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The Committee consisted of the following Members:

Chairman: Jim Sheridan
Allen, Mr. Graham (Nottingham, North) (Lab)
Beckett, Margaret (Derby, South) (Lab)
Bottomley, Peter (Worthing, West) (Con)
Brown, Lyn (West Ham) (Lab)
Burt, Lorely (Solihull) (LD)
Djanogly, Mr. Jonathan (Huntingdon) (Con)
Heald, Mr. Oliver (North-East Hertfordshire) (Con)
Jenkins, Mr. Brian (Tamworth) (Lab)
McFadden, Mr. Pat (Minister for Business, Innovation and Skills)
Moffatt, Laura (Crawley) (Lab)
Mullin, Mr. Chris (Sunderland, South) (Lab)
Thurso, John (Caithness, Sutherland and Easter Ross) (LD)
Walker, Mr. Charles (Broxbourne) (Con)
Wicks, Malcolm (Croydon, North) (Lab)
Wright, Jeremy (Rugby and Kenilworth) (Con)
Wyatt, Derek (Sittingbourne and Sheppey) (Lab)
Mick Hillyard, Committee Clerk
† attended the Committee

Third Delegated Legislation Committee

Monday 8 February 2010

[Jim Sheridan in the Chair]

Draft Employment Relations Act 1999 (Blacklists) Regulations 2010
4.30 pm
The Minister for Business, Innovation and Skills (Mr. Pat McFadden): I beg to move,
That the Committee has considered the draft Employment Relations Act 1999 (Blacklists) Regulations 2010.
It is a pleasure to serve under your chairmanship, Mr. Sheridan.
As the title of the measure implies, the roots of this issue go back many years. The Employment Relations Act 1999 conferred on Ministers powers to introduce regulations banning the blacklisting of trade unionists and the denial of employment or career advancement by virtue of trade union membership.
I am sure that we all agree that freedom of association is an important part of any free economy. Workers can choose to join, or not to join, a trade union, and if they become active within a union, they should not be denied employment on that basis. The powers in the 1999 Act were enabling. Regulations were not introduced at that time because it was not believed that blacklisting was taking place, although it had occurred in the past. When the Act was reviewed in 2003, draft regulations were drawn up, but they were not introduced because there was still no strong evidence that blacklisting was taking place. Indeed, few, if any, of the respondents to the consultation on the draft 2003 regulations argued that blacklisting was taking place. The Government have therefore not rushed to judgment or to legislate on the issue without basing our decision on evidence.
The situation changed last year when an investigation by the Information Commissioner uncovered evidence that a large-scale and covert vetting system was operating in the construction sector through an organisation called The Consulting Association. My hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham) secured an Adjournment debate on 23 March last year in which he highlighted the serious implications of those revelations. In my contribution to that debate, I told the House that the Government would act if it was proved that TCA’s vetting system involved the blacklisting of trade unionists.
The subsequent investigation proved that TCA was indeed involved in the blacklisting of trade unionists. It held details of some 3,300 blacklisted persons, and during its lifetime it managed a secret vetting system for 40 construction companies. The TCA’s sharp practice had prevented union members from finding gainful employment over many years. The commissioner successfully prosecuted TCA for breaching data protection law. Its proprietor, Mr. Ian Kerr, was fined £5,000, and 15 enforcement notices were issued against TCA and some of its user construction companies to stop the collection and use of personal data for vetting purposes. The organisation has since been closed down. That episode showed that blacklisting was taking place and that it was time for the Government to act, not only with a view to the past, but to ensure that the practice was not repeated elsewhere, and that is why we are introducing these regulations.
I will now explain the draft regulations in greater detail. They are being made under section 3 of the Employment Relations Act 1999, which provides a power to introduce regulations to prohibit the blacklisting of trade unionists. In the light of the TCA revelations, we returned to the initial draft regulations of 2003. Indeed, some voices called for us simply to implement what had been drawn up at that time. It became clear to the Government, however, that the 2003 regulations would not have covered a situation such as the TCA case, where the list had been operated not by the employer or prospective employer, but by a third party acting on behalf of a group of employers. We therefore ran a further consultation last summer to ensure that our approach adequately dealt with the type of blacklisting undertaken by TCA. As a result, the draft regulations that we are considering have been significantly amended.
Mr. Oliver Heald (North-East Hertfordshire) (Con): Of course nobody would condone the blacklisting of someone taking part in lawful trade union activities. However, what would be the position for someone who was regularly leading wildcat strikes or not acting in accordance with procedure or the union’s views?
Mr. McFadden: I think that the hon. Gentleman will find that trade union activity does not include the illegal activity that he describes.
Regulation 3 gives the definition of a blacklist—a “prohibited list”—and sets out the general prohibition against the compilation, supply, sale and use of a prohibited list. In effect, this general prohibition provides a right for trade unionists not to be blacklisted. The wording is based closely on the corresponding provisions within section 3 of the 1999 Act. The definition of a blacklist is tight. To qualify, a list must be compiled with a view to discriminating on grounds of trade union membership and activities. Of course, many lists, such as those for normal employment and security vetting, are not compiled for this purpose, and so, quite rightly, will be unaffected.
We recognise that there will be occasions when it could be lawful to have exceptions to the general prohibition found in regulation 3, and these are set out in regulation 4. There is an exception for organisations such as the Royal Mail or other postal providers who might unknowingly deliver prohibited lists because they are simply the carriers of information that they do not examine. The exceptions also cover the work of whistleblowers or journalists who, in the public interest, want to draw attention to blacklists—we should remember that investigative journalism played a key role in uncovering the work of TCA. Regulation 4 also includes an exception for lawyers who advise clients on their compliance with the regulations.
