Employment Bill

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Norman Lamb: I have written a book on compensation in employment tribunals, but I do not have the faintest idea what the point is, either. The passage seems to be nonsense. The compensatory award is designed to compensate the employee for the loss suffered as a result of dismissal, and is irrelevant to the question of the costs of preparing for the case.

Mr. Hammond: One hopes that somebody from the Law Society will read the Official Report of the Committee's proceedings.

Rob Marris: Perhaps I can assist hon. Members. I have neither read the briefing—as I said earlier, I received it in the post only this morning--nor written a book about the matter, but I think that the Law Society is saying that the compensatory award is designed to compensate the applicant for being unemployed for the period between the unfair dismissal and the tribunal hearing. When the Law Society refers to double recovery—I do not agree with this—it means that, if an applicant won his case, he would be paid for that period of unemployment and for his preparation time leading up to the employment tribunal. That is the society's approach.

Mr. Hammond: I am grateful to the hon. Gentleman, because that makes sense to me. I think it is relevant to the issue raised by the hon. Member for Weston-super-Mare about an unemployed applicant, who, it could equally be argued, is paid for his time in unemployment benefits. I would be interested to hear

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the Minister's take on the issue. I believe that other Committee members wish to speak and I look forward to what they have to say and to the Minister's replies.

Rob Marris: At first glance, amendment No. 2 seems quite attractive. I hope that the Minister can reassure me, because I am concerned about proposed new section 13A. The way in which it is phrased—guidelines would be issued under it—seems to depart from normal procedure in civil courts. Normally, the litigant in person would recover costs for his preparation time, but if he was professionally represented, he would not. Were the litigant to be successful, his professional representative's bill would be recovered. I hope that that can be clarified in any regulations to be made under proposed new section 13A.

I would also like the Minister to say whether 13A will cover only vexatious and mischievous circumstances, or whether it will be broader than that. The powers in the Bill for employment tribunals to make regulations are broader than that, although I understand that the Minister intends to confine any overall rules on costs to those criteria.

Preparation time is different. However much one may call for equity, there is rarely equity between parties at employment tribunals. For example, managing directors may spend an average of 47 hours preparing a case. Because many of them are overpaid, particularly when they underperform, they will charge a much higher rate for their preparation time—should they be successful—than an unemployed applicant or one who works for the Post Office and has the misfortune not to be a member of the Communication Workers Union and is not therefore assisted in his or her case. The difference would be one of £100 an hour for a managing director against £6 an hour for a postman.

Thus there is a disparity between parties. However much one may wish for equity in employment tribunals, one will never get it. For example, tribunals have the power to order the reinstatement of unfairly dismissed applicants, but even when such orders are made, employers can sidestep them and the unfortunate applicants continue to be unemployed and cannot return to their jobs. There will never be equity between the parties, however much we might try to legislate for it.

I echo the call for the Minister to issue guidelines on new section 13A, because I believe that payments should be capped to a certain percentage of the £10,000 limit introduced in July. Those guidelines should be tight, and should lessen the disparity between poorly paid applicants and employers. I concede that some managing directors can apply to a tribunal—indeed, I once acted for one who was earning more than £50,000 a year, although most applicants earn far less than that.

Will the Minister explain how the guidelines deal with a successful applicant who instructs a solicitor? The solicitor would charge for his time, but could the winning applicant or the winning company's

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managing director recover their preparation time? Double recovery would be a departure from what normally happens; if a solicitor or a barrister acts for someone in the civil courts, that individual's time can be recovered and the bill can be taxed or assessed, but people do not recover their own preparation time. That is in contradistinction to civil litigants in person; they are not legally represented and can therefore recover their preparation time. Is double recovery envisaged in the regulations to be made under new section 13A?

Mr. Hammond: I am fascinated by the hon. Gentleman's argument, but I suspect that it betrays his background in the legal profession. It is self-evident that in many cases the respondent will sink his own time or his in-house time into preparing and extracting details to be passed on to his legal representative. However, to constrain the use of human resources, he can do what many do and ask the legal boys to get on with it. In the latter case, the lawyers will clock up big fees, all of which they will be able to recover. It might be bad news for the lawyers if the respondent uses in-house resources to minimise the legal fees, but it would be good for the system because it would keep costs down. My experience of dealing with lawyers has been that it is cost effective to do as much work as one can, or for the company to do the work in-house, because it provides the best possible base of material to the lawyers and thus keeps down their time and their fees, which can be £200-odd an hour.

