House of Commons - Deregulation

Select Committee on Deregulation Third Report

THIRD REPORT

The Deregulation has made further progress in the matter referred to it and has agreed to the following Report:-

PROPOSAL FOR THE DEREGULATION (DEDUCTION FROM PAY OF UNION SUBSCRIPTIONS) ORDER 1998

Introduction

1. On 18 December 1997 the Government laid before Parliament the proposal for the Deregulation (Deductions from Pay of Union Subscriptions) Order 1998 in the form of a draft of the Order and an Explanatory Memorandum from the Department of Trade and Industry[1]. The proposal contains two provisions relating to the arrangements made by employers for the deduction of trade union subscriptions direct from pay ("check off"). Under check off arrangements, trade union subscriptions are deducted from pay at source and passed directly to the union by the employer.

2. Under the Trade Union and Labour Relations (Consolidation) Act 1992 ("the 1992 Act") employers are required to obtain re-authorisations at least every three years from workers to deduct trade union subscriptions from pay, and to notify workers at least one month in advance of any increases in the amount to be deducted[2]. The proposed Order would remove both of these requirements. The requirement that a worker's written authorisation is needed to begin such deductions would be retained[3].

3. The House has instructed us to examine the proposal against nine criteria and then, in the light of that examination, to report whether the Government should proceed, whether amendments should be made, or whether the order-making power should not be used[4].

We now report on the proposal against the criteria in Standing Order No. 141(5)(A), as follows:

Does the proposal appear to make an appropriate use of delegated legislation?

4. We have concluded that the proposal may be proceeded with under delegated legislation.

Does the proposal remove or reduce a burden or the authorisation or requirement of a burden?

Requirement for re-authorisation every three years

5. The Department notes that employers are not obliged to operate check off arrangements but many do so voluntarily as the basis of a cooperative relationship with trade unions[5]. In practice, although they too have no statutory obligations in the process, trade unions often share the costs and administrative burden of operating the system with the employer[6].

6. The Department believes that the existing requirement that employers obtain re-authorisation for deductions at least every three years is a time-consuming task for employers and for unions involved in the administration of the process[7]. The TUC believes that the first re-authorisation process conducted under the requirements of the 1992 Act had cost unions over £2 million[8]. We believe that this proposal would remove a burden on businesses and unions.

Requirement to notify workers of increases in deductions

7. The Department also states that the requirement to notify workers paying subscriptions by check off of increases in deductions constitutes an additional administrative burden on employers and on those unions which are involved in the process[9]. We are satisfied that this proposal would remove a burden on businesses and unions.

Does the proposal continue any necessary protection?

8. The proposed Order would not remove the essential requirement that a worker's written consent is required for the deduction of union subscriptions through check off. Workers also retain the right to withdraw their consent to paying subscriptions through check off at any time.

Transitional arrangements

9. Under the proposed Order, those workers who currently pay their union subscriptions by check off will no longer need to re-authorise continuing deductions on an indefinite basis. Instead, it is proposed that employers issue a prescribed notice[10]to all affected workers to inform them that authorisations for payments will be treated as being for an indefinite period and that increases in the amount payable will be allowed without prior notice. These conditions will be taken to have been accepted unless the notice is signed and returned by the worker within 14 days, in which case (as the prescribed notice specifies) authorisation of payments will continue to be limited to a three year period and the requirement for advance notice of any increase in deductions will be retained.

10. We asked the Department whether the provision to allow individuals to opt to retain both the existing limit of three years on authorisations and the requirement for advance notification of increases would create a dual system, causing confusion and disproportionately reducing any prospective administrative and financial savings[11]. This point was also made by the TUC[12]. The Department conceded that the transitional arrangements would create two categories of workers operating check off - those who wished to have their current authorisations treated as indefinite and those who did not[13]. However, it reported that very few workers were expected to opt to retain the old requirements and also that the authorisations of those workers who did opt to retain the old requirements would be limited to, at most, a further three years. After that time, the employer would be free to make it a condition of any subsequent authorisation that it be for an indefinite period and that notification of increases in deductions need not be given by the employer. Therefore, in no more than three years, the employer would be in a position to insist that all check off authorisations were indefinite. The Department believe that any inconvenience caused by a dual system would be extremely limited.

11. However, the TUC argued that, given that the prescribed notice ended with a space for workers to sign and date (with instructions to return the form to the employer), many union members would return forms even though they were content for their subscriptions to continue indefinitely[14]. Consequently, there would be a significant number of workers who retained the three year limit on their authorisations. Re-authorisation would then be required for a large number who had returned their forms. Any transitional arrangement would therefore be likely to generate significantly more of a burden for unions and employers than simply circulating the prescribed notice.

12. We also expressed concern that the prescribed notice to be sent to workers under the transitional arrangements was excessively complicated[15]. We invited the Department to comment on a simplified draft of the notice[16] which they agreed to adopt with minor modifications[17]. We are grateful to the Department for undertaking to amend the prescribed notice to make it less confusing.

