Lord Young of Norwood Green
Main Page: Lord Young of Norwood Green (Labour - Life peer)Enterprise and Regulatory Reform Bill
Lord Young of Norwood Green Excerpts
Baroness Brinton
My Lords, the terms under which ACAS is strengthened are very important, but first I want to reiterate a point I made at Second Reading and to which the noble Baroness, Lady Donaghy, has already referred: it is important to ensure that resources are available right from the start, not just post fees starting to trickle in. When I was a senior county councillor some years ago, I recall that we always believed in the principle of good housekeeping. If the funding of this is based on reducing the costs involved in employment tribunals over the longer run, there is clearly a cash flow problem in business terms before any savings can be made. It is vital that ACAS is staffed and resourced appropriately, so that it is able to pick up the ball and run with it.
I turn to the point made by the noble Lord, Lord Morris. I believe that ACAS is in exactly the right position. One of the great strengths of this Bill is that it recognises that going to mediation before the long wait—I have been involved in EATs both as an employer and as an employee in the past—is the better course. It can sometimes take up to two years for a case to be heard, and that is not good for either side. Early mediation is a good way of resolving this. My knowledge of ACAS over the years leads me to believe that it is in a perfect position to do this.
While I have sympathy with the amendment, I am not sure that it needs to be written into the Bill, but I would hope that the Secretary of State would automatically want to review something like this to ensure that it is actually providing the resources that are needed.
Lord Young of Norwood Green
My Lords, I support the amendment. I am still trying to get my head around the vision of the noble Lord, Lord Marland, as a recruiting sergeant, and I look forward to seeing him at the next factory gates recruitment session. More seriously, this is an appropriate amendment given the background against which the further involvement of ACAS is taking place. Let us be clear on the principle of what the Government are doing. We are at one with the principle of involving ACAS in mediation and conciliation. There is no argument against that. But, as a number of my noble friends have said, if the Government want the ends, they have to will the means. That is the real concern behind the amendment.
As my noble friend Lord Monks said, it is being introduced against the backdrop of a number of other changes being made to workers’ rights, such as the extension of unfair dismissal to two years and the introduction of fees. A lot is going on in this area. We are not opposed to the principle, but we are concerned about whether there will be enough resources. Although the noble Baroness, Lady Brinton, talked about a review, we are actually talking about the anticipation of an impact assessment. We agree about the need for a review, but that will take place in another amendment. I would be interested if the Minister could tell us what the effect of introducing conciliation right across the board will be. Has the situation already been assessed?
It could be said that to a certain extent this is a probing amendment, but we regard it as a serious one. Our concern is that if you want the involvement of ACAS and if it is going to function in a way that will enable it to carry out a conciliation and mediation role, we all need to be assured that the service has the necessary means to do it.
I look forward to hearing from the Minister as to whether the Government have assessed the impact of this issue, including on other areas such as fees. What do they see as the necessary resource requirements of ACAS in its new situation?
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Lord Marland)
My Lords, I thank the noble Baroness, Lady Donaghy, for the amendment. It is, quite rightly, an interesting area to probe. I also compliment her on her work as chair of ACAS and the work of its board.
In summary, this is a nice problem to have. We all agree that ACAS is a terrific institution. It probably sounds rare for this Government to say that they thought it was a very good institution, but we believe strongly in it as an important place to resolve difficulties. That is why we intend to put much more in the way of resources into it, and it will become a fundamental block for early resolution of a lot of disputes. We know it acts fairly and properly, it has a good track record, and we are keen to support it.
I know that many noble Lords have read our recently published impact assessment on resolving workplace disputes, which helps to answer a number of issues that have been raised. We will produce in the new year a further impact assessment on how this process will work and whether the funding should be upfront, which the noble Baroness asked for. We are working to determine the extent of the funding and how best it is to be provided. I hope that by the time we get to the Report stage in the Chamber, quite a lot of the questions will have been answered.
It is important that we get it right and that we listen to the words of the chairman, who said, in front of the House of Commons Committee, that he was confident that ACAS would be adequately funded for its new task. Do not, therefore, take it from us; take it from him that he is confident he will get the right funding. We are working closely with him and the organisation to make sure that we do that. I totally accept and agree, as do the Government, that it is critical that ACAS is properly funded, and we will be able, in the normal course of its annual report, to see how that funding is operating. Noble Lords will be able to judge for themselves annually how that is improving and, through the normal avenues, determine that the progress we hope for on all sides of the House is being made as satisfactorily as possible.
I thank the noble Baroness for this probing amendment. It gives me an opportunity to lay out clearly how we are going to proceed. On that basis, I hope that she will withdraw the amendment and look to see how this develops in the next month or so.
Lord Monks
I intervene again, although I will not make a habit of doing so. In my earlier remarks I referred to a steeplechase that the applicant needs to negotiate to reach the employment tribunal. The tribunal is not a sort of holy grail by any means. The average compensation payments are pretty low when you get there, although there are some spectacular exceptions, and often do not compensate for the loss of employment.
To all the points already introduced into the debate this afternoon, such as needing to be in a job for two years and having to go through the ACAS procedure, the Bill adds the issuing of a rather formal certificate, which the noble Baroness, Lady Turner, is concentrating on. You may then have to pay a deposit for some, or all, of your case and then you arrive in front of the tribunal, which does not have lay members—people who have direct experience a bit like yours—to give you a bit of reassurance.
