Employment Bill [Lords]

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Clause 2

Procedural fairness
Question proposed, That the clause stand part of the Bill.
Mr. McFadden: This is the second part of looking over our shoulder in the sense that the clause will return us to what we call the Polkey line in unfair dismissal cases. The House of Lords judgment in the 1987 Polkey case established the precedent that dismissal could be unfair purely on procedural grounds. However, the judgment also provided that in those circumstances the tribunal could reduce the compensation to the claimant, or eliminate it completely, in proportion to the likelihood that the dismissal would have gone ahead even if the correct procedure had been followed.
Why do we need to take such action? Having decided to repeal the statutory procedures, which we discussed under clause 1, we had to reconsider the procedural fairness provisions that went alongside them. That question was raised in the Government’s consultation on the Gibbons review and an additional detailed review of the different options was issued alongside the main consultation. One option—the one we have chosen—was to revert to the Polkey case law.
Another option was the no difference rule. Where a dismissal was unfair, provided that it could be shown that the failure to follow procedures made no difference to the decision, it would not need to be taken into account. Employees, in particular, felt that that was unfair because it gave employers a blank cheque to ignore procedures in these cases. On balance, we decided to recommend returning to the Polkey line—and, indeed, more people involved in the consultation supported returning to Polkey than to the no difference rule. Therefore, we propose to repeal section 98A of the Employment Rights Act 1996 to revert to the Polkey line of cases.
Question put and agreed to.
Clause 2 ordered to stand part of the Bill.

Clause 3

Non-compliance with statutory Codes of Practice
Mr. Djanogly: I beg to move amendment No. 14, in clause 3, page 1, line 11, after ‘subsections’, insert ‘(1A),’.
The Chairman: With this it will be convenient to discuss the following amendments: No. 11, in clause 3, page 1, line 11, at end insert—
‘(1A) In section 199 (Issue of Codes of Practice by ACAS) at the end of subsection (2) there is inserted—
(ca) discipline and grievance procedure, and’.
No. 5, in clause 3, page 2, line 2, after ‘with’, insert ‘the’.
No. 6, in clause 3, page 2, line 9, leave out ‘a relevant’ and insert ‘the’.
No. 8, in clause 3, page 2, line 10, leave out ‘that’ and insert ‘the’.
No. 7, in clause 3, page 2, line 19, leave out ‘a relevant’ and insert ‘the’.
No. 9, in clause 3, page 2, line 20, leave out ‘that’ and insert ‘the’.
No. 10, in clause 3, page 2, line 26, leave out from ‘(3),’ to end of line 28 and insert—
‘“the Code of Practice” means any Code of Practice issued by ACAS under section 199(2)(ca)’.
Mr. Djanogly: Although there are many amendments, they all do pretty much the same thing. They look at what constitutes the defined code of practice in dispute resolution. I shall consider some of the wider issues in the code in the stand part debate. I direct the Committee to the debate in the other place on this matter. Lord Bach, the then Minister, confirmed that six codes were currently issued under chapter 3 of the Trade Union and Labour Relations (Consolidation) Act 1992. By his own admission, the drafting of the clause was deliberately wide to allow for flexibility to cover other present or future codes.
While I agree that we have no interest in hamstringing ACAS, there is a need for certainty on this front. Employers are placed in a disproportionately burdensome position whereby they are forced to comply with broadly defined procedures. To prevent undue expense and time-consuming second-guessing of the legislative intention by employers, would it not be prudent to specify the relevant code from the outset as the ACAS code of practice on discipline and grievance procedures? Would that not be preferable to a definition that encompasses six separate procedures but expects compliance with only one? There is a need to give employers a clear, well sign-posted route for dealing fairly and efficiently with disciplinary procedures. It is a course of action that, for most, is a last resort. It benefits neither the employer nor employee to have an opaque legislative procedure, which leaves both parties in the dark. This is especially true given the financial penalties for non-compliance.