13. A number of respondents to the consultation document, including Rowley Ashworth Solicitors and the TUC, argued that the proposed transitional arrangements were unnecessary. The TUC argued that no existing authorisation forms referred to a three year limit and authorisations given by workers should be regarded as being intended for an indefinite period[18]. They believed that repealing the existing requirement would simply lead to all existing authorisations becoming indefinitely valid. They provided us with a selection of texts from current authorisation forms used by some of their larger affiliated unions, none of which made reference to any three year limit. Rowley Ashworth Solicitors also noted that they were not aware of any authorisations that had been confined to a limited period[19]. They too argued that if the requirement for re-authorisation every three years were to be removed, then authorisations should be seen to be indefinite.

14. The Department acknowledges that few, if any, of the authorisations given since the 1992 Act came into force explicitly limit authorisations to three years, but it believes that in many cases employers have not retained copies of the authorisations and the exact text is not known[20]. We are not aware of any authorisations that specify that they are time limited.

15. The Department also takes the view that at least some of the authorisations given under the requirements of section 68 of the 1992 Act could be argued to be subject to an implied limit of three years because they were given under legislation that specified a three year limit on their duration[21]. Workers who gave their authorisation in the light of that legislation can not be assumed to have authorised more than the law allowed at the time. The Department is concerned to avoid the possibility of a worker seeking to establish, some period after the proposed Order comes into effect, that his or her authorisation should have been limited to a three year period and claiming that all subsequent deductions were therefore unauthorised. The employer would then be liable to pay back all the relevant contributions. We do not believe that this is a likely prospect. We accept the argument, acknowledged by the Department, that nothing in the 1992 Act[22] purported to alter workers' contracts with their employers; it merely imposed a statutory prohibition on an employer from carrying out such a contract without meeting certain requirements[23]. Consequently, we believe that removing the requirements introduced under the 1992 Act should allow check off agreements to continue indefinitely in accordance with their terms. We do not believe that workers would claim that deductions had been made illegitimately on the grounds that their authorisation had been given under a statutory requirement that had subsequently been lifted, and doubt that, if such a claim were made, it would succeed.

16. We do not believe that the transitional arrangements are necessary to retain protection. We are satisfied that workers would have signed authorisations for deductions on the basis that they were to last until they cancelled them themselves. We believe that the transitional arrangements would place an unnecessary burden on employers and unions, and recommend that the proposed Order be amended accordingly.

Requirement for re-authorisation every three years.

17. We considered whether removing the requirement to obtain re-authorisations every three years would remove any necessary protection for workers. Peninsula Business Services argued that the requirement that deductions be re-authorised every three years ensures that workers are regularly put in a position of making a value judgment about the service that they receive from their union[24]. They expressed concern that numbers of workers would continue paying subscriptions unwittingly if this requirement was removed.

18. A number of unions argued in their responses to the consultation document that one by-product of the re-authorisation requirement had been that some union members had inadvertently dropped out of union membership through failure to return re-authorisation forms in time (if at all). UNISON reported that they had suffered no loss of membership as a result of the re-authorisations, but that approximately 15,000 of their members had failed to re-authorise continuing check off deductions before the expiry of the three year limit[25]. UNISON rules required continuous membership for certain services such as death benefits, accident benefits, incapacity benefits, rights to representation and grants for education, so failures to re-authorise in time had potentially serious consequences for workers. The Retained Firefighters Union reported a recent occasion when someone had approached the union for help after an accident while on duty only to find that they were no longer a member of the union, having failed to re-authorise[26].

19. We wrote to the Amalgamated Engineering and Electrical Union, the National Federation of SubPostmasters, the Graphical Paper and Media Union and the Retained Firefighters Union to ask whether they had lost membership as a result of the re-authorisation process and to ask to what extent their membership levels recovered in the following months[27]. The results were not conclusive. Even where figures were available regarding loss of membership due to re-authorisation, a simple calculation of the numbers who subsequently re-joined would not account for all the members who had inadvertently failed to re-authorise. We acknowledge that there may be some union members who would unwittingly continue their union membership if the requirement to re-authorise deductions every three years was removed. However, we believe that there is a greater risk to union members who inadvertently fail to re-authorise deductions, thus fall out of membership and then discover that they can not make use of the services to which they believed they were entitled. We do not believe that removing the requirement for re-authorisations every three years would remove necessary protection.

Requirement to notify workers of increases in deductions

20. We also considered whether removing the requirement that employers notify workers of increases in deductions made under check off would remove necessary protection. Rowley Ashworth Solicitors argued that there was no statutory or other requirement for separate notification of increases in other voluntary deductions from pay and there was no justification for such a requirement relating to union subscriptions[28]. They also noted that the Employment Rights Act 1996[29] required employers to provide itemised pay statements to employees which would clearly show exactly how much was being deducted under check off.