It is a daunting prospect and, while I can guess some logic behind the need for an ACAS certificate at the end of the conciliation service, it raises a number of points. First, why is it necessary? It is not necessary now and I am not aware of there ever having been any state of confusion. If the two parties have not agreed, the case continues. Anyway, ACAS has to issue a certificate. How long it will take will depend on its case load and whether it is another bureaucratic stage. I know that the time clock does not start running until after the certificate is issued, but it seems that there is scope for some legal problems.
I would be interested in an explanation, if it is possible to get one today, on the reasoning behind this particular stage being put in. Is there some doubt about whether conciliation has failed? Is there a need to signal that conciliation has failed and that you cannot consider it any further informally in some way? Often, conciliation goes on right up to the tribunal itself, even maybe during the tribunal. However, if you have signed the certificate concluding that process rather formally, the informal scope for conciliation is reduced. I wonder if the Minister could explain a little more about this provision.
Lord Young of Norwood Green
My Lords, this is again a legitimate probing amendment. I, too, would be interested in getting some reassurance from the Minister about the process of conciliation. We hope that the conciliation process will work but there are going to be cases—I guess a significant number—where it does not. I suppose that the aim is to ensure that we do not insert any more delay than is necessary. The point about a certificate has already been raised. It would be useful if the Minister could confirm that the clock does not start running again until after the certificate has been issued.
Lord Marland
I am very grateful for this probing amendment—well I am sort of grateful, as much as one can be for an amendment. I recognise the noble Baroness’s direction of travel—time is crucial for someone who has lost their job. The whole point is to be able to get a quick resolution so they can go back and find another job or sort out the problems between them. We all agreed in an earlier amendment that ACAS is in an unrivalled position to do that and that is why we are very keen to support this direction of travel.
Having been quite a significant employer myself—and employee, as I thought in my own mind—and on one rare occasion been associated indirectly with a tribunal and seen how it was operated, I have deep concerns for both the employee and the employee about the terrible time it takes to go through a tribunal. It can be months before a decision is made and hours can be spent often on quite simple things. Both employee and employer are hung out to dry for months on end, not knowing what the cost is going to be, what the result is going to be and whether they will be able to go back to employment. It therefore seems to me that this is a simple process putting firmly in the domain of ACAS the opportunity to resolve an issue before going to the tribunal. It does not stop a party going to the tribunal, of course—it is well within their rights to do so. There is every opportunity to do so.
I emphasise that the Government are open to listening to other alternatives, if a better alternative is found, but I think that most of us here think that ACAS is the right place to go and that if we can have a speedy resolution to our problem, we should do so. I know that other noble Lords have had experience in this area. We would be open to suggestions from the noble Baroness about alternatives.
I am not sure that I can deal with the specific point that the noble Lord, Lord Monks, mentioned because he knows far more about it than I do. I would like to consider the question and drop him a note on it. It is something I want to get my head around. He has probably set me a huge elephant trap that I will stumble into unbeknownst.
I hope that I have given the noble Baroness a clear line of travel and—
Lord Young of Norwood Green
I want to be clear what the Minister is going to clarify. I asked about when the clock starts. Is it after the certificate has been issued? I would be grateful if that could be clarified.
Lord Marland
I can clarify that. The certificate is necessary to demonstrate compliance with the obligation. It would have to be issued within that framework.
Lord Young of Norwood Green
My Lords, this is an eminently sensible proposal and I am sure that the Government are going to review the workings of ACAS in the light of the new procedures. My noble friend has set out in graphic detail the likely impact of what is taking place. We need to ensure that we get this right, because if we do not, we are likely to see the law of unintended consequences take effect. I shall be interested to hear from the Minister what review process the Government have planned, and what the timescale is.
Lord Marland
I can give noble Lords a very simple answer because both the Government and the people observing us will want to make sure that there is a review of how ACAS is performing. As the noble Baroness will know better than I, having been the chair of ACAS, it has to report annually to the Secretary of State, and we will insist on that. For those who are interested, it is set out in Section 253 of the Trade Union and Labour Relations (Consolidation) Act 1992. I can tell the noble Baroness that early conciliation will form part of that report, so in our view there is no need to have a separate report from what is embraced in the annual report. I hope that satisfies the noble Baroness, but I want to say that it is fundamental that this is reviewed and that the whole thing is taken seriously. The report is published and will be available in the Library of the House, so everyone has an opportunity to read it and make sure that everything is progressing in the way we all hope it will.
“(6E) The Secretary of State and the Lord Chancellor acting jointly, shall consult on—
(a) the level of professional attainment required by legal officers to carry out provisions in subsection (6D);(b) the appropriate remit of proceedings that an appointed legal officer could determine; and(c) the appropriate mechanism for appeal,with regards to the provisions of subsection (6D).”
Lord Young of Norwood Green
My Lords, I remind Members of the Committee that all employment disputes are currently determined by full employment tribunals or by an employment judge sitting alone. Legal officers can be appointed under the Employment Tribunals Act but can determine cases only where the parties have agreed the terms of determination or the case has been withdrawn.
