Mr.
McFadden: I am grateful to my hon. Friend for raising that
important and valid issue. It has been raised a number of times with me
by Citizens Advice, which has campaigned long and hard on it, and is
campaigning for proper enforcement of tribunal awards. This is about
not an extension of the law, but its
enforcement. In
July, I met representatives of Citizens Advice with the Under-Secretary
of State for Justice, my hon. Friend the Member for Lewisham, East
(Bridget Prentice), to discuss the matter. I put on record my thanks to
my hon. Friend for taking the matter so seriously, particularly in
recent months as we have been discussing it with Citizens
Advice. As
the hon. Member for Huntingdon said, the new clause follows on from a
similar one tabled in the other place during earlier stages of
consideration of the Bill. It would allow the Secretary of State to
provide by regulation for an organisation or organisations to enforce
employment tribunal decisions that remained unpaid on the due date,
which is normally 42 days after judgment on behalf of the
claimant. 3
pm As
Lord Bach said in the other place, the Government recognise the need to
do more. He laid out some steps that are being taken by the Ministry of
Justice, which has responsibility for the issue. I will recap those
briefly. First, there are measures in the Tribunals, Courts and
Enforcement Act 2007 that, when implemented in the secondary
legislation to which the hon. Member for Birmingham, Yardley referred,
will allow unpaid awards and legally binding agreements brokered by
ACAS to be automatically registered as country court orders so that the
full range of enforcement options can be
pursued. Importantly,
unpaid awards will be included on the register of judgments, orders and
fines, which is often consulted by banks and credit companies when
considering applications for credit. The Ministry of Justice is working
to introduce those measures by April next year, which is the same date
as the implementation date for the changes to the dispute resolution
system which we have been
discussing. Secondly,
the Ministry of Justice is undertaking research to explore the extent
of non-payment. I appreciate that there has been research by Citizens
Advice, which has been referred to, but the Government are carrying out
research on the issue. The hon. Member for Huntingdon asked about the
dates for that research. It started on 8 September and will
report by 26 November. Citizens Advice has helpfully published its own
research, which will contribute to that work. Taken together, the two
studies will provide detailed evidence of the extent to which
employment tribunal awards remain unpaid. That will give the Ministry
of Justice a firm basis for considering what further steps are
appropriate, bearing in mind the changes in the 2007
Act. I
have met Citizens Advice to discuss the issue and I understand the
difficulty for vulnerable workers. It is important that the Committee
is aware that there is an exemption from court fees for claimants in
receipt of income support and the other key means-tested benefits, and
for those whose annual income is below a certain
threshold. That includes fees for enforcement directly through the
county courts, but not for enforcement by High Court enforcement
officers. I
am pleased to say that the Ministry of Justice is committed to
continuing to work with Citizens Advice to review and approve where
possible the process for the enforcement of awards. One option that
will be discussed is the Citizens Advice proposal for High Court
enforcement officers in this area. Ministry of Justice officials are
already in touch with Citizens Advice on the
matter. In
summary, I believe that this is a valid issue to raise. We all want
people who win their case at tribunal to get the award to which they
are entitled. I take this matter seriously. I assure the Committee that
the Ministry of Justice also takes it seriously. We will maintain a
dialogue with Citizens Advice on it. I do not think we can say at this
stage whether the method proposed in the new clause is the right one.
However, I accept the validity of the issue and guarantee that we will
maintain a dialogue with Citizens
Advice.
John
Hemming: I understand from the Minister’s response
that there is automatic registration of judgments for ACAS agreements
but not for tribunal agreements. One would presume that the objective
is to ensure the automatic registration of judgments from the tribunal
in the county court. That could be done by the employment tribunal
service
itself.
Mr.
McFadden: I think I am right in saying that that does
include the automatic registration of tribunal judgments. When I
mentioned ACAS-brokered agreements, I did not mean that only those were
registered and not employment tribunal
judgments.
John
Hemming: On that basis, I beg to ask leave to withdraw the
motion. Motion
and clause, by leave,
withdrawn.
New
Clause
4Fair
Employment Commission ‘(1)
The Secretary of State shall appoint a body, to be known as “the
Fair Employment Commission”, to discharge the functions
conferred or imposed on the Fair Employment Commission under this
section. (2) The Secretary of
State may refer the matters specified in subsection (3) to the
Commission for their
consideration. (3) Those
matters are— (a) the
operation of the National Minimum Wage Act
1998; (b) the operation of the
Employment Agencies Act
1973; (c) the operation of the
Health and Safety at Work Act
1974; (d) the operation of the
Gangmasters (Licensing) Act 2004;
and (e) such matters relating
to this Act as the Secretary of State thinks
fit. (4) In considering the
matters specified in subsection (3) the Commission may carry out such
inspections of workplaces as it considers
necessary. (5) Where matters
are referred to the Commission under subsection (3) above, the
Commission shall, after considering those matters, make a report to the
Secretary of State which shall contain the Commission’s
recommendations about each of those matters.’.—[John
Hemming.] Brought
up, and read the First
time.