John Hemming: We broadly support the amendment. When there are statutory codes and a process that people need to follow, clarity is greater and things are easier.
Mr. McFadden: I thank the hon. Member for Huntingdon for the spirit in which he moved the amendment. My response is about future-proofing the Bill. The clause is important and goes wider than the subject matter of the amendments. I am sure that we will return to that on clause stand part. The clause is about the balance between content and merit, which I mentioned in my opening remarks. It includes the capacity to vary awards based on the degree of adherence to the codes issued under it.
The definition of a relevant code of practice was, as the hon. Gentleman pointed out, discussed in the other place. A relevant code of practice is one issued under the Trade Union and Labour Relations (Consolidation) Act 1992, which relates exclusively or primarily to procedures for resolving disputes. The hon. Gentleman correctly said that there was more than one code. There are currently six codes, some relating to disclosure of information to trade unions for collective bargaining purposes and others relating to industrial action, picketing and so on. Those matters need not concern us here and are not covered by the clause.
Of the existing codes, the definition of a relevant code of practice in the clause would apply only to the ACAS code of practice on disciplinary and grievance procedures. I endorse what my hon. Friend the Member for Hastings and Rye said a few moments ago about the valuable work that ACAS does and its expertise in these areas. The clause will also allow the application of adjustment in the context of future relevant codes issued by ACAS or the Secretary of State under the 1992 Act.
The amendments would have two effects. First, they would tie the definition of “relevant Code of Practice” to a code on discipline and grievance procedure issued by ACAS and not the Secretary of State. Secondly, they would provide expressly in the 1992 Act that ACAS’s power to issue codes encompasses codes on discipline and grievance procedure.
On the first point, ACAS certainly plays a crucial and valuable role in the resolution of workplace disputes, as I have said. In my time as employment relations Minister, I have valued my working relationship with ACAS. That organisation is sometimes in a strange position because its successes do not reach the news. It resolves many issues without their spilling over into a wider problem of industrial relations. The drafting of the clause to refer to codes issued by ACAS or the Secretary of State is therefore not intended to belittle or downgrade the role of ACAS. However, under the amendments, it would not be open to the Secretary of State to issue additional codes if he or she so wished. While there is currently no intention for the Secretary of State to issue a code of practice under this provision, the power exists and the Government do not wish to exclude the possibility that it might be used. It would therefore not make sense for tribunals to be unable to take account of the provisions of such a code, were it to be issued.
We believe the second proposal to be unnecessary. Under section 199 of the 1992 Act, ACAS has the power to issue codes of practice as it thinks fit to promote the improvement of industrial relations. That covers the issue that we are discussing.
We believe that the first effect of the amendments would be to tie the hands of future Secretaries of State in issuing codes alongside the ACAS codes. The second effect is unnecessary. On that basis, I hope that the hon. Gentleman will not press the amendment.
John Hemming: Does the Minister accept that employers and employees both need certainty and that the Department should be guided by that need when issuing guidance and identifying what is and is not relevant?
Mr. McFadden: I accept that clarity is needed for employers and employees. I do not believe that building in the possibility for the Secretary of State to issue a code detracts from that clarity. I have been quite clear that the code we are talking about in the Bill is the ACAS code.
Mr. Brian Binley (Northampton, South) (Con): May I add my expressions of pleasure at serving under your chairmanship, Mr. Bercow? It is always clear, with no confusion whatsoever, and we are grateful for that.
May I, too, question the Minister about simplicity? The Bill was originally intended to be a simplification of what is pretty complicated law for laymen to deal with. That is what matters. We are dealing in many cases with very small business people who cannot afford recourse to the law on such issues. They try to do their best, but find it a nightmare. The complication that we create in this law leads to a compensation culture, which is not healthy, especially for small businesses. Over the next two years, it will be particularly unhealthy because, as we all recognise, such businesses face massive strains.
Having represented my company in days gone by in three tribunals, I know how much the law has been misunderstood. I know also how effective ACAS is in helping with these matters, particularly in supporting both sides in such disputes. To complicate the law beyond that process seems to me simply to add further problems, not only for small businesses that deal with these matters from an employer side, but for employees.
