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The procedure is also credited with stimulating an upturn in the number of voluntary recognitions that trade unions achieve. The procedure was designed to encourage parties to discuss issues and find a voluntary resolution. When the Government reviewed the statutory procedure a few years ago, it was found that
the procedure had indeed had that effect. In fact, the number of voluntary recognitions dwarfs the number of statutory awards made by the Central Arbitration Committee. Some 900,000 employees are now covered by recognition arrangements as a direct or indirect result of the statutory procedure.
Andrew Miller: My hon. Friend will recall that those regulations replaced the regulations that were put in place by the Trade Union and Labour Relations (Amendment) Act 1976, which were subsequently abolished by the previous Conservative Government. I hope that he has noticed a shift in position today, with the Conservatives saying that they are satisfied with the present regulations.
Mr. McFadden: Conservative Members’ comments that they were satisfied with the current regulations were reflected in the speech made by the hon. Member for Huntingdon (Mr. Djanogly).
Our review of the procedure concluded that it was working in a reasonable manner, and that it had avoided the pitfalls and problems that beset attempts to devise statutory procedures in the past. The existence of the statutory recognition procedure has the effect of making someone think twice before derecognising a union that has been voluntarily recognised. Why should an employer derecognise, if the union could then restore recognition via the statutory procedure, if the majority of the work force wanted that to happen? At the very least, the decision to derecognise could draw the employer into the statutory procedure. I would argue that the existence of the statutory procedure already provides an adequate safeguard against decisions taken by an employer to derecognise a union that enjoys the support of a work force in a company.
I fear that the Bill’s treatment of union recognition goes beyond the provisions in the TUPE regulations. It does not merely provide the same protections as those that apply in TUPE. Let me explain that point. Under regulation 6 of the TUPE provisions, the new employer, the transferee, is tied to the recognition arrangement in just the same way as the old employer, the transferor—no more, and no less. That logic applies to a number of the provisions in TUPE. In other words, the new employer stands in the shoes of the old one and is tied to the recognition arrangement in exactly the same way. So the freedom of the old employer to derecognise the union, albeit in the context of the statutory procedures that I have outlined, applies equally to the new employer in a TUPE situation. Most recognitions are voluntary and can be terminated by either side within notice periods if they so wish. Under TUPE, the new employer can choose to derecognise the union within such a time scale; in practice, very few do, but TUPE would, in theory, allow them to do so.
However, there is no cross-reference to regulation 6 of TUPE in the Bill; nor is there a cross-reference to regulation 5, which explicitly deals with the status of collective agreements. Instead, clause 3 refers to the issue of union recognition and other collective agreements by stating that they are subject to parts of regulation 4 of TUPE. Yet that regulation deals with
individual contracts of employment between the employee and the employer, and does not cover collective agreements between the trade union and employer. The net effect is significantly to change the treatment of union recognition agreements and other collective agreements.
For example, under clause 3, after an equity transfer, the employer could not derecognise the union for a reason unconnected with the transfer, unless he has an economic or technical reason to do so. That would provide a new legal underpinning to voluntary recognition deals that is different from TUPE and other statutory procedures—a limitation not found within the TUPE regulations. My hon. Friend the Member for Nottingham, East said several times that his intention was to treat equity transfers as if they were TUPE transfers, but on that point and one or two others, I fear that that principle is not quite reflected in the Bill.
Clauses 4 and 5 deal with information and consultation rights in the event of an equity transfer. That is an important issue, so I quite understand why my hon. Friend emphasises it. Clause 4 defines the information and consultation rights, including their timing, the identity of the participants and the content of that dialogue; whereas clause 5 deals with the available remedies. These provisions are based on regulations 13, 14 and 15 of TUPE. Again, however, there are important provisions in those clauses that are not found in the regulations, which would have the effect of conferring a different set of rights under the Bill from those under TUPE.
I appreciate the importance of proper consultation and a number of important consultation rights already exist. As I have already mentioned, perhaps the most important are in the Information and Consultation of Employees Regulations 2004. Where those rights are exercised, they would ensure that the business implications of new ownership are thoroughly discussed with the work force and their representatives. The 2004 regulations cover many of the circumstances with which clauses 4 and 5 are concerned.