To date, no legal officers have been appointed in the employment tribunals system. Clause 10 states that legal officers should be able to determine specified types of claims where both the employee and employer have consented in writing. We welcome that aspect. However, while we support the principle of rapid resolution of disputes, we have some concerns about the proposal to permit legal officers to determine employment disputes. Legal officers currently do not receive the equivalent training to that of employment judges and may not be employment law specialists, but decisions made by a legal officer would have the same status as an employment tribunal decision. If legal officers are to determine some basic cases, it is essential that any decision can be reviewed by an employment judge or through an appeal to an employment tribunal.
The amendment therefore requires the Secretary of State and the Lord Chancellor to consult on the level of professional attainment, and the remit and mechanism for appeal, of legal officers empowered to make determinations and decisions. We see this as an important area. Although some of these cases may appear to be basic, there can indeed be complex problems underlying them. Therefore, the training and remit of legal officers are fundamentally important. I should welcome a response from the Minister. I beg to move.
Baroness Donaghy
I was having second thoughts on whether I should speak to this amendment because I would not really be doing so with my former ACAS hat on. However, that should not prevent me commenting.
The proposal for legal officers has been dusted down off the filing cabinet many times. I was a member of industrial tribunals, as they were then called, from 1974 to 1989, and therefore have had a long involvement on both sides of the fence on this. I am sure that the idea of legal officers was discussed in the 1970s, 1980s, 1990s and the noughties. In fact, the idea must be so old that it must be growing hairs like gooseberries. I congratulate the Minister on again bringing out this item from the filing cabinet. However, I should point out that that does not make it an antique worth buying.
This is intended to be a cheap way of obtaining legal services, and I suspect that the legal profession will wake up to this one quickly. I suspect that it will be disliked by employment judges; equally, there is a danger that it could second-guess the conciliation process at ACAS. Even more equally, in a time of austerity when the Government are seeking to cut the number of public servants, I should have thought that it was fairly unlikely that a whole platoon or army of these, dare I say, young law graduates or whoever will be employed by any department to do this job. And, if so, which department would it be? Will they be part of the Employment Tribunals Service, or will they be direct employees of BIS or another adjunct of the Ministry of Justice?
I am sorry that in this case I cannot be very enthusiastic but I support the amendment because I think that it may at least give some idea of government thinking on this matter. However, I give a warning that, even though this measure has been recommended many times, the devil is in the detail and the practicalities usually overcome any action on this.
Lord Marland
Members on the Benches opposite make some very timely comments on this amendment because at the moment the Government are reviewing the response to the consultation. One of the elements of that review is rapid resolution, which involves legal officers, so we will obviously consider the points that the noble Baronesses and the noble Lord, Lord Young, have made. As I say, they are timely.
I say in response to the noble Lord, Lord Young, that decisions of a legal officer would be reviewed by a judge, so there is someone looking over their shoulder, and any decision by a legal officer could be reviewed or, indeed, reversed within the existing provisions in the employment tribunal rules. I think we have a level of comfort there but, as I said, this is a timely amendment. It is not something on which we have resolved our position. Noble Lords have identified a number of areas of concern. As we are in the middle of a consultation process, we will obviously take those into account. We will, I hope, have come to our conclusion by Report, when we can talk further and explain what is going on. On the basis of those comments, I hope that the noble Lord will withdraw his amendment.
Lord Young of Norwood Green
I thank the Minister for the assurance that he will give us a more detailed answer prior to Report, pending the results of the consultation. We have stressed the importance of ensuring that the individuals have the right training. We have also stressed the importance of establishing,
“the appropriate remit of proceedings that an appointed legal officer could determine”.
Given the assurances that I have received from the Minister, I will withdraw the amendment. However, if we do not get a satisfactory response, we may return to it on Report. I beg leave to withdraw the amendment.
Lord Young of Norwood Green
This is another important area of the Bill about which we have concerns. It seems to us that in the desire to reduce costs there is a real danger that the whole nature of employment tribunals will fundamentally change. We need to remind ourselves that historically these tribunals have had lay representation on them. That was the very foundation of what were previously called industrial tribunals. All our information and evidence is that the participation of lay representatives is much appreciated and is an integral part of the proceedings that ensures that justice is seen to be done. It gives an essential level of knowledge, experience and expertise and ensures a diversity of views.
Lord Marland
I am not denying the issues that the noble Baroness refers to. No one is. We completely understand those issues. As I referenced earlier—the noble Lord, Lord Monks, referenced it, too—the judge can turn to external advice to support them in a case if they need to. There are complicated circumstances but, in relation to this amendment, the reality is that they are being invited to make a judgment based on the law. It is not about the extenuating circumstances; it is not a question of asking, “Should we give them more money?”. It is about the law and the interpretation of the law in coming to a judgment. Other aspects are involved, which is why the ACAS system is so good because it is conciliatory between two parties. In this instance, however, where you are being asked to interpret the law, we believe that the judge is the person to do that. We totally understand all the permutations around employment disputes, but at the end of the day it is the judge who will determine it. An employer or an employee should want their case to be found within the law by someone who can interpret it.
