Employment Bill [Lords]

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John Hemming: We are perhaps more sympathetic to the Government on the 25 per cent. figure, but that obviously depends on the Minister’s answer to the question at hand. Compliance with the codes is perhaps a procedural issue, rather than a substantive one. Inasmuch as the Bill is orientated towards the substance of the issue, we do not feel that it necessarily would be good—for employers or employees—to revert to a greater focus on procedural matters and change the 25 per cent. figure to 50 per cent. Hence, we are generally with the Government on this.
Michael Jabez Foster: I certainly want to resist the amendment. I am surprised that it comes from the quarters that it does, because powers have previously been used against employers, usually small employers who have simply not understood the procedural requirements.
Mr. Djanogly: My point was that we do not have the figures about how powers have been applied. I would be grateful if the hon. Gentleman put us right on those figures.
Michael Jabez Foster: My evidence is empirical. I agree that the substantive figures would be helpful. However, anyone who deals with small employers—not just as a lawyer but in their constituency surgery—knows that it is they who almost inevitably fall foul of the procedural rules. The hon. Gentleman seems to be penalising small employers because of some failure on their part, as we discussed earlier, to have the resources to access knowledge across the board. They do not even have the ability to go to Citizens Advice for support, as employees may. This amendment is therefore targeted against small employers, which is wholly unfortunate.
Mr. McFadden: Let me first deal with the point about figures. I do not believe that the tribunal service issues a breakdown of the cases in which the current variance of 10 to 50 per cent. is used, but it has told officials in my Department that the top end of that variance is rarely reached.
The more substantive issue before us is what the degree of adjustment on procedural grounds should be. I started my remarks today by saying that the Bill has a thread running through it, which is the balance between procedure and merit in tribunal cases. The hon. Member for Birmingham, Yardley got it right when he cautioned us against running against the Bill’s general direction by elevating procedure to too great a level above merit. My hon. Friend the Member for Hastings and Rye is also right when he says that the effect of the amendment, if accepted, could be that a small employer, having perhaps been substantially correct in the case presented to the tribunal, is hit with a 50 per cent. increase in the award against them because of the procedural weakness of not appealing to the ACAS code. The reason why we are removing the 2004 procedures, as set out in clause 1, is that, having reviewed their operation for a few years, we concluded that process was being elevated above merit. I fear that the amendments would lead us to fall back into that trap.
Mr. Swire: In reviewing that matter in the legislation, has the Minister or any of his officials discussed the implications with the Federation of Small Businesses?
Mr. McFadden: Yes. We discuss all our employment matters with the main business organisations regularly, including the Federation of Small Businesses, the CBI and others.
Another issue to remember is that, whereas the 2004 procedures required tribunals to elevate procedure above content, under the changes that we are bringing in, that judgment will be for the tribunal to make. The hon. Member for Huntingdon asked why the figure was 25 per cent. instead of another one. These matters are not an exact science; where we set the figure is a matter of judgment. Our policy aim is to not elevate process above content, and to not allow procedure to be simply disregarded. We want to get that balance right by allowing tribunals, at their discretion, to vary an award if there has been an unreasonable failure to adhere to procedures.
Clause 3 creates an incentive mechanism by proposing that tribunals be allowed—not required—to adjust awards by up to 25 per cent. if either party has acted unreasonably in failing to comply with the relevant code of practice. An adjustment of 50 per cent. would take us back to the system that the Bill is trying to reform and would perhaps repeat the unforeseen consequences of the 2004 procedures that we are trying to move away from.
Mr. Djanogly: The first point to make is that the Minister has admitted that the figures do not exist, even though in 2002 it was claimed that they would. We are all operating in the dark; we do not know what the situation is. The Minister said that it is not an exact science; I say that he is sticking his finger into the wind. We are hindered by a lack of information but I am starting to see the problem, which the hon. Member for Hastings and Rye elaborated on and the Minister confirmed.