The 2004 regulations were seen generally as a very important step in our system of industrial relations. Indeed, John Monks, the former general secretary of the TUC, described them as
“potentially the most significant piece of employment legislation ever to be introduced in the UK”.
They were based on an agreement reached between the TUC and the CBI. Those rights apply to employers with 100 or more employees and next month they will be extended to cover those with 50 or more. That means that they will cover a significant proportion of UK employees and a comfortable majority of those in organisations that are likely be subject to equity transfers of the kind that the Bill is concerned with.
The 2004 regulations are flexible, allowing employers and employees to devise the consultative arrangements that best suit them. In our view, it is preferable for businesses and employees to decide their own arrangements voluntarily. The 2004 regulations provide scope, however, for employees to require the employer to introduce information and consultation arrangements where none exists. They also provide scope for employees to seek new systems where they consider that voluntary systems are insufficient.
The object of the discussions is to reach an information and consultation agreement. Under the 2004 regulations, employers and employees are free to include in their agreement any aspect of the business’s operation as a subject for consultation, including issues around business ownership. When parties fail to reach an information agreement, the employer is required to institute a fall-back set of standard consultative provisions. Under the 2004 regulations, that includes consultation on the recent and probable development of the economic situation; the current and anticipated employment levels, particularly if there is a threat to employment in the undertaking; and decisions likely to lead to substantial changes in work organisation or contractual relations.
There is therefore an important opportunity in the 2004 regulations for employees, supported by their trade unions, to require an employer to discuss issues consequent upon equity transfers. Moreover, the regulations enable employees to create long-term information and consultation arrangements to help them influence decisions on a continuing basis. The Government recognise the importance of the regulations, which can be extremely valuable. We have kept a commitment to publicise them. We have alerted affected employers, arranged mailshots, sent e-mails, put information on the web to raise awareness and recently written to an estimated 40,000 organisations employing 50 to 99 employees, which will be brought within the scope of the regulations in April. ACAS has put together a programme of training events to help parties consider the effect of the regulations on them.
Clauses 4 and 5, on consultation, go further than either the 2004 regulations or the TUPE arrangements. They would require a five-year forward look, with recourse to the High Court should that not happen. Again, that would not simply translate TUPE but go beyond it.
The consultation rights available to employees do not stop at information and consultation regulations. Other important rights are available. We have heard in the debate about redundancies. When an employer proposes redundancies, other existing consultation rights come into play. If more than 20 redundancies are proposed in a 90-day period, the employer is required to consult for a minimum of 90 days with employees’ representatives. They must discuss the reason for the redundancies as well as ways of minimising or avoiding them. If that discussion does not happen, each employee concerned may be entitled to a protective award, which constitutes a significant incentive for the employer to consult properly in accordance with the law.
We have also heard that private equity companies can be large undertakings, operating across borders in several EU member states. That could bring them within the scope of the European works council directive, which is another information requirement. The UK is subject to it, and it led to our implementing the Transnational Information and Consultation of Employees Regulations 1999. Those regulations provide employees of European-level undertakings with ongoing access to information and consultation rights. They give employees of undertakings or groups of undertakings with at least 1,000 employees in total, and at least 150 employees in each of at least two member states, the right to be represented on a European works council. As has been
said, a new owner might wish to change the terms of an occupational or stakeholder pension arrangement, in which case another consultation right comes into play—the 2006 occupational pension schemes regulations.
My hon. Friend is right to stress the importance of information to employees. The purpose of my going through the rights available to employees in some detail is to show that we share his concern and have introduced a number of regulations to ensure that employees have recourse to information.
Mr. Chope: I appreciate the level of detail that the Minister has provided. Will he explain why the Government did not give a written response along those lines in answer to the request of the Select Committee on the Treasury last July? If the Government had given such a response, perhaps the Bill would never have come about.
Mr. McFadden: My understanding is that when the Government gave information to the Select Committee, they covered the position that I set out—the difference between an employer changing hands and a share transfer under TUPE.
