mandate for the exclusion of lay panel members and there is no clear evidence that suggests a judge cannot satisfactorily deal with unfair dismissal claims. This would send out a small but significant message to businesses that have been calling for the change that is before us today.

Coming back to the original point, our major challenge is not only to keep people in employment where possible but to encourage employers or even those sole traders to add to their workforce. Having hired and trained many people in my professional career, I know that one year is often an insufficient time in which to come to that final judgment. I therefore support the proposals put forward by my noble friend today.

[Lord Scott of Foscote]

My Lords, perhaps I might say a word or two about the second Motion moved by the noble Lord, in particular the statement of reasons.

I was astonished to learn from the noble Lord, Lord De Mauley, who took the time to come and explain the position to me, that the statement of reasons was only an adjunct to the introduction of a right to claim for unfair dismissal. It was thought desirable to have a statement of reasons so that the employee subject to the dismissal would know what the reasons were and could have some record on which he could base his opinion as to whether he should bring a claim for unfair dismissal.

I had supposed, maybe naively, that it would be regarded as good management practice for employers to give reasons for dismissal, particularly to young employees, for whom this had perhaps been a first job, and those who had previously been long-term unemployed. With those reasons, they could modify their behaviour if they were lucky enough to obtain alternative employment, or they could go into some other occupation if they thought that there was some insuperable barrier to their success in the job from which they had been dismissed.

The noble Lord explained to me that the introduction of a one-year period before the right to reasons for dismissal arose was tied to the one-year period that was the condition for being able to bring a claim for unfair dismissal. The two ran together. He explained that if the condition for bringing a claim for unfair dismissal was to be raised from one year to two years, so too the right to have reasons for dismissal should be raised from one year to two years.

I find myself in some difficulty in accepting that the right to reasons for dismissal should be tied in that way to a claim for unfair dismissal. I should have supposed that it would be good management practice and, moreover, a matter of common courtesy for an employer to inform an employee why they were being dismissed. The notion is that a young person could be taken on as an employee, perhaps in his or her first job, and after six months—that is the position now but 18 months would be the position if these statutory instruments come into effect—be dismissed without being given any reason whatever for the dismissal. It is astonishing that that could be regarded as acceptable management practice.

Acceptable management practice would be to provide reasons to an employee who was being dismissed, particularly if it were a young person or a person who had been long-term unemployed and was working his or her way back into employment habits. I respectfully disagree with the part of the Motion that attacks the proposition that the time period for getting a statement of reasons for dismissal should be raised to two years. I would want greater justification than has yet been offered for requiring a two-year period before a statement of reasons for dismissal can be obtained. It should, as I repeat—I am afraid that I have repeated it more than once—be regarded as good management practice for an employer to tell an employee being dismissed why he or she is suffering that fate. For those reasons, I support the second amendment.

[Lord Beecham]

My Lords, I support my noble friend’s amendments, if only because the Government’s policy seems to be based on a myth; namely, that in this country our labour market is more regulated than those of our successful competitors. It is a myth comparable with that of the compensation culture, which has been used to justify some of the changes under the Legal Aid, Sentencing and Punishment of Offenders Bill, which limped through the House last night at the end of its Third Reading.

I want to comment briefly on two aspects of the Motions. First, on the composition of tribunals, the Explanatory Memorandum to the statutory instrument records:

“The Government accepted that some unfair dismissal cases can be ‘fact heavy’ and that the input of lay members can be beneficial. But evidence and consultation responses (including from some judges and some lawyers/law firms, and in particular from business) suggested that for those cases which revolve essentially around questions of fact rather than any complex legal point, Employment Judges are competent to deal with an assessment of the evidence against established legal tests and criteria without the need for lay members”.

The inference to be drawn from that note is that there are cases in which there are complex legal points. In those circumstances, how do the Minister and the Government justify taking out of the scope of legal aid and advice, employment law tout court, which is essentially the position except in relation to discrimination cases? It is clear that there are a proportion of cases in which legal points arise; hence, the justification for the change that the Government propose. However, they do not balance that by allowing legal aid and advice to those appearing as complainants in those cases.

Secondly, I wish to touch on the point made by my noble friend Lord Borrie and the noble and learned Lord, Lord Scott, about the statement of reasons. I sympathise very much with the noble and learned Lord and feel that a statement of reasons for dismissal should be given at whatever point an employee is dismissed but for an additional reason, apart from those advanced by him. If you are dismissed and have to seek another job, it would be helpful to be able to demonstrate that your dismissal was not related to any inadequacy or misconduct on your part, if such were the case, but, for example, arose because there was insufficient demand for continued employment in the firm in question or for some reason not related to the person being dismissed.

The Government’s proposals mean that, for the first two years of employment, no one will have the benefit of such clearance to demonstrate to another employer that he is in other respects perfectly fit to be employed, subject to the employer’s own requirements. Particularly in the conditions of the present labour market, that is something to be deplored. For those reasons, in addition, I strongly support the amendments in the name of my noble friend.