I would like to make one further point. Employees often have recourse to Citizens Advice and receive legal representation as a result, but many employers are unable to do that. There must be a balance. Establishing one code of practice is an important part of that balance because everybody knows where to go. Everybody knows in the first instance that ACAS is the authority. To complicate that particular trend seems unhelpful. I urge the Minister to think again.
11 am
Mr. Djanogly: I had intended the amendment to be probing, but I will have to go away and think further about it. Having heard the Minister, I am not totally satisfied. I always feel rather uncomfortable when I hear a Minister say that we need to legislate for what might need dealing with in the future, and that the Secretary of State might need such powers. I get the same chilly feeling that I had yesterday evening when I heard the Home Secretary say that she was going to put her draft Bill in the Library.
I agree with my hon. Friend the Member for Northampton, South. Businesses expect clarity. They will want at the very least a full explanation of what this legislation means for them. There is potential for things to be changed and for them not to hear about it, and to therefore be confused as a result.
Mr. Hugo Swire (East Devon) (Con): Does my hon. Friend agree that in the present economic climate, it is even more important to be clear about what we are asking businesses to do and how they should change? The cost implications of those changes will not be inconsequential, at a time when most companies are struggling to survive.
Mr. Djanogly: My hon. Friend makes an important point that I will use when discussing other aspects of the Bill. I thank him for making it now as it is relevant.
We will go away and think about this matter further. In the meantime, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mr. Djanogly: I beg to move amendment No. 3, in clause 3, page 2, line 15, leave out ‘25%’ and insert ‘50%’.
The Chairman: With this it will be convenient to discuss amendment No. 4, in clause 3, page 2, line 25, leave out ‘25%’ and insert ‘50%’.
Mr. Djanogly: This is another probing amendment, which attempts to discover the Government’s reasoning behind the reduction in the power of employment tribunals to vary awards for non-compliance from 50 to 25 per cent.
The first question we must ask is whether this is yet another example of the Government tinkering with regulation unnecessarily. Section 31 of the Employment Act 2002 provided employment tribunals with the power effectively to punish employers or employees who failed to comply with the statutory disciplinary and grievance procedures. That Act enabled—indeed, obliged—employment tribunals to vary awards made to employees by anywhere between 10 and 50 per cent., depending on what they considered just and equitable. I confess that I am no statistician, but I have trouble seeing how reducing the maximum figure from 50 to 25 per cent. does anything other than blunt the teeth of the employment tribunals and reduce the scope for dealing with vexatious claims.
Furthermore, by reducing the penalties for non-compliance, could it not be said that the suggestion to employers is that compliance with the new ACAS code of practice for discipline and grievance is somehow less important than compliance with the previous code? In the other place, Lord Jones of Birmingham, then a Minister, stated that the power to adjust awards up and down was
“an incentive mechanism to encourage parties to follow good practice.”—[Official Report, House of Lords, 4 February 2008; Vol. 698, c. GC465.]
Furthermore, Michael Gibbons in his report recommended that there be an incentive to comply with the code. While I agree that those are laudable aims, I cannot help feeling that the incentive has had its legs cut from under it and become half the incentive that it could have been.
With that in mind, I ask the Minister two simple questions. What is the Government’s rationale for changing the figures? Secondly, why choose 25 per cent.? I am also curious as to how the Minister and the Government envisage employment tribunals enforcing a non-statutory, principle-based procedure for dispute resolution.
The 2006 consultation on the Employment Act 2002 stated:
“The Employment Tribunal Service will be able to monitor the number of cases where failure to comply with the procedural elements becomes an issue, including the number of cases where awards are adjusted because of procedural failings.”
Yet from what I have been able to discover—I would appreciate it if the Minister put me right—no such figures have been produced. Can he tell us why and give us those figures now? Without knowing how the existing system has been working, how can we get the system right with this Bill?
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