The hon. Gentleman and the Minister seem to be saying that they understand the concerns of companies and small businesses, and that they are unsure of the tribunals’ ability to get to grips with the problems of putting companies and employees on an even procedural footing and of dealing with vexatious claims. In other words, if the figure were 50 per cent., it could be used disproportionately against companies, rather than employees. In that context, I can see why the figure is capped at 25 per cent. rather than 50 per cent, but that does not make it right. Equally importantly, it shows that the Bill will not have the impact that the Minister has claimed.
Barry Gardiner (Brent, North) (Lab): On a previous amendment the hon. Gentleman asked for increased clarity. Does he not accept that reducing the scope by which any penalty may vary from 50 to 25 per cent. gives the clarity and certainty that small businesses would welcome?
Mr. Djanogly: No, I totally disagree with the hon. Gentleman. If companies and employees were to be treated on a fair and equal basis and the figure was 50 per cent., that figure could well act as a disincentive against vexatious claims. The point that the hon. Member for Hastings and Rye and the Minister made is that companies and employees may not be treated in the same way, and that companies may therefore lose out. I tend to agree. We do not know whether we can agree because we do not have the figures. So, as I said before, we are thrashing around in the dark here.
11.15 am
Mr. McFadden: Let me cast some light. The hon. Gentleman referred to vexatious claims. Surely he accepts that vexatious claims can be dealt with at a pre-hearing review and that the tribunal will recognise them as vexatious and will not find in favour of the person who brought them. To elevate this procedural device of saying that not adhering to the code should be matched with an ability to vary awards up or down by 50 per cent. will not deal with an issue of vexatious claims. They can either be dealt with in the current process, or the target would be missed.
Mr. Djanogly: The Minister pre-empts my final point; I am going to agree with him. When we get on to vexatious claims we do have some figures. We will come on to that because I have great concerns about those figures, but to my mind it is impossible to separate the debate between the procedural and the vexatious; certainly, the average small company would not do so. For them, it is all part of the same problem. As the Minister says, the Bill separates the procedural from the vexatious and is rather toothless as a result.
Moreover, the Bill ignores the question of vexatiousness, so we have tabled amendments to remedy that. I am sad to see that those amendments are not being considered under this clause. I feel that they should be, but that is a decision taken by others and I respect it. We will come to that issue at a later stage, but the Minister will take the point that vexatious claims are not dealt with in the Bill, and that is what will most concern small businesses. On the basis of what we have heard, we will wish to reconsider our position on these clauses, and I seek leave to withdraw the amendment.
The Chairman: Order. I make it clear to members of the Committee that ordinarily when someone seeks leave to withdraw their amendment, I will immediately put that question to the vote. Similarly, if an hon. Member seeks to push their amendment to the vote, I will immediately put it to the vote. In this case I have received a slightly belated indication from the hon. Member for Birmingham, Yardley that he wishes to speak on the matter and on this occasion I will happily allow him to do so. Hon. Members will quickly discover that I am a facilitator. I want them to contribute but unfortunately I am not psychic, so an hon. Member who wishes to catch my eye cannot rely simply on raising their eyebrow. They need to rise and indicate their wish to speak.
Mr. Djanogly: I understand that the procedural formalities here mean that I must again seek the Committee’s leave to withdraw the amendment, so I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mr. McFadden: I beg to move amendment No. 1, in clause 3, page 4, line 3, after ‘Society)’, insert—
‘Regulation 17 of the Cross-border Railway Services (Working Time) Regulations 2008 (SI 2008/1660) (breach of regulations)’.
I refer the Committee to proposed new schedule A2 on page 3 of the Bill, which sets out a list of jurisdictions to which the rest of the clause applies. In other words, those are the enactments under which someone could pursue a claim under the clause.
Government amendment No. 1 will add an enactment to that list. It is periodically updated as employment law evolves. As we have discussed, tribunals can apply an adjustment to proceedings under the jurisdictions, as set out in new schedule A2. That schedule replicates the jurisdictions listed in schedule 3 to the Employment Act 2002 and covers the vast majority of the jurisdictions of claims accepted by employment tribunals.
