Employment Bill [Lords]

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Clause 5

Conciliation before bringing of proceedings
Question proposed, That the clause stand part of the Bill.
Mr. McFadden: Clause 5 brings us on to the duties and powers of ACAS. At present, ACAS has a duty—I stress that word, “duty”—in certain circumstances to conciliate in cases where no claim has been presented. The effect of the clause will be to change that duty to a power.
It may be helpful to explain the context of this change, which is an important underpinning element of our package of changes to the dispute resolution system. As we have heard throughout this morning, ACAS has a good record of achieving settlement in the period after a claim is made to an employment tribunal but before the process of the tribunal hearing. Currently, it also has a duty to offer conciliation in certain cases that are capable of becoming the subject of an employment tribunal claim where both parties request it, or where one party makes a request and the conciliation officer judges that there is a good prospect of success.
This duty is not new; it has been on the statute book since the 1970s. However, during the 1980s in particular ACAS found that some employers were using this pre-claim conciliation duty simply to obtain an ACAS settlement, as the basis for a legally-binding agreement to underpin severance arrangements that had already been agreed without the involvement of ACAS. Also, the nature of the duty on ACAS to provide conciliation was such that it could lead to ACAS being asked to assist with cases that were never likely to become the subject of an employment tribunal claim, at the taxpayer’s expense. That was not the intention of the duty.
The Government see clear benefits in making the conciliation services of ACAS more widely available in disputes that have not yet reached the stage of a tribunal claim but are likely to do so; making that change is an integral part of these reforms. If a dispute can be resolved before the parties set out their positions in a formal and legal way, that can save considerable time and costs for all concerned. A total of 85 per cent. of respondents to the consultation following the Gibbons review supported the proposal that ACAS should be given additional resources to provide such services.
I have already referred to the additional resources that the Government are making available to ACAS in order to achieve that aim. Those resources are considerable. However, we also think that it is appropriate to give ACAS the power to target properly pre-claim conciliation on those cases where it thinks that it can make the most difference and be the most valuable. That is really the purpose of the clause.
It will then be open to the parties in such cases to decide whether to use the service. Regardless of whether the parties take advantage of this pre-claim conciliation, if the dispute subsequently turns into a tribunal claim they will still have access to ACAS conciliation services in the post-claim period, in the usual way.
In short, we are trying to ensure that ACAS is able to manage effectively the new case load that we wish it to take on, without having to restrict the use of its services unduly and without having to transfer resources from other parts of its operation into an area where it has a duty to respond to every request. So we want more pre-claim conciliation; we have given ACAS more resources to achieve that, and we also want to give ACAS the power to use its discretion to apply those resources where they would be best used. That is the purpose of the clause.
Mr. Djanogly: The clause deals with encouraging conciliation. I am happy to say that we agree with the thrust of these proposals. In the other place, there was significant debate on the relative merits of conciliation and mediation. Perhaps that was because many mediators were involved in that debate. I am not a mediator. I have since heard in a roundabout way that ACAS is generally not keen on mediation as a form of dispute resolution. There are certainly some circumstances in which mediation is a better way of moving forward than conciliation. Does the Minister agree with the claim that I have heard that ACAS steers clear of mediation when it should sometimes go in that direction? What is the Government’s attitude to mediation? If he thinks that there are situations where mediation would be more appropriate, how does he intend to promote it?
The clause will free up ACAS and, at the same time, give it more resources. In clauses 1 to 7 we are attempting to create a system that provides the maximum chance for disputes to be resolved before they get to the door of the tribunal.
John Hemming: Accepting what the Minister says, there is the facility to encourage people to follow the code of practice and adhere to proposals from conciliation. People must try to reach an agreement and will find themselves in a procedural anomaly if they fail to adhere to that agreement. Therefore, there will be the 25 per cent. penalty. Is that the Government’s intention?
Mr. McFadden: The Government’s intention is to encourage people to settle disputes outside the workplace. The code offers certain help in doing that by setting out procedures to be followed. As the introduction to the code says, dealing with these things informally can often help. That is a direction that we want to go in. Of course, we always have to balance that with the right of access to a tribunal. That touches on some of the amendments that we will discuss later.
John Hemming: I made a blunder in my question to the Minister. Would the Government consider saying in the code of conduct that if the conciliator suggests a figure and the employer or employee does not adhere to it, but does not get substantially more or less, there will be a procedural penalty? That is often the case with other judicial proceedings, although there are obviously no cost issues here. However, if the conciliator says that something is worth £10,000 and the employment tribunal then says that it is worth only £9,000, could there be a procedural penalty for the employer or employee?
Mr. McFadden: I am not sure whether that would constitute a procedural penalty. I do not want to place myself in the shoes of the tribunal chair. I have no doubt that tribunal chairs will look at such matters, take into account efforts or proposals that have been made at the conciliation phase and consider everything in the round. With this clause, we want to maximise ACAS’s effectiveness by giving it the discretionary power to target its resources on the conciliation cases where it can have most effect with the increased budget that has been provided by the Government.
Question put and agreed to.
Clause 5 ordered to stand part of the Bill.

