Enterprise and Regulatory Reform Bill

Memorandum submitted by Unite (ERR30)

This evidence is submitted by Unite the Union. Unite is the UK’s largest trade union with 1.5 million members across the private and public sectors. The union’s members work in a range of industries including manufacturing, financial services, print, media, construction, transport and local government, education, health and not for profit sectors.

Executive Summary

· Unite is particularly concerned about Part 2 of the Bill that covers employment issues.

· None of these changes will do anything to improve the economy and will have far reaching and detrimental impacts on the poorest and most vulnerable people in our society.

· Unite is also concerned about the changes to the EHRC and the introduction of sunset clauses.

1. Introduction

1.1 While some elements in the Bill such as the Green Investment Bank and changes to rules on Directors’ Remuneration are somewhat welcome they do not nearly go far enough. Others such as the ideological attacks on employment rights and the Equality and Human Rights Commission are likely to do the British economy damage, creating greater insecurity, inequality and discrimination.

1.2 This submission is divided into two parts. Part 1 will deal with the broad context of this Bill, considering the argument used to justify changes and their broad implications. Part 2 of the submission will deal with Unite’s concerns clause by clause.

PART 1 – Context and Background:

2. Government policy

2.1 The Enterprise and Regulatory Reform Bill (2012) was launched with the express aim of building "a lasting recovery has to be built on the back of sustainable sources of demand and, above all, exports and stronger business investment" and scrapping "unnecessary bureaucracy that is holding back companies, overhaul the competition framework, and boost business and consumer confidence". [1]

2.2 Unite has consistently argued that the Government’s economic strategy is wrong headed, based predominantly on hear-say, anecdote and a strong ideological belief system that has no bearing on what sensible businesses or economists are saying. These reckless policies have already driven the UK back into recession and Unite is extremely concerned that the long-term result will be devastating for the majority of British people for decades to come.

2.3 This Bill does nothing to alter that view, doing little to improve economic demand or create jobs in the economy. There is no evidence that any of these measures – which will undermine job security for working people – will benefit the economy or raise employment levels.

2.4 Viewed alongside the raft of other changes in employment law currently being introduced, the proposals in this Bill constitute an enormous attack on people’s human rights at work. This assault ranges from raising the qualifying period for Unfair Dismissal to 2 years, introducing fees for tribunal cases and requiring parties to pay for witness expenses for tribunal hearings, to allowing Employment Tribunal Judges sitting alone in unfair dismissal cases.

2.5 In addition there have been "Calls for Evidence" and Consultations on ET fees, TUPE, collective redundancy consultation periods and "no fault compensated dismissals" and more are threatened, included on "protected conversations". But it seems now that the provisions in the ERR Bill might well be used to provide for something similar.

2.6 The evidence from employers does not support Government claims. A business perceptions survey that BIS commissioned [2] undermines the Government case. Of all the businesses surveyed the majority (60%) do not think employment regulation dissuade them from employing more staff. Of all the different sized business only a majority of sole traders did not agree that employment regulation is fair and proportionate – i.e. people who do not actually employ anyone. Of the 40% that did think employment regulation was a burden, only 1% thought that dismissal/disciplinary action is the thing that most puts them off employing staff – that is only 0.04% of all those surveyed. This was not even in the top 10 issues bothering businesses.

2.7 Unite has no doubt that many of these changes suggested in this call for evidence will predominately hit the poorest and most vulnerable workers in the economy.

3. The importance of employment law

3.1 Unite strongly asserts the need for fair employment rights in an economy and does not share the current Government’s view that labour market regulations, be it in law or through collective bargaining arrangements, are obstacles to an efficient labour market and a functioning market economy. This view can be seen across Government policy including in the recent attacks on employment rights and opposition to union facility time. The Government’s simplistic and ideologically dogmatic view of the labour market fails to grasp the extreme imbalance of power between employers and employees within it. This imbalance is what regulation is there to address.

3.2 Employment law is enshrined in many international conventions and charters. For example they are underpinned by Article 11 – freedom of association – of the European Convention on Human Rights and Fundamental Freedoms (ECHR). Litigation on behalf of trade union members also raises issues under Articles 6 (Right to a Fair Trial) and 8 (Respect for Private Life) of the ECHR.

3.3 Similarly they are protected by Article 31 (Fair and Just Working Conditions) of the Charter of Fundamental Rights of the European Union 2006. Article 30 of the Charter of Fundamental Rights of the European Union "every worker has the right to protection against unjustified dismissal, in accordance with Community law and national laws and practices". According to Article 4 of ILO Convention No. 158 on Termination of Employment of 1982 "the employment of a worker shall not be terminated unless there is a valid reason for such termination connected with the capacity or conduct of the worker or based on the operational requirements of the undertaking, establishment or service".