The new jurisdictions for the employment tribunal are based closely on existing rules regarding discrimination on grounds of trade union membership or activities. This is intentional. We want to build on arrangements that are well understood and that operate effectively. However, the draft regulations do have some distinctive features.
First, the regulations recognise the special difficulties created by the covert nature of blacklisting. For example, the existence of a blacklist might not come to light until years after a detriment was suffered. We have therefore given greater scope for the tribunal to extend the normal time limit of three months for making complaints when it is “just and equitable” to do so. The secretive nature of blacklisting also makes it difficult for complainants to prove their case, so the regulations put the onus on respondents to prove they did not act unlawfully, if there are facts that show that, in the absence of any other explanation, they breached the general prohibition.
Secondly, the regulations recognise that victims of blacklisting should be entitled to reasonable compensation. Blacklisting represents discrimination on grounds of trade union membership. The cost to those subject to the practice can run into many thousands of pounds because of lack of employment or lack of career advancement. The draft regulations therefore establish in each tribunal jurisdiction a minimum compensation award of £5,000. That minimum would apply in most cases, but the tribunal has discretion to reduce the minimum when the previous conduct of complainants—perhaps unrelated to trade union membership, such as violent conduct in the workplace—makes it just and equitable to do so.
Thirdly, the regulations recognise that some, including trade unions and the self-employed, will be unable to make complaints to the employment tribunal. Regulation 13 therefore allows these other organisations or persons to complain to a county court, or to the Court of Session in Scotland, about a breach of the general prohibition. Under the court option, they will be able to sue for damages for any loss they suffered as a consequence of a blacklist.
Peter Bottomley (Worthing, West) (Con): Where is the exemption to allow whatever the Department for Education and Employment is now called to have a list of trained teachers who cannot be employed?
Mr. McFadden: I am not sure what the hon. Gentleman is referring to.
Peter Bottomley: The education Department used to have a list—title X or something—
Margaret Beckett (Derby, South) (Lab): List 99.
Peter Bottomley: I am grateful to the right hon. Lady. That was a list of people who could not be employed. Is there not an exemption in the order for that kind of thing?
Mr. McFadden: I think that the hon. Gentleman might be referring to legitimate lists that are held for the purpose of vetting, security and so on. They would be unaffected by the regulations, because regulation 3 makes it clear that the lists covered are based on trade union membership, not wider security or vetting purposes.
Although blacklisting is, by its nature, covert, and it is therefore difficult to say with absolute accuracy how extensive it is, we believe that it is rare and that the vast majority of employers do not engage in the activity and would not support its use by others. As has just been mentioned, employers often seek to vet future employees on the basis of fair criteria that are openly applied. The regulations do not interfere with such fair practices and there is nothing that employers need fear from the draft regulations.
We should unite in condemning the kind of blacklisting that the regulations prohibit and in standing up for the principle of free choice for employees about whether they wish to join a union. We should also go further and defend the principle that exercising that choice should not result in the denial of employment or someone’s career being held back.
I hope that we shall not hear the hon. Member for Huntingdon making his familiar condemnations that any legislation that benefits people at work represents Labour legislating to appease trade union paymasters. The regulations are intended to uphold the principle of free choice at work, and that is something we should all support.
The draft regulations have now been through two rounds of consultation. They are balanced, reasonable and robust, and they complement existing protections in this area that are found in trade union and data protection law. As our impact assessment shows, the compliance costs for businesses, trade unions and others are very low. If the regulations are approved by Parliament, they will send out a strong signal that we want to banish blacklisting from our labour market and operate modern industrial relations that consign such activity to the past.
4.43 pm
Mr. Jonathan Djanogly (Huntingdon) (Con): The right hon. Gentleman tried to pre-empt my comments. Perhaps that is a sign of our having sparred for many years.
Peter Bottomley: My hon. Friend and the Minister will be changing places soon.
Mr. Djanogly: Hopefully.
I want to make it plain from the outset that the Conservative party is absolutely opposed to discrimination against individuals on account of their membership of a trade union. That includes, but is not limited to, blacklisting. We support the existing law that makes it illegal.
The actions of The Consulting Association, which precipitated the latest review, and brought us here today, were clearly unacceptable. Conversely, trade union membership is not some kind of secret society that people should want to hide. Assuming that details of relevant individuals are properly registered by organisations under the Data Protection Act 1998, and that any questions relating to information held are duly and properly answered, we do not see why companies and other organisations should not be permitted to produce and maintain such details for valid uses.