John
Hemming: I beg to move, That the clause be read a Second
time.
This is
another probing provision, which looks at having a body where the
various stakeholders—as is now the phrase—can argue their
case so that the law can be kept in view. I am interested in hearing
the Minister’s views on
that.
Mr.
Djanogly: The hon. Gentleman said that this was a probing
provision. I have two concerns about it. First, the emphasis once again
seems to be on a new body to deal with problems of enforcement, and I
fear that that might create undue costs for not enough benefit. The
Bill already contains provisions to strengthen the investigative powers
of the employment agency standards inspectorate in enforcing the
Employment Agencies Act 1973 and related regulations, including powers
to allow EAS inspectors to demand and secure copies of financial
information from an agency or suspect directly, or from their bank or
building society. I suggest that we give some time at least for those
provisions to bed in and take effect, and that we then review the
effectiveness of what we have done in this Bill, rather than too
quickly forming a new body with sweeping powers of
investigation. My
second concern is that a balance must be maintained between the freedom
of business to go unhindered by arbitrary state intervention and that
of the individual to fully enjoy the rights afforded to him by law. I
am concerned that such a balance is not achieved by the new clause, and
that we would simply be creating another body and yet more red
tape.
Mr.
McFadden: The idea of a fair employment commission was
suggested in a report published by the TUC earlier this year. It had
established a body called the commission on vulnerable employment,
which looked into this whole area, and that idea was one of its
recommendations. The issue is what we mean by such a body, and whether
we mean the combination of all the agencies covered by new clause 4.
The issue of the closer co-ordination of the enforcement agencies has
been raised with the Government. I am certainly committed to such
co-ordination; it is in the interests of vulnerable workers, reputable
business and the taxpayer. The question is whether we need to bring all
the agencies together in one body. I am not sure that that would be the
most effective way to
proceed. What
the Government have agreed to do is to set up a board—the fair
employment enforcement board—which will bring together all the
agencies to ensure that they can co-ordinate their work and that we get
the best value for money from the taxpayer, and also to deal with some
of the silo issues that we have discussed. Representatives of the TUC,
the CBI and the Federation of Small Businesses will also be on the
board, because it is important that we hear the views of both employees
and business as we discuss enforcement. My experience is that when it
comes to proper enforcement, the CBI and the TUC often
agree—they both have a great interest in strong and effective
enforcement.
The
board’s work will focus on helping vulnerable workers and their
employers by improving enforcement, raising awareness of employment
rights, and so on. The board will meet for the first time next month,
and its key focus will be to oversee delivery of the key measures in
the vulnerable workers forum report, which was published a few months
ago. Those measures include the development of plans to pilot a single
enforcement
helpline and a review of the strategies for taking forward a sustained
campaign to raise awareness of basic rights and to encourage reporting
of abuses. I am all for closer co-ordination but I am not sure that it
is necessary to have a single enforcement body as the clause implies.
Putting that together could absorb a great deal of institutional energy
rather than doing the job for which the enforcement bodies were set up.
That will be what the new board tries to take forward rather than the
picture painted in the new clause. This is again about transferring
more of the burden for navigating the system from the vulnerable
workers themselves to the Government. I appreciate
where the hon. Member for Birmingham, Yardley is coming from, but
closer co-ordination, better working together and better value for
money are probably a better route than full merger or the creation of a
single commission. We have gone some way towards achieving that and I
hope that it will be
effective.
John
Hemming: I am slightly surprised by the hon. Member for
Huntingdon wanting to maintain four quangos when we are suggesting
having only one, but if the Conservatives now want to increase the
number of quangos, that is their choice.
It is quite
clear that the direction of travel is towards greater co-ordination and
I would not be surprised, from what the Minister is saying, if that is
the result after time. I see no merit in dividing the Committee on
this. I beg to ask leave to withdraw the
motion. Motion
and clause, by leave, withdrawn.