3.4 The Government’s proposals – particularly in the context of other reforms – are undermining such fundamental and basic human rights.

4. The employment relationship

4.1 Employees are in a unique position of inequality as regards the conduct of civil claims against their employer arising out of the employment relationship.

4.2 In the employment context the "relationship of subordination" and "innate inequality" is well recognised. In her book "Data Protection in the Financial Services Industry" (2006 ISBN 0 556 08662 X Page 25), Mandy Webster expresses it this way: "There is unequal bargaining power between an individual and an organisation…  Nowhere else is this so evident than in the relationship between employer and employee…  The view has been expressed that in the relationship between employer and employee, the employee is at such a disadvantage in terms of bargaining power, that they cannot ever give consent freely and without undue influence from the employer, simply by virtue of the fact that this is the employer.  The Information Commissioner indicated agreement with this view."

4.3 Unite is a member of nearly all the global and European union federations. Through these and other bodies, such as European works councils, Unite works closely with other trade unions across the continent and world. It is widely recognised that the UK has one of the most decentralised and deregulated labour markets in the EU and OECD [3] . Empirical research has shown that there is absolutely no evidence that labour market deregulation improves the economic performance of a country [4] .

4.4 As John Philpott, the chief economist for the Chartered Institute of Personnel and Development put it: "The vast weight of evidence on the effects of employment protection legislation suggests that while less job protection encourages increased hiring during economic recoveries it also results in increased firing during downturns. The overall effect is thus simply to make employment less stable over the economic cycle, with little significant impact one way or the other on structural rates of employment or unemployment." [5]

4.5 Undermining employments rights encourage s disharmony in industrial relations and this will have a major detrimental effect on society and the economy . According to Mamphela Ramphele , former Managing Director at the World Bank " s ound industrial relations can lead to a stable economy and prevent disruption to national life." While " c oordination among social partners can promote better investment climates while also fostering a fairer distribution of output" (World Bank Report, 2002 [6] ).

PART 2 – Unite comments on specific clauses in the Bill

5. Employment

5.1 Unite’s main concerns with the Bill relate to the employment rights issues covered in Part 2. The consultation will deal with these first before returning to other elements of the Bill at the end.

5.2 Unite sees no justification for these arbitrary changes that are being proposed. Such proposals will fundamentally weaken the opportunity for workers to access justice in employment disputes while doing nothing to increased employment or stimulating the economy. What follows is a clause by clause explanation of these concerns.

6. Dispute resolution and ACAS conciliation:

· Clause 7 : Conciliation before institution of proceedings

· Clause 8 : Extension of limitation periods to allow for conciliation

· Clause 9 : Extended power to define "relevant proceedings" for conciliation purposes

6.1 Unite the Union is always happy to involve Acas in appropriate cases. Unite tries to conduct disputes with employers in a responsible manner and believes that conciliation is invaluable when used in the right situation.

6.2 Unite is, however, concerned that Acas will be set targets and otherwise be encouraged to settle claims which are not in the best interests of claimants. This includes those cases involving stress or other injury. Acas staff are not qualified and do not understand such issues.

6.3 Unite is also concerned that these changes will increase the time before resolution in a contested and irreconcilable case. Unite envisages practical difficulties in relation to obtaining a certificate as well as delay, additional expense for both employees and employers. Unite sees a danger that the Acas conciliation process will grow into a quasi-Tribunal process, but without safeguards. As a consequence potentially complex legal challenges to decisions at Acas will almost inevitably arise which could freeze the whole process pending legal clarification of points under challenge.

6.4 It is likely that these proposals will lead to further court action on procedural grounds, such as problems in the conciliation process or the granting of a certificate. Unite is particularly worried about the impact of the obligation to provide information to ACAS. This should not be used to prejudice a claimant’s case in a tribunal and all information must remain confidential.

7. Employment Tribunal Reform

· Clause 10 : Decisions by legal officers

7.1 Unite is concerned that these new legal officers will not be trained to a high enough standard and will not be employment law specialists. Clause 10 implies that decisions made by a legal officer would have the same status as an employment tribunal decision and could only be appealed to the Employment Appeal Tribunal. Such appeals are complex and costly and the EAT cannot consider the merits of any case, only points of law.

7.2 Unite believes if legal officers are to determine some basic cases, it is essential that any decision can be reviewed by an employment judge or appealed to an employment tribunal. Even jurisdiction issues can be complex and require argument and evidence.

