Eighth Standing Committee on Delegated Legislation
Wednesday 14 March 2001
[Mr. Eric Illsley in the Chair]
Draft Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2001
The Minister for Competitiveness (Mr. Alan Johnson): I beg to move,
That the Committee has considered the draft Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2001.
The Chairman: With the leave of the Committee it will be convenient to consider the draft National Minimum Wage Regulations 1999 (Amendment) Regulations 2001.
Mr. Johnson: I am grateful to the Committee for allowing these two regulations to be considered together. I am sure that it helps to make the best use of the Committee's time.
The proposed regulations make necessary changes to the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000, and the National Minimum Wage Regulations 1999 (Amendment) Regulations 2000. The first will make it easier for employers and workers involved in a dispute over the application of the part-time regulations to reach agreement without resorting to an employment tribunal. The second makes a minor point of clarification on who is entitled to the national minimum wage.
If hon. Members are satisfied, the regulations on part-time workers will apply to England, Scotland and Wales, with Northern Ireland introducing its own legislation along similar lines. The minimum wage regulations apply directly to the whole of the United Kingdom. Both amendments will come into force on 1 May this year and be effective from that date.
I mean to demonstrate that these regulations will improve the operation of the original legislation. They will help to encourage a partnership approach from employers and workers in applying the part-time workers regulations and correct a potential anomaly in the national minimum wage regulations regarding the trainees exemption.
Let me first offer some background on the need for these two sets of regulations. The original regulations on part-time workers successfully implemented a European directive. The regulations have been broadly welcomed and are already having a positive impact. We implemented them via the Employment Relations Act 1999, which was designed to promote fairness in the workplace and encourage a partnership approach between employers and workers. The part-time regulations were consistent with that aim. They also included provisions to encourage people to stay in, or return to the labour market where otherwise important skills and experience might have been lost.
When drafting the regulations an error was made where we omitted provisions to give employers and workers greater scope to reach agreement in the case of a dispute. It is unfortunate that the error was not spotted in time to save the Committee from having to consider them today. The provisions are standard in employment law and apply to virtually all other employment rights, including the right to claim for unfair dismissal and the right to bring a claim for discrimination on the grounds of sex, race or disability. They help many employers and workers to settle disputes without resorting to employment tribunals, saving them time and money. It is only sensible to extend the flexibility offered by these provisions to the part-time workers regulations and encourage a partnership approach to settling disputes over their application.
I turn now to the national minimum wage amendment. As hon. Members will remember, on 4 July last year we debated the increase in the main national minimum wage rate and a number of other regulatory changes, as recommended in the independent Low Pay Commission's second report. However, after those discussions, a minor technical difficulty with a part of those amending regulations came to our attention. On 14 July 2000 in the other place, we explained the problem and announced our commitment to return with a slightly amended version of the relevant regulations as soon as possible to clarify the situation once and for all. That was accepted by their Lordships and the amendment to the principal regulations under debate today fulfils that commitment.
I should now like to go into greater detail on exactly how the measures in the two regulations will improve the operation of the original legislation and make better use of everyone's time. I have stated that the part-time regulations will give parties involved in a dispute greater capacity to come together and settle their differences without having to go to a tribunal. That will be achieved in two ways.
First, the regulations will amend section 18(1) of the Industrial Tribunals Act 1996 to increase the ability of the Advisory, Conciliation and Arbitration Service to conciliate in claims brought under regulation 5(1) of the part-time workers regulations. Regulation 5(1) gives part-timers the right to equal treatment in their terms and conditions of employment when compared with similar full-timers. The amendment allows officers appointed by ACAS to conciliate between parties to reach a binding agreement before a claim reaches an employment tribunal. Any conciliation would be entered into on a voluntary basis and the proceedings are generally informal. There is no time limit attached to the conciliation process and no set format. Negotiations can be conducted over the phone, or in face-to-face meetings with one or both of the parties. There is no need for either side to take formal legal advice and either party retains the right at all times to revert to a tribunal hearing.
This informality fits with the Government's preferred approach to regulation and dispute resolution, which is to keep burdens on business and costs to the worker at the lowest possible levels and to encourage a partnership approach. I have lodged a regulatory impact assessment of the proposed changes with the Libraries of both Houses and the estimates made in that assessment bear that out although, as I am sure hon. Members recognise, it is extremely difficult to put exact figures on the impact of new regulations.