In a sense, the amendment can be put down to timing. Following Third Reading of the Bill in the other place, the Cross-border Railway Services (Working Time) Regulations 2008 came into force on 27 July. I am sure that all hon. Members noticed that at the time. Those regulations transpose a European directive on working conditions for railway workers on cross-border railway services. For example, they allow a worker to complain to an employment tribunal if his employer has refused to permit him to exercise rights relating to rest, break periods and so on. Regulation 17 was inserted into schedule 3 to the Employment Act 2002. This is a consequential amendment that will add regulation 17 to new schedule A2 as a jurisdiction to which the new adjustment provisions will also apply.
Mr. Djanogly: In principle, we see no reason to oppose the amendment. Perhaps the Minister could clarify who constitutes a cross-border worker for the sake of the remedies provision. Does he have figures for the number of times such remedy claims have been successful, and in how many of those cases would a tribunal have varied the award on the basis of a failure to comply with the code? Finally, does the Minister believe that the amendment will have any cost implications?
Mr. McFadden: An example of the type of worker involved is somebody working on a railway service through the channel tunnel, which is a cross-border railway service. This provision will apply to their breaks, rest periods and so on. The hon. Gentleman asked how many times the tribunal will be able to take cases. That is a matter for the future, not the past. The cost implications for employers operating services through the channel tunnel will depend on the extent to which they adhere to the working time regulations. If the regulations are contravened, there will of course be a cost implication. As in all of these matters, there is a very easy way to avoid cost implications: to adhere to the law in the first place.
Amendment agreed to.
Question proposed, That the clause, as amended, stand part of the Bill.
Mr. Djanogly: I would like to continue probing this part of the Bill. I note with interest the comments of Lord Henley in the other place on the circulation of the draft ACAS code. He was concerned that the other place was furnished with a copy of the draft code only on the morning that it was to be debated.
Given the importance of the new code and the fact that it forms much of the core of the Bill, I would be grateful if the Minister enlightened the Committee on the consultation process that was undertaken. I am aware that the consultation was initiated and subsequently undertaken by ACAS. I would be grateful if the Minister answered the following questions on the consultation process. What format did the process take and which organisations were contacted? What responses were received and will the House have the opportunity to see them?
A shorter, more concise code is to be welcomed. I know that most employers will welcome the emphasis on informal dispute resolution, but will the lack of guidance given by the principle-based approach increase the workload of the employment tribunals? I hope not, but will the Minster give his view? I thank him for sending through a finalised version of the code—I think that it arrived last Friday. He will appreciate that we have had a short time to review it, and we will need to seek people’s views and possibly come back to him at a later stage.
Having looked through the code, I would like the following points, on the code’s paragraphs, to be addressed. The advice at point 5 of the original draft code issued by ACAS stated:
“Employers and employees should do all that they can to resolve disciplinary and grievance issues in the workplace. Recourse to an employment tribunal should only be a last resort.”
Why has that express and clear statement been removed? Point 8 states:
“In cases where a period of suspension with pay is considered necessary”.
Some employment lawyers have been saying that there is a need to clarify that, given the number of possible reasons for those cases. Is there a need to specify the situations where it is needed? In point 13, the phrase “workers” is used in the body of the section, yet the title states “employees”. We need consistency, especially as the words may convey different ideas and roles. In point 20, should “further misconduct” not become “any misconduct”, thus removing any impression that the subsequent misconduct needs to be associated with the former? It would also ensure that minor misconduct does not slip through the net. After point 33, should powers to investigate the reported grievance and then to discuss it with the employee not be included? The manager should be able to undertake an informal fact-finding procedure before formal proceedings are initiated.
What prevents employment tribunals and courts from seeing the code as statutory again, and how will the Government avoid that? Does ACAS see it as an organic code that will be reviewed and changed as needs be? If so, how frequently is it intending to review the code? How much discretion will employment tribunals have with regard to those who follow the spirit rather than the letter of the code, especially small businesses that may lack the human resources capability of others? How do the Government propose to make small businesses aware of the new code? That action is very important in itself.
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