Lord Young of Norwood Green
My Lords, having heard what the Minister said, I admit that I find his response deeply unsatisfactory. He said that that is what an employer or an employee should want because it is only a point of law. Although this debate has touched on other amendments, what we are saying through this amendment is that if things are as clear-cut as the Minister has said, having the consent of both parties for the judge to sit alone should not be a problem. I do not think that it is as clear-cut, for all the reasons given. The noble Baroness, Lady Brinton, pointed out the importance of diversity, which is what lay members bring. A range of other points have been raised. My noble friend Lady Donaghy said that the employment context needs to be taken into account, not just the law. That is what lay members bring to the legal analysis at the Employment Appeal Tribunal. We are in Grand Committee, so we will withdraw the amendment, but we make it absolutely clear that we will return to this on Report, because the Minister’s response does not deal with the genuine concerns that have been expressed on both sides of the Committee.
Lord Young of Norwood Green
I shall speak also to Amendment 20FA. These amendments are designed to probe the Government’s intentions behind granting the Lord Chancellor additional powers over the composition of certain employment appeal tribunals. Subsections 6 and 7 grant the Lord Chancellor discretion in certain cases to determine as he sees fit the number of employer representatives and worker representatives that may serve on that tribunal. The intention of Amendments 20D and 20FA is to ensure that the Lord Chancellor does not exercise that power in a way that may unfairly disadvantage the worker.
Amendment 20D clarifies that the Lord Chancellor may not use this power to set the number of lay members at zero and therefore prohibit, in certain cases, the judge deciding to sit with lay members, even if he thinks it appropriate. Is it the Government’s intention that the Lord Chancellor should be able to use this power to prevent judges calling lay members to sit on the Employment Appeal Tribunal? Amendment 20F would ensure that the Lord Chancellor cannot exercise this power so that one group is represented by greater numbers than the other. It is about balance on any tribunal. It surely cannot be fair to have a situation where there are lay members sitting on the EAT with experience from the point of view of the employer, but none with experience from the other side.
It may be that the Minister feels that we are being a bit paranoid at this point but, as somebody once said, just because you are paranoid, it does not mean that they are not trying to get you. I would welcome clarification on that and on all the issues I have raised. If the Government will not accept this principle, will the Minister tell the Committee in what circumstances they believe it would be appropriate and fair for a judge to sit on the EAT with an employer-representative lay member and without a worker representative or, indeed, vice versa? I beg to move.
Baroness Whitaker
My Lords, I apologise for not being able to take part in the proceedings on this Bill earlier, but as a former employment tribunal member, I would like to reiterate arguments made earlier that the whole point of employment tribunals and the EAT is experience of the workplace from relevant and, in fact, instrumental perspectives of justice. That refers to points of law as well as to facts because the law is interpreted in a context, as the noble Baroness, Lady Brinton, said earlier. It is not a just process—that is, interpreting and applying the law. As well as not being objective, it is not informed by both these perspectives as of right. The risk with the Bill as it stands is that you could have a representative of the employer or the employee but not necessarily both. That is going to make a travesty of the tribunal concept.
Lord Young of Norwood Green
I thank the Minister for his constructive response. I reassure the noble Lord, Lord Brooke, that these are in the nature of probing amendments. We were seeking to elicit the kind of response that we received. I welcome the assurance that clarification will be provided prior to Report. With that in mind, I beg leave to withdraw the amendment.
“(7A) The Secretary of State must—
(a) prepare guidance for the purpose of assisting judges in deciding when it may be appropriate for proceedings to be heard by a judge alone; and(b) publish and lay before Parliament guidance given under paragraph (a).”
Lord Young of Norwood Green
My Lords, this again could be seen as a probing amendment but it would constitute useful, practical advice or guidance for judges. It is a simple amendment which seeks to place a duty on the Secretary of State to prepare guidance for judges regarding situations where it is appropriate for them to sit alone. It would be helpful to define those criteria. Such a definition could take into account the points that have already been made about the need for diversity and the need to have an injection, as it were, of lay experience and wisdom. I think that is fairly straightforward.
I wish to speak also to Amendment 20F which would impose an additional duty on judges to have regard to the Secretary of State’s guidance under the terms of Amendment 20E and, if it is decided that a judge should sit alone, would require that a statement be published explaining the reasons for that decision. That would provide reassurance to those appearing before the tribunal. It would probably also establish some useful precedents in these cases regarding when such a measure is appropriate.
Amendments 20E and 20F are both probing amendments but are reasonably practical examples of how we think that this clause could be suitably amended if we are going to go down this road. I beg to move.
Lord Marland
My Lords, I am afraid that I have a slightly different philosophical view on this matter from that of the noble Lord, Lord Young, although I recognise that this is a probing amendment. I do not think that it is for the Secretary of State or, for that matter, government to intervene in the judiciary. The judiciary should be set aside from government and particularly from some, if not all, Secretaries of State. Whereas I understand the accountability aspect, I do not think this is the right form in which to set it out. Clearly, Parliament sets the framework for these tribunals and how they are managed but I do not think that it is for the Secretary of State or the Government to interfere in this. I am sure that the noble Lord, Lord Young, having been in government himself, and with all his wisdom and experience in these areas, will recognise that that does not strengthen the situation. However, we will doubtless debate this matter further and other ideas will come forward. We are always open to ideas, as we should be, but I hope that with those comments he will withdraw his amendment.
Lord Young of Norwood Green
The noble Lord did not really address Amendment 20F, which talks about imposing an additional duty on judges. Even if he does not like the idea of the Secretary of State providing guidance, part of the amendment refers to publishing a statement explaining the reasons for a decision if it is decided that a judge should sit alone. I would welcome a response on that.