The measures do not put cost obligations on either party involved in the dispute. The conciliation service provided by ACAS comes without a charge, and there is no need to incur legal fees. The costs of resolving the dispute might amount to no more than the price of a few phone calls. That is particularly helpful for small businesses, which do not have the management resources of some larger organisations.
The second element of the part-time regulations amends section 203 of the Employment Rights Act 1996 to allow workers to contract out of their right to bring claims under the original regulations where an effective compromise agreement has been reached. For an agreement to be effective, the worker must have received advice from an independent adviser, which could be a qualified lawyer, a trade union official or an advice centre. The requirement need not be a disincentive to workers seeking to enter into an agreement. Advice will be available at no extra cost to the individual from their trade union, and free legal advice is always available from the Law Centres Federation.
There will be additional costs for ACAS resulting from the amendment, and these are set out in the RIA. However, we estimate that the costs of employment tribunal cases to individual businesses, and sometimes to workers, are higher than the additional costs incurred by ACAS or the cost of reaching a compromise agreement. That means that the amendment should show a net benefit to the economy.
We can expect a further benefit from the changes. The measures will also help reduce the increasing burden on the Employment Tribunals Service, a burden that we are already taking measures to address. On average, 25 per cent. of applications made to employment tribunals go as far as a hearing. A great many are settled by ACAS conciliation or compromise agreement. Bringing the part-time regulations into line with other employment rights in this respect is clearly the correct course of action.
We have responded to concern about the growth in employment tribunal applications with a package of measures to make the process fairer and quicker for reasonable claims while imposing greater deterrents and penalties on weak cases. The new measures, which I expect to lay before the House in the next few weeks, will help to free up tribunal resources for genuine complaints by improving case management and weeding out weak cases from the system. The measures will also apply to the part-time workers regulations.
I shall turn now to the detail of the national minimum wage amendment. The point at issue is a particularly complex one which results from a potential mismatch between the wide definition of ``worker'', including ``agency worker'', used in the National Minimum Wage Act 1998, and the reference to a certain type of trainee known as a ``national trainee'' in the National Minimum Wage Regulations 1999 (Amendment) Regulations 2000, which took effect on 1 October 2000.
The drafting of the regulation means that there could be a situation where a young trainee who does not actually work for an employer might nevertheless be taken to be an agency worker, as defined in the primary legislation. However, I stress that such a reading of the law would rest on a rather obscure legal technicality and be counter to a common-sense understanding of what the law intends. Because that point did not impinge on the main intention of the new regulations, they were approved in the other place.
It might be helpful if I clarify the purpose of section 34 of the National Minimum Wage Act 1998, which entitles agency workers to the national minimum wage. The section was necessary because some people who were supplied by agencies to work for others had such peculiar and often deliberately obscure contractual arrangements that they did not count as ``workers'' under the standard definition in section 54 of the Act. Section 34, however, was never intended to apply to those who are supplied by a training organisation, such as a training and enterprise council, to a business for training rather than performing work, and should not be taken to do so.
I apologise to hon. Members for the complexity of the amendment, but I can assure them that there is nothing sinister behind it. The technical change does not alter the intended effect of the principal regulations, but merely corrects a potential anomaly in the previous wording.
I am sure that like me, Mr. Illsley, you will have welcomed my right hon. Friend the Secretary of State for Trade and Industry's statement to the House on Monday 5 March. He announced that the main national minimum wage rate would be increased to £4.10 per hour on 1 October 2001, as recommended by the Low Pay Commission, which concluded that the implementation of the national minimum wage to date had been a success. It believed that prospects for economic growth and stability in the UK suggested that there was now scope for such an increase. In its view, the increase would not adversely affect the economy or reduce aggregate employment.
We estimate that 6 per cent. of adult employees will get a pay rise next October as a direct result of the minimum wage. The increase will make a real difference to low-paid workers and their families, but the rise will not affect wages growth throughout the wage distribution.
The minimum wage has been a highly successful policy. It has had little negative impact and there is little or no evidence of higher costs feeding into higher prices or of negative employment effects. Indeed, jobs are being created, especially in the service sector where the minimum wage has had its greatest impact.
The two sets of regulations before the Committee will contribute to the ability of employers and workers in Great Britain to operate more effectively when dealing with matters of employment law. The part-time regulations give employers and workers greater scope to settle disputes in a spirit of partnership. The minimum wage regulations put right a particularly tricky bit of legal drafting.
I hope that my explanation of the need for, and the effect of, these changes has been helpful to hon. Members and I commend the two regulations to the Committee.