As I say, consultation rights are important, but the Bill goes beyond those rights, and beyond TUPE, on the issues of the five-year period after the transfer and recourse to the High Court. The Bill would compel the employer, the transferee and the transferor to provide information on a number of topics. Some of those requirements are reflected in other regulations such as the European works directive, but the situation as regards that directive is not quite the same. It is about ongoing consultation on the overall position of an enterprise, and not about providing a snapshot of the moment at which an equity transfer is taking place. The consultation process defined in clause 4(5) is more prescriptive and detailed than that in TUPE. It would take some time for the back-and-forth exchanges envisaged to take place; indeed, it could take many months, when there was a prospective transfer.
For the reasons that I have set out, which have to do with share transfer and the respects in which the Bill goes beyond TUPE, the Government cannot support the Bill. However, I would not want my hon. Friend or other hon. Members to think that we were unconcerned about the issue of the exploitation of employees. We are alive to such issues on a number of fronts. We have put significant resources into enforcement of existing employee rights, and rightly so. To refer back to debate a couple of weeks ago, we have given agency workers new rights to withdraw from tied accommodation and transport, without any detriment to themselves. Our Employment Bill, which will improve rights in relation to the minimum wage, will have its parliamentary stages this Session.
The TUPE regulations were reviewed and service contract transfers were included; that reflected our concern about the issues. We know that the TUPE provisions are necessary to protect a group of employees in a specific situation—not share transfer—and at a time of significant uncertainty. We are aware that Britain has benefited enormously over the past 10 years from a flexible business environment. The Bill’s provisions go further than TUPE and would apply to a much wider group of companies, and we do not think that that is necessary, so we cannot support the Bill.
However, I accept that my hon. Friend the Member for Nottingham, East genuinely wishes to ensure proper protection for people at work. He was kind enough to thank me for the positive, constructive dialogue that we have enjoyed on the issue in recent weeks, and I am certainly happy to maintain a dialogue with him on the subject. He knows that a voluntary code of practice, to which I referred, has been developed by private equity firms. I am pleased to tell him that my right hon. Friend the Secretary of State for Business, Enterprise and Regulatory Reform is happy to facilitate a round-table discussion on the issues involving my hon. Friend, representatives of private equity companies and trade unions. The hon. Member for Ribble Valley said that we should be discussing such issues with interested parties, and, as I say, my right hon. Friend the Secretary of State is happy to facilitate a round-table discussions on these issues.
My hon. Friend will also be aware that the Treasury Committee looked into the matter of private equity and issued an interim report last year. My understanding is that the Committee intends to return to the issue at some point, and I am sure that it will be interested in receiving representations from my hon. Friend, the industry and external supporters of the Bill when it does so.
For the reasons that I have set out, I do not believe that the Bill is the right vehicle for dealing with the issues that have been raised. However, in view of the dialogue with my hon. Friend that I have offered, including the round-table facility, I hope that he will consider withdrawing the Bill and pursuing the issues that he has raised today in the manner that I have suggested.
1.56 pm
Mr. Christopher Chope (Christchurch) (Con): I congratulate the Minister on having given us almost one hour of good, robust common sense. I sympathise with the hon. Member for Nottingham, East (Mr. Heppell), but my regret is that he has been led up the garden path, perhaps not by the Minister or the Government, but certainly by Mr. Jack Dromey.
You know, Mr. Deputy Speaker, how valuable and precious this Friday time is for private Members’ Bills, and the hon. Gentleman, who had the good fortune to come fifth in the ballot with the chance to bring forward new legislation that he thought would make the world better for some if not for everyone, chose the Bill, submitted its long title and had every opportunity to discuss it with the Government, but only now, at the eleventh hour, are the Government saying, “Let’s have a round-table discussion.”
I am sure that the hon. Gentleman will eagerly take up that option because it is the only morsel on the table for him to grab, but I want to challenge the Government as to why this mass of information on a technical subject, which had been requested by the Treasury Committee last July, was not provided sooner. The Committee pointed out, in paragraph 81 of its report, that several witnesses had said that TUPE applied if assets were bought from a company, but not if shares were bought, and therefore that TUPE did not
apply to takeovers. On the other hand, witnesses from the British Private Equity and Venture Capital Association said that TUPE did apply to takeovers. The Committee said:
“We ask the Government to clarify the application of TUPE to takeovers in time for the resumption of our inquiry.”
