The Parliamentary Under-Secretary of State for Trade and Industry (Jim Fitzpatrick): I beg to move,

In short, the order, which was laid before the House on 23 November, adds three employment rights jurisdictions to the list of jurisdictions contained in schedules 3, 4 and 5 to the Employment Act 2002, bringing those three jurisdictions within the scope of the statutory grievance procedures introduced by that Act. Before describing the order in more detail, I shall briefly describe the statutory grievance procedure.

The Employment Act 2002 introduced a broad framework to improve the handling of individual grievances in the workplace. The main aim of the provisions is to encourage employers and employees to resolve employee grievances early through greater dialogue rather than through litigation. The procedure introduced minimum standards for the handling of grievances which were based on the existing practices of employers. The broad framework was built upon by the Employment Act 2002 (Dispute Resolution) Regulations 2004, which set out in more detail how the procedures would operate.

The 2002 Act contains a three-step procedure designed to encourage the resolution of grievances. These require the employee to set out the grievance in writing and for the employer and the employee to meet to discuss the grievance. The procedure also contains a final appeal stage. A failure to observe the three-step procedure has consequences for both parties in the event that a complaint is made to an employment tribunal. In the case of employees, a failure to observe the procedure could mean that in certain circumstances the tribunal would not consider their complaints. However, if their complaint was heard and it was successful, the tribunal could reduce the amount of any award of compensation. In the case of employers, a failure by them to follow the grievance procedure could result in the award being increased. The award could also be increased if the employer had failed to provide an accurate or complete written statement of employment particulars to the employee who had brought the complaint.

Schedule 3 to the 2002 Act lists those jurisdictions where an award for compensation may be adjusted because there was a failure by either the employer or the employee to follow the disputes resolution procedures. Schedule 4 lists those jurisdictions where employees may not make a complaint to a tribunal because they have not followed the statutory grievance procedure. Schedule 5 lists those jurisdictions where an additional award may be made because the employer failed to provide a written statement in the proper form.

I turn now to the order. Article 2 identifies the three jurisdictions to be added to the lists in schedules 3, 4 and 5. The three jurisdictions are similar in nature and it may assist hon. Members if I briefly outline which each deals with. The European Public Limited-Liability Company Regulations 2004 introduced a framework for the creation of the European company. When creating a European company, the managements should consult employees about the nature and level of the future employee involvement in the company. Typically, this will involve the creation of a special negotiating body comprising employee representatives with which the management should negotiate for this purpose.

The Information and Consultation of Employee Regulations 2004 create a mechanism for employers to inform and consult employees about ongoing matters in the workplace. Provided that they satisfy certain criteria, employees can request an information and consultation agreement. Once employees have formally requested such an agreement, the employer must negotiate the precise terms of the agreement with employee representatives. The Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006 ensure that employers are required to consult affected employees or their representatives when they are planning to make a listed or significant change to pension arrangements.

In all three cases, the employer has dealings with employee representatives in some form. Each of the three sets of regulations provides protections against detriment for their respective employee representatives or in some cases for the employee themselves. Article 2 identifies those parts of the regulations that provide the detriment protection and inserts them into the three schedules.

The order will therefore ensure that when individuals believe that they have been treated detrimentally under any of those three jurisdictions, they will be encouraged to use the statutory grievance procedure before making a claim to an employment tribunal. Article 3 of the order provides transitional provision. Schedules 3, 4 and 5 already cover similar jurisdictions: for example, they already mention the protections against detriment for employee representatives appointed under the Transnational Information and Consultation of Employees Regulations 1999. The order, therefore, creates consistent treatment for like jurisdictions.

In preparing the order, the Department of Trade and Industry carried out a three-month public consultation between May and August 2006. Some 12 responses were received, including from the Confederation of British Industry and the Trades Union Congress. Respondents were generally content with the proposed order and agreed with our assessment that the provisions would not be costly or burdensome to implement. The order makes some technical changes to certain schedules to the 2002 Act, bringing them up to date with subsequent legislative changes, and will ensure consistent treatment by the tribunals of similar jurisdictions. I commend the order to the Committee.

Mr. Tobias Ellwood (Bournemouth, East) (Con): I think this is the first time that I have served under your tutelage, Mr. Williams. I am grateful to do so.

