Employment Bill

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Brian Cotter: I wish to speak to amendment No. 27. As we know, under current law a tribunal can rule that an employee has been unfairly dismissed on either procedural or substantive grounds. Clause 34(1) changes the conditions relating to procedural fairness. If an employer fails to comply with the minimum statutory procedures, the tribunal will automatically find that the employee has been unfairly dismissed. However, clause 34 seems to go far beyond achieving that aim by excluding the possibility that a dismissal could be substantively unfair even where it is not procedurally unfair. For example, a person could be dismissed on a very minor ground such as turning up for work a minute late.

Amendment No. 27 is designed to tighten up the clause by limiting its impact to the circumstances in which it appears it was intended to apply. Under the amendment, dismissals could be deemed unfair for other reasons, even if they were found to be procedurally fair. I should be interested to hear the Minister's response to that key point.

Mr. Mark Prisk (Hertford and Stortford): In principle, I welcome the attempt to minimise the impact of minor procedural changes. In that regard, the Government's effort to reverse the Polkey principle is acceptable, but the clause gives rise to problems, with which the amendments attempt to deal, and to an inconsistency that is at the heart of the clause's relationship with the rest of the Bill.

On the one hand, the Government are using the Bill to promote the idea that businesses and all forms of employers should seek to follow a regular and accepted procedure, whether in general, disciplinary or dismissal situations. On the other hand, in many senses clause 34 reduces the importance of that same procedure. Perhaps the Minister would like to comment on that inconsistency and the message that it sends to employers and employees. I am also concerned that the absolute nature of proposals in relation to awards against a failure to follow minimum statutory procedures is potentially unfair to the smallest of firms. Neither the scope nor the character of the procedures is crystal clear, so the danger of an employer unintentionally falling foul of minor procedural mistakes is all the greater.

The Law Society's much-quoted briefing highlights the point that the hon. Member for Wolverhampton, South-West (Rob Marris) raised earlier, namely that although clause 34 may be intended to be narrow and focused,

    ''its wording excludes the possibility that even where a dismissal is not procedurally unfair, it could still be substantively unfair. It does this by making the provision applicable . . . to the whole 'Part' of the Employment Rights Act 1996, in which it will be added.''

There is a danger that the clause may have a wider effect than the Minister intends. Will he comment on that?

Mr. Lloyd: The concentration on subsection (2) is important. The hon. Member for Hertford and Stortford mentioned the Polkey principle, so he should have no objection to its reversal. This could become an incredibly arcane debate in which only those of us who wear employment law anoraks are entitled to take part, but we risk unsettling some fundamental issues if the Bill stays in its current form.

My hon. Friend the Member for Wolverhampton, South-West said that there are two primary concerns-first, that where an employer fails to meet the basic criterion of a fair hearing, natural justice is put at risk and, secondly, that an employer who fails to pursue a proper and fair investigation can use the current wording of the Bill to avoid the charge that their procedure was inadequate.

At first, I wondered whether common sense says that an employer who makes a tiny procedural slip up should not be charged with that error to the exclusion of everything else. An employer who has made a manifestly fair dismissal in the sense that the charge is of enormous gravity and under any logical terms would warrant dismissal may find that because he failed to put the right postscript on the letter it is deemed to be unfair. Naturally, we do not want that to happen.

Several kinds of cases that tribunals have in the past judged to be unfair dismissal would almost certainly not be so judged in future, because the reversal of the Polkey principle means that they are unable to make judgments on the same basis.

Mr. Simmonds: Does the hon. Gentleman think that the reason why not many cases have fallen into this category is because small businesses are exempt, and that that is where problems will arise?

12.30 pm

Mr. Lloyd: We must look at several issues in the round. One problem is that we know only what tribunals have resolved. Because tribunals sit in geographically dispersed parts of the country there is no central collation of their proceedings. Examples are folklore unless they can be illustrated by real cases. To help the Committee, the TUC has tried to find practical examples where this change in the wording of the law will make a material difference.

British Home Stores v. Burchell is an old case from 1978 in which the tribunal decided that an employer is under an obligation to carry out a reasonable investigation before initiating disciplinary action. Common sense would suggest that reasonable investigation is central to natural justice, a judgment which was confirmed by that tribunal, but that must be placed in context. Although an employer is under that duty, they do not have a duty to have got the case right. All they must demonstrate is that they believed that they were acting in the right way. They could have got it wrong, but only on the basis of proper investigation.