· Clause 11 : Composition of Employment Appeal Tribunal

7.3 This is a further rolling back of the principle of the tribunal system, which is intended to rely on the practical industrial relations experience of the employee and employer "wing members". It is hard to see how this move away from the ‘industrial jury’ model will assist with robust and commonsense interpretations of reasonableness, particularly in unfair dismissal cases.

8. Unfair dismissal awards

· Clause 12 : Power by order to increase or decrease limit of compensatory award

8.1 These changes have not been subject to public consultation. They were also not included in the Government’s response to the Resolving workplace disputes consultation. Unite suspects that the Secretary of State intends to set the cap at the minimum despite powers to do otherwise.

8.2 Unite is strongly opposed to this change because in practice this amounts to the discredited "no-fault dismissal" idea in all but name, For example, if an employer buys out a business and for no good reason wants to sack a 55 year old worker on £39,000 a year with 30 years service and entitlement to 6 month’s notice, the employer will simply be able to hand over 8 months pay as a compensatory award. The worker will have no legal right to challenge. If the worker was on minimum wage, the employer would only have to pay £13,000. As 24.2% [7] of all periods of unemployment exceed 12 months this means a significant blow to a significant number of successful claimants.

8.3 Tribunals will be unable to award more compensation even when the circumstances of the case would justify greater compensation. Pension loss is not included therefore if there was a significant claim for pension loss no compensation could be given.

8.4 Unite is shocked by such proposals. Even Adrian Beecroft said that "…the rules setting out the level of compensation for unfair dismissal seem reasonable [8] ."

8.5 The proposals significantly undermine the concept of "polluter pays" whereby an aggrieved party in a contract is reimbursed for the full loss of earning associated with the illegal activity. For example, when there is a dispute about a contract for supply of goods, where the employer has supplied inferior quality of goods to that specified in a contract, the financial award is unlimited and is equal to the loss suffered by the customer. In contrast when a human being is treated unlawfully by an employer who breaches their contract, the proposals limit damages to £26,000 or less in many cases rather than the actual loss to the employee.

8.6 Lastly this proposal would open up major loopholes for employers to avoid payments, such as by setting up separate businesses to exploit these measures. Such loopholes will inevitably lead to satellite litigation based on for example the definition of type of business adding greater costs to all involved.

8.7 Unite would strongly argue for the removal of this clause.

9. Financial penalties

· Clause 13 : Power of employment tribunal to impose financial penalty on employers etc

9.1 Unite believes that this clause misses the main problem with employment tribunals, that is many rogue employers do not obey the rulings of employment tribunals and refuse to pay workers arrears and costs that they are owed. According to the CAB, this problem affects as many as 1 in 10 claimants [9] .

9.2 Rogue employers will not be deterred by the risk of such a limited financial penalty. £5,000 – or £2,500 with the early payment deduction – is a small price to pay for getting rid an employee they do not want. In fact the penalty may simply encourage them not to pay the penalty while refusing to pay the compensation to the employee. Unite believes this issue would therefore be better dealt with by dealing with this non-compliance issue. Proper enforcement of employment tribunal rulings would serve as a much more powerful disincentive to employers to abuse workers.

9.3 The business lobby is demanding that clause 13 is removed from the Bill but the reality is that it will be little used by tribunals. Few ET Judges will be prepared to say that a breach had aggravating features. Today, in those relatively few claims that do not settle, it is rare for a judge to make recommendations (such as that a manager undertakes discrimination training) alongside an award.

9.4 Unite understands that the Government is proposing to remove this provision in the Equality Act 2010 that gives employment tribunals the power to make wide recommendations about the employer's workplace or in relation to their behaviour in successful discrimination claims. This makes no sense. Well constructed recommendations designed to prevent recurrence of a discriminatory act in future can be and have been very effective avoiding discrimination. The workers are not exposed to discrimination, the employers do not expend resources and pay damages and costs and the tribunal is less troubled by claims as a result [10] .

10. Whistle-blowing

· Clause 14 : Disclosures not protected unless believed to be made in the public interest

10.1 This clause restricts the definition of "qualifying disclosure" in whistle-blowing legislation to "in the public interest", which has not been defined.

10.2 Unite is concerned that this would deny protection if an employee complains that their own, or colleagues, contracts of employment that has been breached by the employer.

11. Statutory redundancy pay increases/decreases

· Clause 15 : Indexation of amounts: timing and rounding

11.1 Unite opposes this as over the long term this will mean that a "weeks pay" will lose value compared to real wages. This will effect payments such as Statutory Redundancy Pay. Unite also believes that a "week’s pay" is far too low.