Rob Marris: Would that I had been earning £200-odd an hour when I was practising law. A survey published by the Gazette Weekly Journal of the Society this week said that in-house lawyers are generally considered cheap, but I hope that the Minister will elucidate the matter and say whether the guidelines will be so tight that that disparity will not be a factor. I hope that the guidelines will be at or below the cost of in-house lawyers, that outside lawyers will be subject to taxation or an assessment of costs and that, if the bill is too high, it should be cut down by a tribunal or assessed by a county court assessor. I hope for some strict guidelines.

Alan Johnson: This is a culling amendment rather than a probing amendment. It is a strange way to probe, but I am suitably probed. Nevertheless, the amendment gives us the opportunity to discuss an important issue that is of concern also to my hon. Friends. It would be wrong to delete subsection (2), which is the basis for fairer recompense than that currently provided. To avoid doubt, and bearing in mind our curious exchange about the explanatory notes, I should say that we are clear on the fact that the cost awards will not change. Currently, they are made when a party or its representative has behaved vexatiously, abusively or otherwise unreasonably, or when the bringing or defending of the case has been misconceived. That is set out in legislation and no change is intended. The preparation time, which we are debating, is merely another measure to provide for the cost awards and does not change the basis on which they are made.

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That is an important point, and I accept that we have to read a large amount in a short period. However, the explanatory notes state:

    ''It is also intended that the new awards''—

the preparation time—

    ''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''.

The notes use a shorthand and do not go through the list of criteria, but it is clear that we are not changing the basis on which cost awards are made.

Cost awards relate to 2 to 4 per cent. of cases. The hon. Member for Weston-super-Mare quoted a figure that I did not recognise, which was that last year there were 247 cost awards out of 130,000 applications. I do not agree completely with him about the extent of the problem. There are many reasons for the increase in cases. People are more aware of their rights and, thanks to the Government, they have more rights to be aware of. Under a previous Government, qualification to go to an employment tribunal and claim unfair dismissal was hiked up to two years from one year—I think that it was down to six months for a time—but we have reduced it to one year. Those are relevant factors, but the growth in employment tribunal cases started 10 years ago. In the late 1980s, the then Government considered the rise. There are an awful lot of reasons for it.

We must not get carried away with the idea that a large proportion of applications are vexatious or unreasonable. That is not the case. On anyone's assessment, the percentage is tiny.

Brian Cotter: My figure of 247 could increase substantially. My main purpose in mentioning it was to suggest that there has not been a great deal of experience in assessing costs, in spite of the great many cases that are made. The object of the amendment is to highlight grave concerns about cost awards.

Alan Johnson: Let us deal with cost awards. My hon. Friend the Member for Amber Valley rightly mentioned our evidence. Much of it is from the consultation on ''Routes to Resolution'' and suggests that the increased limit on costs from £500 to £10,000 at employment tribunals—there has never been a limit at employment appeals tribunals—has been used to browbeat people into not pursuing claims. That is why we have said that we shall have a complete study of cost awards and the way in which they operate. We will issue fresh guidance and ask the employment tribunal system taskforce to consider the issue.

The concern relates to the £10,000, which I think that my hon. Friend suggested was a new complication. The system is fairer. Only 2 to 4 per cent. of cases may be involved, but that is still an awful lot of cases that should not clog up the system, and the numbers are rising. At the moment, either the respondent or the applicant have a cost award made against them. Out of 247 awards last year, 167 were against the applicant. Eighty cases—32.5 per cent., which is almost a third—were made against the respondent, so applicants do not always have the cost awards made against them. In those cases, the primary

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way in which a cost award would be assessed would be legal fees, among a few other odds and sods. No compensation can be obtained for the time spent preparing for the case. Fewer than a third of respondents—29 per cent.—use external legal representation at a hearing. Of applicants, fewer than a quarter have any legal representation—that is around 20 per cent., according to information collected three years ago, so things may have changed, but those are the latest figures on which we can work. It is weird, in a system meant to discourage legal representation and encourage a more informal atmosphere, that the person who does without legal representation and spends days at the kitchen table preparing for a rigorous, daunting procedure, cannot be awarded costs.

12.30 pm

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