Mr. Prisk: I share the hon. Gentleman's concern that there are cases, some of which he has cited, where the line between what is substantive and what is procedural is unclear. However, would his criticisms not be better directed towards the weakness in the drafting of schedule 2 rather than being expressed through the amendment?
Mr. Lloyd: Alas, Mr. Benton, we have passed that point in the Bill. I asked my hon. Friend the Minister whether we could strengthen schedule 2 by adopting, for example, the ACAS code, which would have raised the minimal level. That would have been one way of approaching the problem. My hon. Friend the Minister made it clear that although the Government support the ACAS code, he is trying to establish a minimum and simple threshold that all employers will take on board. Although I still urge my hon. Friend the Minister to look again at raising that threshold, I can understand his intention. With a simple code, as the schedule outlines, no one can really use the defence that it was too complicated and a terrible burden.
Whether the Committee likes it or not, subject to Report and amendments in another place, schedule 2 is what we have. We must try to look at how to preserve the position for those who, at least notionally, are covered by something better than schedule 2 but will find that eroded by the impact of the Bill.
The hon. Gentleman raised an important point. I put another concern before the Committee. Because of custom and practice before tribunals, a range of tests applies to different types of disciplinary action. For example, on dismissals related to incapacity or sickness, an employer is required to give the employee fair warning and an opportunity to mend his or her ways and show that he or she is fit to do the job. On the other hand, in misconduct cases, the employer should investigate the complaints of misconduct fully and fairly and hear what the employee wishes to say in defence, explanation or mitigation. In redundancy cases, the employer should warn or consult any employees affected or their representatives, adopt a fair basis on which to let the redundancy occur and take such steps as may be fair or reasonable to avoid or minimise redundancy by redeployment in the organisation.
The important point is that different tests have arisen, because of different circumstances, by custom and practice over time. That is not unreasonable. Misconduct is clearly very different from redundancy. The test of reasonableness in redundancy is normally about ensuring that there is no arbitrary discrimination. Obviously, the test is different in a case of misconduct because misconduct is specific to an individual or group of individuals.
If we reverse the Polkey decision, the real concern is that those developed tests defined by the case law approach will be thrown out of the window and that, rather than having a refined system that offers fairness to all parties, we will have a much more arbitrary system. In the end, that could lead to injustice and unfairness because tribunals will no longer be able to make decisions in the way in which they have in the past.
I have a high regard for my hon. Friend the Member for Wolverhampton, South-West, but I am yet to be convinced that the amendment is the right way for us to move forward. I appeal to the Minister to reflect on the spirit of the concerns that have been raised and to recognise that there is substance in the remarks made by hon. Members on both sides. He should address those in a way that guarantees not a simple reversion to tribalism and the Luddite approach but that ensures that we will continue to get the benefit of the custom and practice that tribunals have shown, in such cases, in the interests of fairness in the workplace.
Alan Johnson: This is one of the most important debates on this part of the Bill. I will address the specific points that hon. Members have raised after I have placed on record the Government's thinking.
Clause 34 has two main effects. First, it will reinforce the new minimum procedural standards by making it automatically unfair to dismiss employees unless those procedures have been followed, while providing for the first time that in such circumstances there will generally be some compensation for the employee. It will also ensure that when an employer fails to follow a procedure that goes beyond the new minimum procedures, or makes an error in following it, that in itself will no longer render the dismissal unfair, provided that he or she can show that following it would have made no difference to the decision to dismiss the employee and that the dismissal is otherwise fair.
Mr. Lloyd: Those comments are interesting and helpful. My hon. Friend said that if the employer shows that he would have otherwise have followed the procedure, dismissal would be fair. The Bill as drafted does not have that test.
Alan Johnson: That is the nub of the issue. We are drafting new section 98A into subsection (2), and we believe that that makes the right connection in that it remains the employer's responsibility to prove that dismissal was fair. We have spoken about minimum standards, but the minimum will not be sufficient in all cases. The amendment tabled by my hon. Friend the Member for Wolverhampton South-West makes precisely that point about the linkage with the need for the dismissal to be fair in all other respects. I will come to that in a second.
Mr. Prisk: Must an employer ensure that he does what is necessary, or should he do what is felt to be correct under the wider definition? How can employers ensure that they are doing what they should when such uncertainty exists?