12. Compromise Agreements

· Clause 16 : Renaming of "compromise agreements", "compromise contracts" and "compromises"

12.1 Unite is concerned by this change in the context of amendments from BIS to introduce into the ERR Bill provisions for settlement offer to be made which cannot be revealed in proceedings.

12.2 Unite also understands that BIS plan to consult in the near future on ways of encouraging the use of compromise agreements. Unite will monitor this consultation closely to ensure that it does not lead to a diminution of employees’ rights.

13. Other areas of the Bill

· Clause 1: The green purposes

· Clause 2: Designation of the UK Green Investment Bank plc

· Clause 3: Alteration of the objects of the UK Green Investment Bank plc

· Clause 4: The UK Green Investment Bank plc: financial assistance

· Clause 5: The UK Green investment Bank plc: accounts and reports

· Clause 6: The UK Green Investment Bank plc: documents to be laid before Parliament

13.1 Unite has been a strong supporter of the principle of a state investment bank including using the existing government holdings in the banking industry as a vehicle for this. Whilst the proposed Green Investment Bank is a partial step in this direction its remit is limited. Unite is concerned that it will not have enough finances, and there are real question marks about whether it will deliver either genuinely green investment or vital investment in employment that is urgently needed.

13.2 The stronger case for the UK to adopt the state investment bank model is based on the need to leverage additional investment in a wider range of sectors and to help reduce its dependence on property and finance. Such a bank would have the capacity to raise large amounts of funds on the commercial markets, backed by a smaller capital base provided by the state. A state investment bank could be set up on a commercial basis to be run by an independent board, with all stakeholders represented, subject to a remit to generate a long-term return based on investment in British business in a diverse spread of sectors and in infrastructure.

13.3 This model has been used by successful state banks in other European countries and around the world.

· Clause 49: Sunset and review provisions

13.4 Unite opposes this as it believes that this change is likely to have wide ranging implications if used as a matter of course and could be a way to further undermine hard won rights and legislation such as employment rights.

· Clause 51: Commission for Equality and Human Rights

13.5 This clause significantly waters down and reduces the role and operation of the EHRC. The Government is currently engaged in a massive assault on the roles and powers of the EHRC. It has already experienced massive cuts to resourcing and grant making powers, along with outsourcing of the EHRC helpline. Unite believes that this signals the abolition of the EHRC as an organisation that works to promote equality, and eradicate discrimination.

13.6 Unite is strongly opposed to these changes and sees this as further evidence of the Coalitions lack of commitment to tackling discrimination and promoting equality.

· Clause 57: Directors’ remunerations: effect of remuneration report

13.7 Unite believes that this is a step in the right direction, but doesn't go far enough as firstly the vote is likely to take place after the remuneration has already been received and secondly the directors will still be able to sue the company for breach of contract.

· Other clauses

13.8 Unite is still monitoring the changes to market regulation, merger and competition law covered in this Bill.

July 2012

[1] Vince Cable, The Secretary of State for Business, Innovation and Skills, Hansard: 11 Jun 2012 : Column 64 http://www.publications.parliament.uk/pa/cm201213/cmhansrd/cm120611/debtext/120611-0002.htm#12061114000001

[2] http://www.bis.gov.uk/assets/biscore/employment-matters/docs/d/12-626-dismissal-for-micro-businesses-call.pdf

[3] OECD statistics: http://www.oecd.org/document/22/0,3746,en_2649_33927_43221014_1_1_1_1,00.html

[4] http://www.tuc.org.uk/extras/flexiblewiththetruth.pdf

[5] http://www.cipd.co.uk/pressoffice/press-releases/questionable-merit-watering.aspx

[6] https://extranet.unitetheunion.org/external/default/WDSContentServer/WDSP/IB/2002/09/13/000094946_02083104140023/Rendered/PDF/,DanaInfo=www-wds.worldbank.org+multi0page.pdf

[7] Office for National Statistics Labour Market Statistics CLA02: Claimant count by age and duration (last updated May 2012). http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-230793


[8] http://news.bis.gov.uk/imagelibrary/downloadmedia.ashx?MediaDetailsID=5551


[9] Citizen’s Advice Bureaux, Justice Denied, 2008, http://www.citizensadvice.org.uk/justice_denied.htm

[10] http://www.personneltoday.com/articles/2012/06/18/58594/equality-act-2010-what-recommendations-do-tribunals-make-to-employers-that-discriminate.html

Prepared 5th July 2012