New Clause
5Employment
tribunals: costs ‘In the
Employment Tribunals Act 1996 (c. 17) in section 13 (costs and
expenses), after subsection (2) there is
inserted— “(3)
The losing party in any proceedings before an employment tribunal shall
bear the costs of the winning
party. (4) Up to 25 per cent.
of any claim can be awarded to the defendant as a penalty on the
claimant in the event that the claimant’s action is deemed
vexatious.”.’.—[Mr.
Djanogly.] Brought
up, and read the First
time.
Mr.
Djanogly: I beg to move, That the clause be read a Second
time.
We now go
back to the first part of this Bill, dealing with employment tribunals.
At the start we discussed the procedure of employment tribunals and
penalties for non-compliance. I said at the time that it was difficult
to have that debate without discussing vexatious claims, not least
because we did not have the facts and statistics to make a decision in
relation to the procedural aspects, but also because vexatious claims
are of most concern to employers. Now we can have that debate in an
area where there are more statistics on vexatious
claims. The
new clause has two proposed subsections, the first stating
that
“The
losing party in any proceedings before an employment tribunal should
bear the costs of the winning party.”
Since 1999, on average
111,754 claims have been accepted every year by employment tribunals,
of which only 15 per cent. are successful; 66 per cent. are
withdrawn or settled; and 19 per cent.—some 21,233—are
dismissed or unsuccessful. Given that the estimated average cost to
employers of defending a tribunal case is about £9,000 and
almost 10 days of lost time, it is unsurprising that the CBI reports
that a quarter of cases are settled by employers, despite receiving
advice that they are likely to win. This pattern is especially true for
small and medium-sized companies that are less likely to have internal
resources or legal advisers to fight claims on their
behalf. There
is another recurring pattern with small businesses, in that tribunal
applications are disproportionately high in small employers,
particularly those employing between 50 and 249 employees—215
applicants came from a group of employees that employ only 4 per cent.
of the work force. Taken together, those businesses that employ fewer
than 250 people are respondents in 62 per cent. of cases but employ
only 37 per cent. of the labour
force. Business
organisations report that there is a culture of settling cases to get
rid of them, which is encouraged by the fact that costs are rarely
awarded against litigants, and complainants may have relatively few
costs of their own. Employers believe that cases are pursued using
no-win, no-fee lawyers in the expectation that businesses will settle a
claim at a level below what they believe it would cost to defend it at
hearing. Take,
for instance, the case of the Law Society in 2001, when it ran up costs
of more than £1 million defending itself against claims of race
and sex discrimination made by its former vice-president, who had
previously been forced to resign after allegations that she herself had
bullied and harassed staff. Despite finding that the claimant had
indeed created an atmosphere of “fear and dread”, and
that she had also lied under oath, a tribunal found in her favour after
a six-week
trial. The
Employment Tribunal Service reported in 2003-04 that 976 awards of
costs had been made—34 per cent. to claimants and 66 per cent.
to respondents—out of 30,107 claims that went to a hearing, the
average order being £1,859. By 2006-07, that figure had shifted
with 509 cost orders being made: 32 per cent. to claimants and 68 per
cent. to respondents. The average award was £2,078, but the
maximum was £65,000. That means that costs were awarded to
employers in fewer than 0.3 per cent. of all cases, with the majority
getting less than £1,000. To compound this, the number of cases
accepted by employment tribunals has gone up since 2004-05 from 86,000
to 132,000 in 2006-07, an increase of 53 per
cent.
3.15
pm The
Employment Tribunals (Constitution and Rules of Procedure) Regulations
2001 introduced changes to the employment tribunals rules, including an
increase in the maximum amount of unassessed costs that tribunals could
award from £500 to £10,000, and the power to make an
order for costs in cases where a claim had been misconceived. Rules 39
and 40 set out when an award of costs must and may be made
respectively. Employment tribunals must make an award only where a
hearing is postponed because a business fails to adduce reasonable
evidence as to the availability of the job, or a comparable one, from
which the claimant was dismissed or, alternatively,
if the claimant informs the respondent business at least seven days
before the hearing that they seek re-engagement. This is a provision
that will hardly set the mind of small businesses at ease when they
consider the cost of defending themselves. Rule 40
allows employment tribunals to make cost awards where claimants have
brought proceedings and have
“acted
vexatiously, abusively, disruptively, or otherwise unreasonably, or
that the bringing or conducting of proceedings has been
misconceived.”
If that is the case,
the employment tribunal must then consider whether it should exercise
its discretion to make a costs order. Employment tribunals have been
held to have acted erroneously in three cases, because after finding
that the case fell in to one of the headings in rule 40(2) they did not
then separately consider whether they should exercise their discretion
to make a costs award.
