Employment Bill

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Norman Lamb: That intervention highlights the fact that we need clarity on the clause.

My other main concern is that, although the Minister may choose to limit the circumstances in which discretion is exercised by way of subordinate legislation, a future Minister or Secretary of State could exploit the power that is proposed in the Bill in a pernicious way, making it much more dangerous for an applicant to pursue, or to continue to pursue, a case because of the possibility of a substantial award of costs in respect of preparation time. Much greater clarity is needed. We are concerned that the Bill allows such wide discretion to use subordinate legislation in a way that could seriously impact on an applicant's assessment of whether to pursue or to continue to pursue a claim.

12 noon

Mr. Hammond: This has become a properly structured amendment, although it was not in its original form. That is disappointing, considering its origin. I was surprised to hear the hon. Member for Weston-super-Mare say that he was flagging up an issue without suggesting any solution. He got there before I did. I should have preferred to see the issue probed by way of amendments to new section 13A to deal with the potential problems identified by the hon. Member for North Norfolk. I hope that the Minister will clarify—either by intervening now or when he speaks later—in what circumstances an award of costs in compensation for preparation time could be made.

Explanatory note 63 says:

    ''It is also intended that the new awards could be made only in the circumstances in which a costs award may be made at present, that is, where the party has behaved unreasonably in some way.''

At present, before the passage of the Bill, that is the situation. A party must behave unreasonably or vexatiously or there must be an unreasonable delay before a costs award can be made. My understanding of clause 22 is that it changes that, so that there is no longer in the primary legislation a requirement for vexatious or unreasonable behaviour to have occurred before a costs award can be made. If I understand the situation correctly, and the explanatory note is right, the circumstances under which an award under new clause 13A can be made will be different from those under which an award of costs generally can be made. It seems odd to say that the Government want to broaden the range of cases in which a general award of costs can be made so that there is not a requirement for vexatious or unreasonable behaviour per se, yet in the

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case of preparation time, they will return to the old definition under the present law and require vexatious or unreasonable behaviour. That is significantly inconsistent. Perhaps the Minister can explain why it is felt to be necessary.

The issue is important; the preparation time required to defend against a tribunal application will impose a significant burden on employers, particularly small employers. I am sure that colleagues have experienced such cases. I have done so myself. A small business faced with a tribunal application may feel that it is in the right and can make a good case—it is not about to say, ''hands up, fair cop''—but not have the spare resources to deal with the preparation of the case, to go back to old records, to research and assess all that has gone before, in order to present its case effectively. Often, small employers—and even large employers—are left in a position of trading or trying to do a deal. An application is made, the employer considers his case and says, ''I think that I have a good case. I am confident that the case would succeed if it went before a tribunal, but I will need to take Fred off his job for three or four days to prepare for it. I will need to spend a day at the tribunal, in a town 30 miles away. It will cost us thousands of pounds and we cannot afford it.'' The sensible business decision is to cut a deal with the applicant, even where the application is unlikely to stand up in court.

A few weeks ago, I met a constituent who is the chairman of a large quoted company that employs about 30,000 people, half of them in the UK. He told me that it is routine in his business to buy off applicants to industrial tribunals because the disruption and cost in management time are too great. The Government's figures suggest that it costs businesses about £2,000 on average to prepare for a case. A sensible business will make an offer even to an applicant who does not have much of a case because its business logic tells it that it is better to pay out £500 or £1,000 and avoid spending £2,000. That stimulates precisely the type of applications that the Minister wants to prevent—applications that are without merit—in the hope that the employer will seek a financial settlement rather than incur disruption to his business.

I suggest to the hon. Member for Weston-super-Mare that there is no equity in the present system, which is unfair and likely to stimulate the sort of applications that we want to discourage. Therefore, new section 13A is an essential part of the Bill and, with respect to the hon. Member for Weston-super-Mare, to suggest deleting it without proposing a more effective alternative is a betrayal of the interests of small business that the hon. Gentleman so ably represents on other occasions.