The problem with the schedule 2 minimal grievance and disciplinary structure is that it does not call on the employer to institute a proper investigation. Not only will the employer not have to get it right-it will be a reasonable defence to say that they thought that they got it right-it will not be necessary for them to say, ''I took proper steps to ensure that I got it right''. They can say, ''I believed that to be the case and I acted on it''. Under subsection (2), they will have to show that they would have decided to dismiss the employee if they had followed the procedure.

That is not a tough test; it is an extremely subjective test. How does the employer show that they would have acted that way had they followed the procedure and investigated? They could argue, ''I still would have dismissed the employee because he is a pain in the neck. We have wanted to get rid of him for years.'' The question of investigation is significant.

Last year's case of Midland Bank v. Madden provides another relevant example. Mr. Madden joined the bank as a school leaver and over a period of 11 years had risen through the ranks. He went from being a trainee bank clerk to chief cashier foreign clerk and eventually reached the position of leading clerk. He was a man of some probity within that organisation and up to that point he had an unblemished employment record. In July 1997, three debit cards were stolen from the bank almost certainly by a bank employee. Following a tip off from the bank's police liaison officer, the police raided Mr. Madden's home and he was arrested, but because of a lack of evidence he was released without charge.

Under our criminal justice system that is the end of the story. However, an internal workplace investigation took place, and although Mr. Madden denied any knowledge of the allegations the decision was made to sack him following an investigation of other employees. He exercised his right to appeal, but to no avail. The tribunal found that the tenor of the internal investigation pointed to Mr. Madden as the likely culprit. It also found that the investigation of other employees was not as thorough as the police investigation of Mr. Madden. It decided that the relevant managers had accepted the investigators' conclusions too readily and uncritically, and on that basis it decided that the investigation was inadequate and therefore found in his favour.

If that case were subject to this legislation, the employer would have argued that they would still have decided to dismiss the employee had they done anything differently because they had already drawn their conclusions. They would simply have asserted that they were right, and the tribunal would not have been in a position to decide that that dismissal was unfair. I ask my hon. Friend the Minister to consider that case carefully.

Bentley Engineering Co. Ltd. v. Mr. Mistry in 1978 is the final case that I should like to bring to the Committee's attention, and it concerns the question of how a meeting is conducted. Mr. Mistry was employed as an office clerk and became involved in a fight with another employee. Both men alleged that the other had started the fight, thus placing the blame on the other individual. Statements were taken from other employees who had witnessed the fight, and the assistant personnel officer, who interviewed both men the following day, decided to dismiss Mr. Mistry. He appealed, but neither the other combatant nor any witnesses were at the appeal hearing, so Mr. Mistry did not have the opportunity to cross-examine them. Both the employment tribunal and the appeals tribunal found that the dismissal was unfair because Mr. Mistry had not been given written statements by the witnesses and the other employee involved in the fight. The appeals tribunal ruled that the employer had failed to satisfy the requirements of natural justice, which entails:

    ''not merely that a man shall have a chance to state his own case in detail; he must know sufficiently what is being said against him so that he can properly put forward his own case.''

That was a fundamental tribunal decision.

Most people would agree with the tribunal that if Mr. Mistry did not have the opportunity to know the basis of the evidence against him or to cross-examine those who brought the case, his right properly to defend himself was abrogated. I contend that under this legislation a tribunal would be unable to consider that case in the same way. Schedule 2 does not contain an employee's right to know the case against them. More narrowly, it states:

    ''Meetings must be conducted in a manner that enables both employer and employee to explain their cases.''

Explanation of a case is not the same as an opportunity for Mr. Mistry to be confronted by the witnesses who put the case against him and to challenge their testimony. Once subsection (2) becomes law, a tribunal would find it difficult to reach the same judgment as the 1978 tribunal that Mr. Mistry had been unfairly dismissed.

I appeal to my hon. Friend to recognise that those are real cases. My argument is not hypothetical. It is not a knee-jerk, Luddite reaction, or an attempt to use minor slip ups by an employer as a way of conceding cases in which common sense suggests that an employee deserves dismissal. Sometimes there is a narrow gap between procedure and substantive cases, and they can almost amount to the same thing. In the cases that I have described, discovery of the substantive case depended on the procedure being proper and full.

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