I hope not to detain the Committee for any longer than is necessary. The Opposition generally support the order, which will ensure that the dispute resolution framework, set out in the Employment Act 2002, will apply to three new areas, as the Minister said. We welcome any measures that will encourage more employers to engage in information and consultation activity. Voluntary measures, such as those before us, will provide the flexibility needed in dispute resolution.

Conflict between employers and employees is always very tricky and we welcome anything that the Government can do to ensure that the system is transparent, fair and swift in order to reconcile grievances. However, I took the opportunity to look over the report of the relevant Committee debate in the House of Lords. Some of the answers from the Government were not as full or concise as we would have liked so I shall try to tease out from the Minister some further details.

There is a concern about the overall cost of the statutory dispute resolution procedure. I understand that there has been some feedback from the Institute of Directors, which says that the procedures introduced in 2004 have made dispute resolution more costly in terms of time and money. The Employment Lawyers Association made similar comments on the cost of the procedure. We therefore welcome the Government’s decision to review the framework for dispute resolution, but it would be nice to understand the cost implications better. The Government have admitted that

I understand that in order to do that they are reviewing the Employment Act 2002 (Dispute Resolution) Regulations 2004. The Minister mentioned consultation. Did that include a review of dispute resolution? If not, would it have been more sensible to have waited and implemented the regulations following feedback from that review? Other than that, I am glad to say that the Opposition support the measures before the Committee.

David Howarth (Cambridge) (LD): This is also the first time that I have served under your chairmanship, Mr. Williams. It is a great pleasure to do so.

The hon. Member for Bournemouth, East raised the difficulty with the order—the Government have proposed a review of this area of law. The 2002 Act made many changes to dispute resolution procedures, some of which were clearly not in the interests of employees, although others were in their favour. It seems odd that the Government should seek to legislate on three further jurisdictions in advance of that review.

That point was raised not just by the Institute of Directors, but by the GMB and the National Association of Schoolmasters Union of Women Teachers during consultation. The Government should explain formally why they are legislating now rather than waiting for the review. There is an associated problem with the regulatory impact assessment that covers this order. The assessment that we have before us says simply that what is being done now was anticipated by the regulatory impact assessment for the 2004 regulations. The assessment says that there is no need to carry out a new assessment, as the extra cases that came within the scope of this part of the 2002 Act were already taken into account. It assumes simply that the 2004 assessment was correct, which seems to be a strange thing to do just before carrying out a review that will establish whether that position was correct.

The review must explain, for example, what is happening with the cases that are not backed by the tribunal in which an employee is told that they have not gone through the procedure. The evidence from the NASUWT was that the tribunals reject about 1,000 claims each week. That does not mean they are rejected completely, as they can be brought back, but the NASUWT said that only 10 per cent. come back to the tribunal. Why is that? It could be that the 2002 Act has succeeded completely and that all 900 employee applications are resolved by internal procedures to the satisfaction of the employee and the employer. If that is the case, everything is fine: money has been saved by avoiding formal procedures and the purpose of the 2002 Act has been fulfilled. On the other hand, it is possible that extra bureaucracy is discouraging people from enforcing their rights. If that is the case, and the vast number of those provisions that are already covered by the schedules to the 2002 Act are discouraging employees from enforcing their rights, why should we take that further with these three extra jurisdictions? I gather that they might lead to the rejection by the tribunal of a few hundred cases each year.

There is another, related problem with the regulatory impact assessment. It is obviously a big problem with this sort of change in the law that employees will be disadvantaged by not knowing what their new rights are and what they have to do. Page 18 of the 2004 assessment, which is still being relied upon for this order, states:

There are problems with that. First, with these three jurisdictions, there will presumably not be a national information campaign. The Minister might correct me about that, but I presume that this is not a big enough change for there to be a national information campaign. Secondly, there is a problem with the word “hopefully”. In 2004, it was said that employees would “hopefully” not be disadvantaged because they would know what their new rights were, but what really happened? I am reluctant to legislate on the basis of a hope that has not been reviewed. If the Government have information about precisely what happened and it turns out that there is no need for people in my constituency to worry, I am perfectly willing to accept that.

There are a number of problems, not only with this part of the 2002 Act but with all the changes relating to dispute resolution, such as the changes to the way in which the law dealt with procedural problems in dismissals. I am content to listen to what the Minister says about those difficulties and, if he comes back with a satisfactory reply, I will not object to the order.