Lord Marland
I apologise; I should have responded on that. I was more interested in the overall scheme of the thing. Our view is that this measure would interfere with the discretion given to judges and that it is up to the judges to decide whether they should sit on a panel or not. I do not think that they necessarily need to justify that because we have empowered the judges to take the action if they so wish.
Lord Young of Norwood Green
I cannot say that I am particularly happy with that answer. As I have said previously, while we recognise that we are in Grand Committee and therefore we will withdraw the amendment, we will certainly return to these points at the Report stage.
(a) a trade union official;(b) a workplace representative; or(c) a legal representative.”
Lord Young of Norwood Green
My Lords, this clause gives us real concerns. The concept of a settlement agreement whereby an employee waives their right to go to a tribunal is something that we find unacceptable. It undermines some basic principles. In the circumstances, Amendment 20G is quite appropriate in that it would ensure that the employee could request union, workplace or legal representation at the settlement negotiations. The whole idea of an employer being able, for any reason whatever, to pick on a particular employee and enter into the kind of negotiations that are recommended in the Bill is totally unacceptable because it could open the door to all kinds of discrimination. For those reasons, we believe that if there is to be any possible settlement, although we are opposed to the concept as it is currently defined in the Bill, the employee ought to be entitled to be accompanied by a union, workplace or legal representative. I beg to move.
Lord Monks
I want to support this amendment. Clause 12 generally complicates a situation which is reasonably clear at present. It will make life a little more complicated for workers and probably not that uncomplicated for employers. Essentially, it seeks to make it easier for an employer to end the employment relationship by offering an individual money in exchange for a compensation agreement—the title is changed in Clause 18. Let me explain the situation. At present, where there is a dispute, the terms of an offer cannot be reported to a tribunal. It is called a “without prejudice rule”; in other words, what has gone on before is kept away from tribunal cases. Clause 12 will change that and extend the without prejudice rule so that employers can offer an employee money and an agreement where there is no pre-existing dispute and no application has been made. The worker does not even know that there is a dispute, and the employer says, “Here’s some money, get lost”. This is giving the signal that you can fire staff for an arbitrary reason without following any dismissal procedure.
It was not just this side of the House—I remember some wise remarks by the noble Baroness, Lady Brinton, at Second Reading—that welcomed the dismissal by the Secretary of State for Business, Innovation and Skills of the report from Adrian Beecroft, chief executive of Wonga, the payday loans company. He introduced the concept of no-fault dismissal, which was roundly dismissed by the Secretary of State. I very much welcome what he said about it.
However, this provision in Clause 12 is not that far away from that. It is quite similar. It is expressed differently and rather technically, and is not that easy to follow, but essentially the key thing is that there is no unfair dismissal provision. You have not been warned and do not know anything, but the employer can say, “Here is X amount, get lost. Sign here”. You can no doubt go through the tribunal if you wish, but the provisions legalise that signal. I hope that this is not Beecroft through the back door, or “Beecroft-lite” as some people have been calling it, and that we can persuade the Government to take another look at this and recognise that, although it is in different clothing, it is rather similar to what this well known venture capitalist came up with—a measure that he thinks will create jobs and I think will increase unfairness.
Baroness Brinton
My Lords, I want to make it clear that I do not consider Clause 12 to be “Beecroft-lite”, whether that term is acceptable or not to my noble friend. I hope that there might be some information from the Minister to confirm that, but that was certainly not how I read it.
I want to raise a particular question and I apologise for not having given notice of it; I am more than happy to receive a written answer. I understand that an offer of a settlement agreement could not be used as evidence in an unfair dismissal claim but could be used as evidence in a discrimination claim. It is not unheard of at tribunals to hear both at the same time; therefore, which would take priority?
Lord Young of Norwood Green
My Lords, I want to respond to a couple of points that have been made. I am happy to delete “Beecroft-lite”, if that is causing the noble Lord, Lord Deben, to break out in a rash. The plain fact is that as a result of the introduction of this clause, an employee can be called to a meeting without advance notice of the topic or a formal grievance between the employer and employee, and be presented with a proposal for them to leave their employment for a small payment and after signing a confidential settlement agreement.
I hesitate even more to dispute or cross swords with the noble Lord, Lord Phillips, because in some ways I do not feel qualified to do so. However, it is quite relevant that you should be accompanied by someone if you are going to be called to such a meeting. Perhaps we do not have the wording absolutely right and we will take that into account, but I am merely describing the situation that the amendment was intended to react to, and I apologise if it is not exactly right. However, I agree with my noble friend Lord Monks that this fundamentally changes the nature of employment. As my noble friend Lady Donaghy said, if we really want to give employers some helpful advice on employment relationships, this is not the route that we should going down or the advice we should be giving them. It represents all the negatives.
I am fascinated that termination of employment is the most important thing to focus on as the answer to our current employment problems. When the Chartered Management Institute tells me that only one in five managers receives any training at all these days, I consider that to be a far more important area for us to focus on. I do not make any apologies for the amendment, even though it may not be precisely right. The clause fundamentally changes the nature of the employment situation. In answer to the noble Lord, Lord Brooke, on whether the amendment is unbalanced, we do not think it is. The clause as currently drafted is unbalanced because the employer has the right to call you in without any prior notice and for no apparent reason, and suggest that your employment should be terminated. If only employers could get their contracts of employment, their training and their appraisal procedures right. From my experience of dealing with employers, that is the sort of advice that we should be giving them.