I do not deny that there are some concerns surrounding the issue. The hon. Member for Amber Valley identified one of them—the fact that the threat of substantial costs may deter applications that are well founded. No one wants to create in the tribunal system a situation that already exists in the legal system, whereby even some people who have very strong cases fear to tread because the process can

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become so expensive if they are not ultimately successful. I would be interested to hear the Minister on that.

I suspect that the sensible answer is some sort of fixed tariff approach to awarding preparation costs. That approach would deter the frivolous or speculative case. It would also address the problem which I have outlined of businesses being tempted to negotiate a settlement in cases that they would be almost certain to win were they to go to the tribunal, as long as they could expect to recover a reasonable sum—the figure of £2,000 a case is a good guideline—for their preparation costs. If the hon. Member for Weston-super-Mare does not seek leave to withdraw the amendment, I shall certainly urge my hon. Friends to vote against the proposal to delete new section 13A, while recognising that the amendment raises some important issues that need to be probed.

Grouped with amendment No. 2 are amendments Nos. 8, 17 and 15, to which I shall speak briefly. Amendment No. 8 would delete the word ''may'' and insert the word ''shall'' in its place. Its purpose is to seek confirmation from the Minister that the Bill will definitely include a provision for compensation for preparation time. I have already spoken about the package approach taken in the Bill. A significant part of that package for employers, especially small employers, is the ability to recover compensation for preparation time. I want to be reassured that the regulations will include a provision to authorise a tribunal to order a party to make a payment by way of compensation for preparation time, and that there is no danger of such a provision being lost twixt cup and lip, because when the Minister consults on the regulations he will undoubtedly come under all sorts of pressures from various parties to tilt the playing field one way or another.

Amendment No. 17 is a probing amendment. With the amendment, the clause would provide that an employment tribunal could order a party to make a payment in respect of preparation time in specified circumstances. I tabled the amendment to probe what circumstances the Minister had in mind. Does he intend to leave the matter entirely to the discretion of the tribunal or does he intend to specify the circumstances in which it would be appropriate for a tribunal to award costs?

Amendment No. 15, which mirrors our earlier debate about taxation and assessment, incorporates a provision that I assume will be necessary to allow a tribunal to determine the payments to be made under new section 13A. I expect the Minister to be able to confirm that such a provision will be included in the regulations, but tabling an amendment to the Bill is the only way that we can elicit that confirmation.

In addition to the Minister's answers to earlier questions about the fixed tariff and about how the time of unemployed applicants will be priced, it is important for Committee members to have some understanding of how the whole structure will work in a way that is fair and that achieves the underlying purpose of this part of the Bill. That is, to disencumber the tribunal system from the burden of cases that

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should not be brought but that have resulted from the growth of the compensation culture in this country, where more and more people seem to be willing to take a punt on an application, in the hope that they might win or, perhaps more likely, that their employer might make a rational business decision and give them a sum of money just to go away and forget the matter, thus avoiding putting himself to significant costs and trouble in defending the case. I am grateful to the hon. Member for Weston-super-Mare for giving us an opportunity to debate this issue, but his amendment, which would delete a part of the Bill that is important to employers, is not the best way to go about it.

12.15 pm

Before I conclude, there is a paragraph in the Law Society briefing to which I do not think the hon. Member for Weston-super-Mare referred, and which I do not understand at all. Perhaps it would be helpful if I were to draw the Committee's attention to it, so that the Minister, drawing on his infinitely greater resources, can deal with it. The Law Society says:

    ''The more difficult question will be how to compensate an applicant for preparation time when this time has already been accounted for in the calculation of the compensatory award. To include this time in the costs award would be to compensate the applicant twice at the same time, but to ignore this time would be to demonstrate the inherent unfairness to applicants of this provision.''

I must be honest and say that I do not have the faintest idea what the point of that paragraph is.

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