The
discretion to make such awards in favour of businesses is hampered by
this dual procedural hurdle. Can the Minister tell the Committee how
often cost orders are made under this provision? The scope of these
powers when combined with statistics that I outlined earlier makes me
deeply suspicious that employment tribunals are ruling against awarding
costs to companies in a disproportionately high number of cases. While
I accept that a few small businesses may employ sharp practice and
deserve to be brought to book, it is the widespread belief of business
in the UK that the tribunals have a predisposition towards claimants
and that in any event the system is such that companies are being
forced to settle because of the costs of the system.
The Bill
seems to be saying that dealing with the procedural issues will solve
the problem, which is not at all the case. To that end, my amendment
seeks to redress the balance and ensure that businesses are not
penalised disproportionately by employment tribunals into paying the
costs of claimants. The second part of new clause 5 suggests that up to
25 per cent. of any claim can be awarded to the defendant as a penalty
on the claimant in the event that the claimant’s action is
deemed vexatious.
The rise in
employment claims since 2000 has been almost unstoppable on the back a
compensation culture that is spiralling out of control, according to
the CBI deputy director-general. He said:
“I
visited a company where they had a security camera showing an employee
leaving his shift, getting on his bike and falling off outside the
factory gates. What he did then was to get up, get on his bike, come
back into the company’s gates and fall off
again.” In
2004 the CBI employers association said that 69 per cent. of firms
thought more employees were bringing weak and vexatious claims. The CBI
now reports that 44 per cent. of respondents to its CBI/Pertemps
employment trends survey 2008 felt that weak and vexatious claims have
increased over the past year. It goes on to point out that employers
believe that far too many weak claims proceed through to tribunal as
some tribunal offices are reluctant to use the powers available to
them. It is felt that this is an issue of resources, as the existing
powers could be used more effectively and consistently with better
filtering of claims during the stage at which they are issued to
tribunal. In
recent weeks, I have spoken to various organisations that have raised
concerns about the record of employment tribunals, especially in
relation to vexatious litigants
and the cost of proceedings being disproportionately heavy on small
businesses. We must appreciate that we are not talking about large
outfits with big human resources departments. Often, those operating
small businesses with one or two employees are no more sophisticated
than the employees who are bringing the
claims. The
Department of Trade and Industry’s “Survey of Employment
Tribunal Applications” in 2003 estimated the cost of employment
tribunal proceedings to business as £4,362 per business. That
does not include the main cost: that of time. On average, about 9.8
days were spent on a claim, 7.7 days of which were the time of
directors or senior managers. Further figures for 2005-06 estimated
that the average cost to the Exchequer of each claim was £606.
Given those figures, the cost for the 19 per cent. of dismissed or
unsuccessful cases is about £93 million for employers
and £12 million for the Exchequer. Can the Minister give us the
preliminary figures for this
year? While
I accept that not all dismissed cases are vexatious, a considerable
proportion are. An example is the employee who was caught dealing
cannabis at work and admitted that he had been doing so for some time.
He was dismissed, but claimed unfair dismissal and his notice money.
The case went to a hearing but he did not turn up. Nevertheless, the
company’s representatives were made to go through the evidence
to get the case rejected. Another example is the case of an accountant
who claimed under disability discrimination law for a disability of
acute anxiety about her work performance, which prevented her from
working to deadlines or submitting herself to appraisal. She argued
that her employer had not sufficiently adjusted her working conditions
to take account of that. At lunch time during the tribunal hearing she
disappeared. The case was abandoned, leaving the employer with
substantial, irrecoverable legal
costs. Rule
18(8) of the employment tribunal rules, which are set out in schedule 1
to the Employment Tribunals (Constitution and Rules of Procedure)
Regulations 2004, enables an employment tribunal to strike out a claim.
There are provisions for deposits to be paid and for restriction of
proceedings orders to be made against vexatious claimants. It seems
strange that the Government have been looking to amend employment
tribunal powers when the current rules are so clearly underused. Should
they not instead insist that tribunals use those powers more
effectively? Many businesses, along with my party, believe that this
issue must be dealt with. How does the Minister intend to get tribunals
to work more fairly against vexatious claimants and prevent more from
trying it on in the
future? The
new clause is designed to ensure that vexatious claimants are penalised
for wasting the time of the employment tribunal and, more importantly,
the employer. I have already noted that the cost to business is in
excess of £93 million each year and to the Exchequer,
£12 million. Is it not about time that those who
cause that out-of-pocket expense start helping towards its
repayment?
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