21. The Employment Law Bar Association reported that there are categories of workers who are not classified as employees under the 1996 Act and are not therefore entitled to itemised pay slips[30]. The Department provided us with details of the categories of such workers[31]. We note that the numbers of workers in these categories who would be paying union subscriptions through check off would be small.

22. The TUC asserted that unions already notify their members of increases in subscriptions, and so the requirement that employers separately notify those individuals paying by check off was unnecessary[32]. In their responses to the consultation document, the National Federation of SubPostmasters and UNISON reported that they notified their members of increases in subscriptions through the union journal sent to all members, the T&GWU stated that they write to all their members, and the Bakers Food and Allied Workers Union said that they post notices on all union noticeboards.

23. We also wrote to a selection of other unions to ask them what steps they took to inform workers of increases in subscriptions. The GMB noted that although there was no requirement in their rules that members be notified of increases in subscriptions before they took effect, their Congress would only approve a subscription increase on condition that there was adequate time to notify members before it took effect[33]. They supplied us with a sample of a notification form that would be used at branch or regional level for this purpose. The Amalgamated Engineering and Electrical Union notifies its members through the union journal[34]. The Graphical, Paper and Media Union Rule Book (circulated to all members) specifies the amounts of future increases which are confirmed by a circular sent to all branches in advance of the increase taking effect[35]. The Guinness Brewing Staff Association and the Commercial Union Group Staff Association include notifications of increases in their newsletters, circulated to all members[36]. The Retained Firefighters Union is required to obtain the approval of increases from its annual conference. A "Conference Report" is circulated to all members with details of the increase[37].

24. We are satisfied that unions have procedures in place for notifying their members in advance of increases in subscription rates. We therefore conclude that no necessary protection would be removed by this provision of the proposed Order.

Proposal that initial authorisations include notice of right to withdraw from check off

25. In the consultation document, a proposal was included to require employers to include in the initial authorisation for check off a notice informing workers of their right to withdraw from the arrangement at any time. This was withdrawn in the light of the consultation exercise. A number of respondents argued that it was an unnecessary requirement because it was widely known that workers were free to withdraw from check off arrangements at any time[38]. The TUC and Rowley Ashworth Solicitors believed that the provision would create a new requirement that did not apply to any other voluntary deduction from pay[39].

26. Under the proposed transitional arrangements, the prescribed notice to be sent to all workers currently paying their subscriptions by check off would include a notification that workers are free to withdraw from the arrangements at any time[40]. There will be no such notification issued to workers who begin paying their subscriptions by check off after the proposed Order comes into force. The Department did say that it was desirable for unions to continue their current practice of informing new members entering the check off system that they could withdraw at any time[41]. We agree that there will be sufficient protection for workers retained by the proposed Order without introducing a new requirement that separate notifications should be included in the initial authorisation for payment by check off to inform workers of their right to withdraw from the arrangement at any time.

Has the proposal been the subject of, and does it take appropriate account of, adequate consultation?

27. The Department went out to consultation on the proposal on 29 August 1997, and replies were requested by 31 October 1997. A total of 106 responses were received from employers, employers' organisations, trade unions, and other bodies. We believe that the scope and timing of consultation was adequate.

Does the proposal impose a charge on the public revenues or contain provisions requiring payments to be made to the Exchequer or any government department or to any local or public authority in consideration of any licence or consent or of any services to be rendered, or prescribe the amount of any such charge or payment?

Does the proposal purport to have retrospective effect?

Does the proposal give rise to doubts whether it is intra vires?

Does the proposal require elucidation or appear to be defectively drafted?

Does the proposal appear to be incompatible with any obligation arising from membership of the European Union?

28. We have no concerns to raise under any of these headings.

Extent

29. The proposal would apply to Great Britain only. A separate consultation exercise is being undertaken in Northern Ireland[42].

Report under Standing Order No.141

30. We have concluded that the proposal for the Deregulation (Deduction from Pay of Union Subscriptions) Order 1998 should be amended as set out in paragraph 16 before a draft order is laid before the House.

1 Copies are available to Members from the Vote Office and to members of the public from the Department of Trade and Industry. Back

2 Section 68 of the 1992 Act. Back

3 ibid. Back

4 Standing Order No. 141. Back

5 Explanatory Memorandum, paragraph 4. Back

6 ibid., paragraph 24. Back

7 Explanatory Memorandum, paragraph 8. Back

8 Response of TUC to consultation document. Back

9 Explanatory Memorandum, paragraph 12. Back

10 The original form of notice is laid out in the Schedule to the draft Deregulation (Deduction from Pay of Union Subscriptions) Order 199 in the Explanatory Memorandum. A revised form, drawn up in response to our suggestions, is printed at Evidence, page xl . See also paragraph 12. Back

11 Evidence, page xxi. Back

12 Evidence, page xxxix. Back