Clause 6

Conciliation after bringing of proceedings
12 noon
Question proposed, That the clause stand part of the Bill.
Mr. McFadden: Clause 6 is important because it refers to time limits. The laudable intention of the procedures set out in 2004 was that, in order to focus minds on settling early, there would be time limits on ACAS’s ability to offer its services. In practice, minds are often not concentrated until much closer to the tribunal hearing, by which time ACAS cannot offer its services because it is beyond the time limits. Therefore, the clause will remove the time limits on ACAS’s duty to offer conciliation in cases once they have been presented to the employment tribunal. That will mean that ACAS’s services will be available for both sides right up until the moment the tribunal hearing takes place. We feel that that can be of benefit to both employees and employers.
I never forget that the context for all of this is the significant estimated reduction of up to £170 million in costs for business because of the Bill’s measures that will reform dispute resolution. Part of that is because the Government, rather than having businesses spend all of that money in tribunals, have increased the resources for ACAS and removed the time limits so that it can offer its services in a much greater part of the process.
Since 2004 the duty to conciliate has been subject to time limits of either seven or 13 weeks, depending on the jurisdiction concerned. ACAS retains the discretionary power to provide conciliation after those prescribed periods have expired, but under the clause, those time limits will be removed and ACAS will be able to offer its services in that much-expanded way. Gibbons found that the time limits had not achieved their desired intention and that parties were still realising close to the hearing day that they wished to settle but found that an ACAS conciliation was no longer available. Over 70 per cent. of respondents to the consultation agreed that those restrictions on the availability of ACAS conciliations should be removed. The Government agree, so the clause will repeal the relevant provisions and, like clause 5, is part of our effort to make ACAS even more effective in the future than it has been in the past.
Michael Jabez Foster: I certainly would like to support the clause, because the time limits have been an impediment to settlement. The nature of employment tribunal cases is that people do not concentrate their minds until the last moment, even when orders for directions are made. That is how people work, and perhaps we work like that sometimes. It is certainly the case between employers and employees and their representatives. Frequently the strength of the case is not known until statements have been interchanged as a result of an order for directions or something of that nature. If all the facts are on the table quite late in the proceedings, perhaps ACAS can play its greatest role at that point.
I acknowledge that some costs might be involved in reaching that stage that could have been dealt with earlier if ACAS had had an earlier intervention, so I hope that it will not abandon the possibility of early resolution because it has a longer period in which to do it. ACAS, too, might be subject to the ability to leave things until the last minute, which would be a detriment. If it can go in early and be there late, that would have a great effect.
Mr. Djanogly: We welcome the removal of the time limits and the resulting expanded and more adaptable service that ACAS can deliver.
Question put and agreed to.
Clause 6 ordered to stand part of the Bill.

Clause 7

Compensation for financial loss
Question proposed, That the clause stand part of the Bill.
Mr. McFadden: I want to say a brief word about this final clause dealing with dispute resolution. It inserts a new provision into the Employment Rights Act 1996 to empower employment tribunals to order employers to compensate workers for the full financial loss they have sustained as a result of unlawful deductions from wages, including failure to pay the national minimum wage, and non-payment of redundancy awards.
For the moment we should put ourselves in the shoes of a worker entitled to the national minimum wage who does not receive it. We all have constituents who may be in that position and we have some understanding of just how difficult it is for someone in that position to make ends meet. The denial, contrary to the law, of perhaps a couple of hundred pounds, is something that we could probably all deal with. It would not make us become overdrawn, but to those on the minimum wage it can make the difference between just getting by or ending up in real trouble. That is what this clause is about.
If someone incurs bank charges for going into overdraft as a result of such an unlawful non-payment, the clause would be available to the tribunal to help compensate for that. I stress that it is as a direct result of the non-payment and it is drawn tightly, but it is recognition that financial loss can result from things like unlawful deductions from wages or non-payment of redundancy awards.
Mr. Swire: This all looks very well on paper as we debate it here, but what is the application of this in reality, particularly for casual workers from eastern Europe who are subject to gangmasters? How can this be enforced in that respect?
Mr. McFadden: It is enforced by the tribunal. We will discuss migrant workers and the gangmasters, agencies and so on in the following clauses, but if I continue I may be able to enlighten the hon. Gentleman.
Employment tribunals already have powers to extend awards to full financial loss arising out of claims for holiday pay and breach of contract. The clause will allow workers to bring a combined tribunal claim covering both breaches of the law in all these areas, and claims for compensation for financial loss arising from such breaches. At the moment, workers can obtain the compensation in the claims covered by the clause only via a separate claim to the civil courts. The clause will remove the need for claimants to make a separate claim. It is also designed to encourage employers to make the correct payments in the first place.
The payments that an employment tribunal may currently order the employer to pay or repay under these circumstances are limited to the amount arising from the employer’s direct liability. This means that financial losses incurred by a claimant, which are over and above the amount owed but which can be attributed to the non-payment, can be pursued only through the civil courts. Such losses might include, for example, charges incurred if a direct debit has failed or punitive interest on bank accounts that go into the red.
I will refer later to the work of the Government’s vulnerable worker enforcement forum, which I have chaired over the past year. One of the issues raised time and time again in that forum is just how marginal the existence of some workers is. Such workers are dependent on timely and correct payments, so it is absolutely right that financial loss, which occurs as a result of them not receiving those payments can be taken into account by the tribunal.
Lorely Burt (Solihull) (LD): May I welcome you to the chair, Mr. Bercow? May I also congratulate the hon. Gentleman on his well deserved elevation? We welcome the clause, but we have expressed concerns about how financial compensation should be calculated, particularly interest on the total outstanding amount. It is welcome to hear the Minister talk about bank charges incurred as a result of not paying moneys in a timely way, but how feasible will it be for a tribunal to calculate the award? He rightly points out that many of those affected will not have been paid even the national minimum wage. Using bank charges to give fair restitution to employees might not help a considerable number of those affected. My hon. Friend the Member for Brent, East (Sarah Teather) has previously raised the issue of using interest charges. Where it is not possible to get an idea of bank charges—perhaps if the relevant person does not even have a basic bank account—could a similar interest charge payment be used to ensure that there is fair restitution?
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