Alan Johnson: We have spoken about that in our debates on schedule 2. Employers must not think that they need only go through the basic three-step procedure or go through the motions. For instance, if they dismiss someone for alleged theft, they have to go to the trouble of investigating whether there was theft. That is an important example, because it is not in the minimum standards, although it may be in the more elaborate and sophisticated procedure. If they tried to do that, they could not argue that the lack of an investigation made no difference to the decision to dismiss. Of course it would make a difference if there were no examination or investigation into the reasons for that dismissal.
There is some debate about whether ''in writing'' should appear in the procedures, but employers must ensure that they understand-and they must understand it perfectly well-that that is the basic minimum procedure. They should not think that because the investigative part is not in the Bill-and is in the ACAS code-that there is therefore no need to investigate before dismissal. Employment tribunals are not that easy. Both my hon. Friends said that an employer could stand up and say, ''It made no difference to my decision, I would have dismissed that person anyway.'' Employers cannot get away with that in front of an employment tribunal.
That is the test in the Polkey case, where it was decided in 1998 to reverse the decision made in 1979 that there would be no difference, provided that there was no difference to the employer's decision to dismiss. The point rests on the employer's decision to dismiss. That is one problem that the employer has to get over, but the employer has to be fair in all other respects too.
It has been suggested that we have restored wholesale the no-difference test, which was overturned by Polkey, which is the leading case in this area. In fact, where the statutory minimum procedures are concerned, we are strengthening the principle in Polkey. I will give examples in a minute. We looked at cases that were lost by the employer and won by the applicant on the basis of the Polkey test. In the vast majority, the breach in procedure was a fundamental breach that is now covered by the basic three-step procedure. For example, there was no hearing, or employers did not tell the employee the case against them, or they did not have an appeal hearing.
The Bill should not been seen as reversing Polkey. It strengthens Polkey in respect of the basic minimum standards, and if those minimum standards are not kept, dismissal will automatically be unfair. The Polkey judgement made it likely that an employer who did not follow procedures would lose an unfair dismissal case. Our proposal makes it so important to follow minimum procedures that it will automatically be unfair to dismiss employees without doing so. That automatic unfairness will mean an automatic penalty of at least four weeks pay, unless the tribunal considers that that would result in injustice to the employer. It has some discretion.
At the moment, it is not uncommon for a dismissal to be found to be unfair solely on procedural grounds as a result of the Polkey judgment, but for the tribunal to award no compensation because the procedural failure caused no real injustice to the employee. In the great majority of such cases that we have looked at, the failure was in procedures that would have fallen within the new minimum standards and clause 34 will be in line with the Polkey judgment. Less frequently, the procedural breach relates to a procedure that would have gone beyond the new minimum procedures. It is only in such cases that we propose to allow employers to argue that following the procedure would have made no difference to the decision to dismiss.
The hon. Member for Hertford and Stortford (Mr. Prisk) said that that is inconsistent. We do not believe that. We are setting out the minimum procedures and making it automatically unfair to dismiss if the procedures have not been followed. We are encouraging people to look to the ACAS code, which still holds the field, and it would be perverse and a disincentive if we said to employers, ''This is the basic minimum. We want you to move to something more elaborate and sophisticated, but if you do, be careful because the slightest breach of those procedures will make it likely that you will always be found against at an employment tribunal.''
There is consistency and logic in the provision. To have left Polkey in the new situation with basic minimum standards would have discouraged employers from having more elaborate procedures. As the hon. Gentleman said, it was our firm view that to introduce such a brave new world for every workplace, no matter how small, necessitated our introducing a minimum basic three-step procedure.
Only in cases in which employers have procedures over and above the minimum will restoration of the no-difference test apply. It is a partial and strictly defined restoration of the test. I emphasise that even when an employer is able to show that following a procedure beyond the statutory minimum would have made no difference to his decision to dismiss, the dismissal must otherwise be fair. It is not the case, as amendment No. 27 implies, that the employer is excused from acting fairly in other respects. On the contrary, he must have dismissed the employee for one of the potentially fair reasons set out in the Employment Rights Act 1996. We are not changing that clause. In all other respects, the employer must act reasonably when dismissing an employee, as section 98(4) of the 1996 Act requires. We are not changing that either. Clause 34 is not intended to make any changes to the basic principles of fairness and reasonableness. We believe that the current drafting protects that position.
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