Once we go beyond the principle and take a closer look at the regulations, it becomes apparent that they do not quite do what it says on the box. For one thing, despite looking over the issue since the primary legislation—the Employment Relations Act 1999—was passed some 11 years ago, the Government have come up with just one example of blacklisting in their explanatory memorandum and impact assessment, to justify the order. Even that example, we believe, does not bear much scrutiny.
Looking at the facts, the Information Commissioner found that by keeping around 3,300 personnel files and running a vetting service for construction companies on covert lines, TCA had clearly breached its DPA obligations and was accordingly prosecuted. Will the Minister please explain why the DPA was considered not to have worked in that situation, given that the findings of the Information Commissioner were against TCA, which was ultimately closed down? That being the case, why is the appropriate remedy not to strengthen the DPA, if that is necessary, rather than pursuing this order?
The truth is that blacklists, as the Minister implied, are not a widespread problem in industry. The Government are seeking to justify this legislation on the basis of a single, isolated case. Indeed, under section 137 of the Trade Union and Labour Relations (Consolidation) Act 1992, it was a Conservative Government who made it unlawful for employers to discriminate against individuals due to trade union membership. As I have mentioned, the provisions of the DPA serve as an effective safeguard against covert lists of unionists.
It is worth noting that the individuals who suffered as a result of TCA’s activities are able, under the DPA, to seek compensation for damage and distress. The wide publicity the case received is likely to have acted as a considerable disincentive to any employer considering similar action. We believe that the Government are once more too quick to dive down the legislative route, rather than finding a practical solution. The CBI has said that we need evidence-based, proportionate employment regulation, not knee-jerk reactions to one-off events, and that this would be better dealt with through clear guidance.
Even with 15 pages of regulations, the provisions are so complicated that their implementation will still require guidance. Will the Minister confirm that that is now going to be issued? However, it appears that the Government insist on pressing on with the regulations regardless. On that basis, we have a number of key concerns about their content. First, the Government need to justify their compensation figures in regulation 8. In instances of a breach under any of the regulations, there is now a minimum award of £5,000 and a maximum of £65,300. I should be grateful if the Minister would explain how these amounts have been calculated and to what extent they differ from DPA penalties. It seems that an employer might be in breach of these regulations, even if the employee’s union details have been validly and openly registered under the DPA. It would appear that union membership involves extra rights that other workers do not enjoy. If non-unionised workers are discriminated against for, say, being Communist or even, dare I say, Conservative, presumably they had better be a unionist; otherwise they will not be helped.
The surprisingly large minimum award is of particular concern regarding the concept of detriment in regulation 9. The term “detriment” is a grey area, as it is not defined by the regulations. That could be unfair to employers who would be unable to determine whether they have breached their obligations under regulation 9. We have been presented with 15 pages of regulations that could be interpreted in a variety of ways—good for lawyers, perhaps, but not for reducing red tape. Indeed, it will often be beneficial for employees if their employers have lists of trade union members. For example, in the manufacturing industry the employer would generally negotiate changes to contractual terms and pay increases with representatives from the relevant trade union. However, not all workers in a factory would be part of that trade union. It is therefore useful for the employer to know which employees it will need to negotiate with individually and which will fall under the union.
Will the Minister please advise how these regulations tie in with the need to verify union membership in the event of strike ballots? More generally, will he please explain why these regulations apply to an employer’s own employees at all? A problem could come up when an employer keeps a list, perfectly lawfully, and an employee who is a trade union member becomes disgruntled at having been passed over for promotion or a pay rise. The employee may well have been overlooked for completely valid reasons. However, under these regulations, it could be difficult for the employer to prove that its records, citing the employee as a trade union member, had not affected its decision. At what point do the records become an illegal list? That is not clear. Therefore, in order to reassure employers on this issue, greater clarity is vital about the types of lists that may be maintained and, importantly, in what circumstances those lists can be referred to. Guidance will be needed.
As they stand, the regulations are disproportionately burdensome on business. This is particularly the case with regulation 12 concerning unfair dismissal. The automatic transformation of a dismissal to an unfair dismissal under the regulations will doubtless create a raft of new employment claims to tribunals, possibly loading employers with yet more red tape and bureaucracy. This is an ill-thought-out piece of legislation prompted, no doubt, more by Labour’s imminent need for campaign funds than by any proven need or common sense. We will not oppose it today, but we will review it once we are in government.
4.51 pm
The notes say that this will mostly affect businesses of 250 and more employees. The implication is that it will not constitute a burden for small businesses—I welcome that—but could the Minister explain why small businesses will not be affected in any proportionate way by this legislation? The costs of implementation will hardly be a large cost to business. It is just over £40 per business and £6 per employment agency, if you do the math, as they say. I am concerned about the justification for introducing this measure at this time.
4.53 pm
Sitting suspended for a Division in the House.
5.7 pm
On resuming—
 
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