The Minister referred to the fact that he expects the inquiry to be resumed, but I would have expected, as I am sure would the hon. Member for Nottingham, East, that the information requested would have been supplied far in advance of today. If it had been, it would have helped the hon. Gentleman to have had a better-drafted Bill, which did not contain many provisions that even today he has said that he does not wish to apply and which, were the Bill to reach Committee, he would seek to withdraw.
There is an issue here about process and the extent, or lack of it, to which the Government are prepared to take Back Benchers seriously. The Bill is supported by 12 of the Minister’s right hon. and hon. Friends. In a sense, it does not affect Conservative Members because none of us is a supporter of the Bill, but those right hon. and hon. Gentlemen deserve better from the Government than to have had this long explanation at this late stage. They should have had it much earlier and then the Bill could have been amended, withdrawn or produced on a different basis. We will hear from the promoter of the Bill shortly, but it may be that, in retrospect, he will say, “Well, if I’d known how the complicated law was, I wouldn’t have introduced this measure. Having been successful in the ballot, I would have introduced a completely different Bill.”
I shall not speak at great length, but I should like to put on record the fact that, when the Minister referred to what has been happening in the European Commission, he gave a long quote that included at the end of the sentence the expression, “at this stage”. In other words, the Commission was saying that it did not want to introduce any change at this stage. I hope that the Minister will be alert to Euro-speak and to the fact that that phrase can well mean that a green or amber light is being given to people, particularly in the European trade union movement, to go on pressing for change notwithstanding the very strong arguments that the Minister has articulated against such changes.
It is regrettable that, if the European Commission decided that it would not introduce any more legislation pursuant to the acquired rights directive, it did not just stop and say, “No, we don’t see the case.” Instead, they said, “We don’t see the case at this stage.” That introduces an element of doubt and uncertainty, which is undesirable and may well contribute in the end to the sclerosis of European economies. The European Commission almost suggests that, given half a chance, it would like to introduce more regulation and control. That sends out a very bad message.
There is quite a lot of irony in what has happened today. Certainly, the relationship between the Leader of the House and Mr. Jack Dromey is well known to everyone. The fact that he has been mentioned as the person responsible for the Bill will cause quite a lot eyebrows to be raised outside the House. I do not know how he will deal with the issue at the dinner table this evening with his wife, but I am sure that quite a lot of us would like to be there to see what happens—if indeed the Leader of the House, who is a conscientious
follower of the proceedings here, is aware of what has been happening today, as I am sure she must be.
The hon. Member for Nottingham, East has appraised me of his intentions about the Bill for some considerable time; we have the privilege of serving together on the Administration Committee. All I can say is that I sympathise with him about the position that he finds himself in now, and I look forward to hearing what he has to say.
2.2 pm
Mr. Heppell: The hon. Member for Ribble Valley (Mr. Evans) talked about the unintended consequences of the Bill, and I have certainly already seen some of them. The private equity industry will never have had such glowing praise. Certainly, the standing of both the private equity industry and Mr. Jack Dromey has gone up considerably. I suspect that both their reputations have been enhanced, probably in very different quarters.
I shall be brief; I see the hon. Member for South Suffolk (Mr. Yeo) sitting there, and I am sure that he would like to have a few moments to speak to his Bill.
I hear what the Minister is saying, but I do not agree with everything that he said. At one stage when the hon. Member for Shipley (Philip Davies) was talking, I realised that he would have opposed anything that concerned regulation. I suspect that he does not support TUPE, as it applies now. However, having listened to the Minister read out all the things that people could do to be consulted and become involved when equity transfers take place—Bill after Bill, and occasion after occasion—I started to think that perhaps a bit too much regulation covers those transactions. The real point is that I could go through each thing that the Minister mentioned and explain why it is different from TUPE. He was saying what could be done, but none of those things equates to the same protection as people would receive under TUPE. I still feel the same as I did at the outset. I cannot see a logical reason why an equity transfer that causes distress or uncertainty for workers should not be treated in the same way as a general takeover in which TUPE applies. I do not see why one group of workers should not have the same rights as another group of workers.
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