Lord Marland
I note the legal brain of the noble Lord, Lord Phillips of Sudbury, and I am grateful to him for pointing out some of the weaknesses in this amendment. I was also struck by the words of my noble friend Lord Deben. This is a mild change. Listening to the Benches opposite, you would think that we had torn up the law. Scenes from “Oliver!” kept coming back to me while noble Lords were speaking. We are not going to make progress if on the mildest proposal we start bandying words like “Beecroft” and warn of terrible things. All this is doing is mildly redressing the balance that exists, which noble Lords opposite may not agree with because they have taken a position on it. People on this side agree with it. I am grateful to the noble Baroness, Lady Greengross, because she made a very good point at Second Reading that we have to get the balance right so that employers are given the confidence to start employing again. That is all we are trying to do here. We are not seeking to tear up the rulebook, as has been suggested. Indeed, my noble friend Lord Brooke of Sutton Mandeville came right to the point: the claimant has to have legal advice before agreeing a settlement. Nothing will change that and we are not tearing it away; he has to have legal advice. So far as we are concerned, he can get it from any suitable or qualified individual and, obviously, even from trade unions.
It is fundamental that we ensure the safeguards for both the employer and the employee. It is fundamental that an offer is made and that the claimant is properly guided through the process and understands its extent. But as the noble Lord, Lord Brooke, pointed out, the claimant is the only person who is legally able to take advice because the employer is not. On that basis, something of a mountain has been made out of a molehill and I hope the noble Lord will withdraw his amendment.
The noble Baroness, Lady Brinton, again turned to the subject of discrimination. I am told by my officials— I am happy to amplify if my response now is not adequate—that a tribunal would take into account a discussion of the settlement for discrimination element of a claim, but would disregard that information when deciding the unfair dismissal element. I hope that that clarifies the point, but if not, of course I and my officials are at the disposal of the noble Baroness at any time.
Lord Young of Norwood Green
I could not have put it any better than my noble friend Lady Dean. It is unfortunate that the Minister chose to dismiss the Government’s proposal as just a mild change. It is not a mild change. It is fundamental for the reasons that my noble friend Lady Dean and others have described. It is pointing employers in totally the wrong direction. If we are going to talk about something as serious as dismissal, it is perfectly reasonable to request that somebody should be accompanied by a representative. I do not think that is unbalanced. It is justice and fairness. We are in Committee, so, again, I shall reluctantly withdraw the amendment, but I advise the Minister that we will be returning to this on Report.
Lord Young of Norwood Green
My Lords, I do not want to go over the core arguments about why we are opposed to the direction of travel, to borrow a phrase that the Minister has been using today, but we are. We think it is the wrong direction. We want to undermine the confidentiality. We think it is unfair, unbalanced and inappropriate. Amendment 20H clarifies that settlement negotiations should still be admissible as evidence in a constructive dismissal claim. I shall be interested to hear the Minister’s response. I beg to move.
Lord Brooke of Sutton Mandeville
My Lords, on this occasion, I have considerable sympathy with the amendment moved by the Official Opposition. I do not know whether there are particularly reasons why the words “or constructively” are unacceptable to the Government. No doubt they will emerge, but I can understand that there might be circumstances to which this clause would be relevant where unfairness and constructiveness were mutually exclusive. Something might not qualify as being unfair, but could be interpreted as being constructive dismissal, so I have sympathy for why this amendment has been put down.
Lord Young of Norwood Green
My Lords, I really want to respond to the point about restoring the balance. An employer now has two years to decide whether an employee is suitable. That is two years where you have the opportunity to appraise them, train them and find that they are not responding to that. It really harks back to the point made previously by my noble friend Lady Donaghy that the procedures are there and that if an employer acts in a proper manner they can dismiss employees. I would not demur from that. There are employees who do not measure up. What we do not support, and indeed oppose, is the idea that you can carry out this process and somehow the evidence of settlement and negotiations is not there and is not admissible in any dismissal claim. I will withdraw the “constructive and unfair dismissal” claim because I realise that that offends the legal precision.
We are quite clear that the idea that confidentiality should be used in these circumstances is not just a question of rebalancing. It is not, in our view, in any way helping the prospects for future employment. If we really believed that that was the case then maybe we would consider it, but I doubt it because it seems to us that it is both unfair and unjust. This is a perfectly reasonable amendment and it will be another reluctant withdrawal. We will return to it on Report.
“(3A) The employer will provide to the employee a written statement, setting out the reasons for any offer made under subsection (2), and subsection (1) will not apply in relation to such statement.”
Lord Young of Norwood Green
I do not need to detain noble Lords too long in this case. We believe that it would be appropriate and necessary for balance, fairness and justice for the employer to provide an individual with a written statement on reasons for any settlement offer that ought to be admissible as evidence in any unfair dismissal case. To use the phrase about restoring balance again, we believe that, if we were to go down this road, this amendment is necessary to restore balance and provide justice for an employee who is facing the prospect of dismissal and the difficulty of finding future employment. I beg to move.