Jim Fitzpatrick: Both the hon. Member for Bournemouth, East, and the hon. Member for Cambridge raised legitimate questions as to why we are introducing these provisions. The Secretary of State at the time, my right hon. Friend the. Member for Kingston upon Hull, West and Hessle, made a commitment during the passage of the Bill that there would be a review of the regulations after two years, so that was always going to happen. Subsequent to that commitment, in the past two years there has been anecdotal evidence, to which the Conservative Front-Bench spokesman alluded, that the anticipated gains were not being won, and that the procedure was still costly and not simplified as was anticipated. The hon. Member for Cambridge referred to the discussion that took place at that time. To satisfy both sides of industry we have given a commitment that we will consider attempting to simplify the procedures, which means examining all the available evidence.

The Government and my right hon. Friend the Secretary of State for Trade and Industry have appointed Michael Gibbons to conduct the review to identify the nature of the problems that occur, the costs to industry and how best to mitigate them. He will report early next year with recommendations for improving the procedure, because although the number of disputes going to employment tribunals dipped in the first year, they are now at the same level they were two years ago. We have not made the progress that we wanted, although the evidence is not there to show it. That is why Michael Gibbons will examine the situation, take evidence, consider how the situation could be improved and make progress on that basis.

The number of cases that we are expecting as a result of the regulations is not as the hon. Member for Cambridge suggested. We anticipate that there will be very few—the assessment is that there will be not more than a handful—on the basis of the evidence of other cases in similar jurisdictions. Therefore, we do not think it will have a burdensome effect on employers or on the system. The number of claims that are rejected—

David Howarth: It was not the burdensome effect of the changes on employers that worried me but the removal of the rights of employees. I gathered from the impact assessment that they would be numbered in hundreds, rather than being just a handful.

Jim Fitzpatrick: That is certainly not our assessment. We introduced the disputes resolution procedure not just to lighten the burden on industry but to ensure that fairness in the workplace, which is the ethos of our document “Success at Work”, permeates business, industry and commerce. That will ensure that when problems arise in the workplace the simplest and best resolution procedures are in place to allow both employees and employers to resolve the issue as simply as possible. That was the intention of the original regulations. As I said, we thought that the number of grievances and disputes going to employment tribunals would fall, but that has not quite been the case. We shall examine the evidence to identify why not and make recommendations on the best way forward.

The figures for rejections will be considered as part of the evidence and they will be in the public domain in due course. We will have a more informed discussion when Michael Gibbons has conducted his exercise. Extensive guidance and support is already available; employees are being given the best protection, but the situation has not improved as we thought it would.

Guidance for employers was asked for, and I can tell the Committee that there is already extensive guidance on the application of disputes resolution procedures in the ACAS code of practice on disciplinary and grievance procedures. We will ensure that any freestanding guidance on the three jurisdictions will reflect the change proposed by the draft statutory instrument. The proposed change would come into force on 6 April 2007 in line with our commencement date policy. That will allow almost four months for employers to assimilate the changes we are discussing, which I hope that the Committee will agree to.

Opposition Members asked why we are making these changes now, when a review is taking place, which is a relevant question. There are several reasons. The jurisdictions fit in tidily with jurisdictions and rights in other legislation so there is no conflict—this is a tidying exercise. Furthermore, we cannot pre-empt what the review will throw up or anticipate whether it will be contradictory or complementary to the order. Notwithstanding the review’s findings, its recommendations will have to be consulted on and go through parliamentary procedure so it might be some time before they are adopted. We are introducing the order now to tidy up the procedure as it is at the moment.

Mr. George Howarth (Knowsley, North and Sefton, East) (Lab): Is not the point that the proposed review will presumably be able to assess the impact of the order alongside a whole spectrum of other issues? Nothing will be lost.

Jim Fitzpatrick: Arrangements are in place. If we pass the order today, it will not come into force until April next year and Mr. Gibbons has been asked to report early next year so we might not have time to assess it fully. However, the word will be out there and I am sure that his assessment will take into account the fact that the House has indicated its direction of travel with this tidying exercise. He has to take into account any evidence resulting from today’s decision.

As I have said, the order will ensure that the three jurisdictions will be treated identically to similar ones in the schedules already. I commend the order to the Committee.

The Committee divided: Ayes 9, Noes 1.

Butler, Ms Dawn

Coffey, Ann

Ellwood, Mr. Tobias

Fitzpatrick, Jim

Gilroy, Linda

Howarth, rh Mr. George

McCabe, Steve

McGovern, Mr. Jim

Tipping, Paddy

Howarth, David