Lord Marland
I do not want to delay the noble Baroness, Lady Turner, any longer so will just very quickly say that the Government believe that this amendment undermines the purpose of the clause. However, we have been in consultation on this. That consultation closed on 23 November, and we are considering the responses at the moment. We will obviously publish those responses before Report and will have something more to get our teeth into, although we will doubtless disappoint the Opposition with what we come up with. On the basis of what I have said, I hope the noble Lord will withdraw his amendment.
Lord Deben
My Lords, may I intervene for a moment? I was very impressed by that last speech and thought that it was presented exactly in a proper way—although I do not entirely agree with it, as it is not a charter for bad employers that is being placed in this clause. Let me give the Committee an example of when this clause would be very helpful. It is a real example but, for obvious reasons, I am putting it in a way that could not be traced back to an individual. Somebody had been working for a company for some years but was increasingly unable to cope with the work that they were given. Had that person gone to a tribunal, the details of that lack of ability would have had to be discussed at length because that would be necessary. The employer concerned was a good employer. He sought to give that individual the recompense which they might have got in a tribunal while avoiding the tribunal, which would have been particularly difficult. Under the law as it stands, that was very difficult to do.
All this measure does is to give an opportunity for employers to look for the best way to solve many of these problems. I can think of many occasions on which a perfectly legitimate and reasonable solution could be brought about in this way. After all, it is not a compulsion; it is perfectly possible for people to say, “I want to go to a tribunal”. Therefore, I do not understand why we feel that people are unable to make that choice, or why employers should be refused the possibility of offering that choice.
It seems to me that the Minister is right in saying that this is a very small change but I can think of a number of occasions on which good employers would be able to choose it very effectively. My one concern about this discussion is that we seem to be moving back to a concept whereby somehow or other any flexibility in the law is advantageous only to bad employers. The truth is that the law at the moment makes it more difficult for good employers to do the best thing. As somebody who has to deal with these matters, I believe that most employers in this country are good and that they seek to do things properly. This change will make it easier for good employers to behave properly in circumstances where the necessary paraphernalia of the law would be best avoided in the interests of the employee.
Lord Young of Norwood Green
I do not want anecdotally to try to assess whether the majority of employers are good, bad or indifferent. They occupy a spectrum. Many are good and others are not so good. I say to the noble Lord, Lord Deben, that settlements are currently made outside the tribunal. We do not need to go down this road. I am sorry but the only interpretation we can put on this is that it encourages bad employers. Where does it encourage proper appraisal procedures or proper training procedures? If we really thought that this was about restoring balance, encouraging good practices and good behaviour and encouraging extra employment opportunities, as my noble friend Lord Stevenson of Balmacara said, then of course we would support it. However, in our view it does none of those things, which is why we strenuously oppose it.
Lord Marland
The noble Lord, Lord Young, has just explained why the Benches opposite have got this wrong. All they have talked about is the employee. At no point have they said, “What about the employer? Does this measure in any way improve things for the employer?”. The employer is the person who will employ people, provide jobs and create new jobs. My noble friend Lord Deben made the case beautifully; I need say little because he put it so well. This is exaggerated rhetoric and nonsense. The measure is a mild change but all we are getting is exaggerated rhetoric as if we are all going back to the workplace run by bad employers with bullying and all this sort of thing.
We know that bad employers go out of business—they go out of business fast because people do not want to work for them. They are not good employers, so they go bust. Good employers, who are the larger proportion of people, exist. Very strong rules and regulations have been improved over time—rightly so—and this Government are not saying under any circumstances that they should not be improved, or that they should not have been improved in the past.
We are trying to speed up the process and give people legitimate rights and clear interpretation of the law; then both parties will benefit. Employers will employ more employees, bad employers will go out of business, and bad employees will no longer be employed. At no point has anyone said “What about the bad employees? How do we get rid of the bad employees, who are a burden on good businesses and stop them surviving?”.
Lord Marland
I am not giving way, because we have had enough on this. We have heard everything that the noble Lord has had to say on it. This is a matter of debate, and we will doubtless say more.
Ultimately, we are all coming from the same place. We want good employers and good employees. We want them both to be properly represented and to have the opportunity. As my noble friend Lord Deben says, this simply puts a mild balance back. What employers would like to see happen is just as important as what employees want.
Lord Young of Norwood Green
I wish to put the record straight on one point. I specifically mentioned that there was a proper way to deal with—to use the Minister’s phrase—“bad employees”, or employees who fail to live up to the mark. If the appraisal system is done properly, then there is a route to dismissal.
Baroness Turner of Camden
My Lords, I am still in opposition to this clause. Of course, we know that we cannot press it in Committee. We will take away what has been said during this debate, which has been very interesting and useful, and see what we come up with on Report.
Certainly, I am not at all happy with what has been said. I do not believe that this helps the good employer—quite the reverse. It helps the bad employer who seeks to get rid of employees as easily as possible, which was what Beecroft was all about; we opposed that, as did a lot of other people. We cannot press this now, and it is not our intention to do so, but we shall have a close look at what has been said before we come back again on Report. There are aspects of this clause that I do not like, and which I would like to pursue further.
“(2A) Before the commencement of this section, the Secretary of State shall consult on the appropriate amount to be specified under subsection (2).
(2B) The Secretary of State must lay a copy of the results of any consultation undertaken under subsection (2A) before Parliament.”
Lord Young of Norwood Green
My Lords, the amendment is designed to probe the Government’s rationale behind their plans to cap compensation at 12 months’ pay. Clause 13 grants the Secretary of State the power to limit compensatory awards, which this Government have announced they plan to cap at 12 months’ pay, subject to an overall cap of between one and three times median annual earnings.
The Government have justified the cap on the basis of correcting a misalignment arising from inflation-busting increases over the years, in particular in 1999, when the cap was increased from £12,000 to £50,000. However, it is totally misleading to imply that this was an inflation-busting boost. The year 1999 was a one-off uprating, designed to correct levels that had lagged behind average wages. When the cap was introduced in 1971, it was calculated at 104 weeks’ pay, or £4,160. There has been no requirement to review the cap annually, although it has been increased. Had it increased in line with average earnings—and I stress that—since 1971, the cap would have amounted to £52,800 in 1999.
The Government’s comparison between the increase in the cap between 1999 and 2011—it was 503%, which includes the one-off uprating and the increase in median earnings at 47%—is therefore totally misleading. Were the Government to compare the 47% increase on the figure of £52,800, as it would have been in 1999, had it risen in line with median wages previously, it would be £73,500, which aligns well with the current cap level of £72,000. The Government claim that lowering the cap to 12 months’ wages would give employees and employers a more realistic expectation about the level of tribunal awards, based on the fact that the median unfair dismissal award, including basic and compensatory elements, was £4,560 in 2011-12, or just nine weeks’ average pay. If the Government are really committed to this logic, they would set the cap at substantially less than even the median wage, as it is difficult to see how setting up an expectation of recovering 5.7 times the average award is much better than one of recovering 15.8 times. If the Government want to increase awareness of the average award level, surely it would be better to encourage external services such as ACAS and Citizens Advice to make this clearer when giving advice and guidance.
The reality is that this cap will affect no more than around 150 cases a year out of some 50,000—just 0.3% of all unfair dismissal claims. However, among those 150 individuals who will be denied full compensation, such as a substantial loss of pension rights, are people in the squeezed middle who were previously on above average wages but perhaps are close to retirement and therefore have fewer prospects of finding new employment. That is a daunting prospect given today’s high unemployment rates. Almost half of unemployed workers aged over 50 now face being out of work for more than a year, while there has been a 41% increase unemployment among older women in the past year alone. The link with annual salaries will also mean that low-paid and part-time workers are severely disadvantaged. These workers are more vulnerable in today’s dismal economic climate. I beg to move.
Lord Marland
I am not going to get into that for the moment, but I am sure we will pick it up later. The Government take the matter of this cap seriously and that is why we are consulting on it. The consultation closed on 23 November and we will publish the response before we reach the Report stage, so we will be able to have a good debate on it. I thought that the noble Lords, Lord Young and Lord Monks, made some very poignant remarks, and we share their concerns. We also acknowledge the keen detail of the facts that have been presented. There are very few cases which get to the limit, but they are important. The average award is £5,000, of course, and the cap is £72,300. We recognise that, we understand it; we know that we have got to get it right. We are obviously sympathetic to a number of the cases that the noble Lord, Lord Young, has mentioned and, with that, I hope that we can revisit this in the spirit of co-operation because I think it is important, and that we can be conjugated—conjugare, which means to bind together in the same outcome—in time to come.
Lord Young of Norwood Green
I would not say that it is peace in our time but it is not a bad offer. I genuinely thank the Minister for his response. In the circumstances, I beg leave to withdraw the amendment and I look forward to the further consideration as a result of the consultation.
Baroness Turner of Camden
I want briefly to speak in opposition to Clause 13 and to say that, according to my briefing from the TUC, it is also opposed to the proposals to reduce the cap for compensatory awards in unfair dismissal and other cases. The Government are proposing to reduce the statutory limit for compensatory awards. They claim that reducing the statutory cap would help to reduce employees’ expectations in unfair dismissal claims. However, there is concern that the main effect of these proposals will be to make it cheaper for employers to sack staff unlawfully. Clause 13(2) gives the Government a power to cap the compensatory awards. It is not just the TUC that is concerned about this. The Law Society says in its briefing:
“The Government is seeking a power to vary the compensatory award in line with annual average earnings. The Society queries the arbitrary nature of this limit, which will prevent a substantial number of claimants who have been unfairly dismissed from recovering their full losses”.
Older workers, who are more likely to have accrued higher occupational pension and other entitlements, may find it more difficult to get new employment and will be disproportionately affected. Recent unemployment figures show that nearly half of unemployed workers over the age of 50 have now been out of work for a year or more. Obviously, they find it very difficult to get alternative work. The link with annual salaries could mean also that low-paid and part-time workers could lose out. For all these reasons it is suggested that this clause should not be proceeded with. I am therefore raising my objection to Clause 13.
Lord Young of Norwood Green
I will be very brief. I think my noble friend Lady Turner has expressed our concerns quite clearly. I await with interest the Government’s assurances that they want to get this right. As it stands, we will obviously be returning to this clause on Report.
Baroness Brinton
I am sorry, I am trying to stand up but I am not very fast. I want to add to the comments made by the noble Baroness, Lady Turner of Camden, about matters other than straight salary. The pension pot is one of them, but there are others that need to be taken into account, and I wonder if this has been overlooked or if it is intentional. If it is intentional, I would have real concerns, particularly about some of the pension issues.