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Lord Hailsham of Saint Marylebone: Or unfair dismissal.

Lord Marsh: As the noble and learned Lord says, or unfair dismissal. That is not my belief, on reflection. I shall say why in a moment.

In the case of directors, the Cadbury Report concentrated strongly on ensuring that directors were forced to a realisation of the liabilities which they face. The provision has worked well. It is now common for directors of companies, including people now known as shadow directors, to refuse to continue a discussion with a company in difficulties until there is legal advice available in the room. A few years ago that position would have been regarded as ludicrous.

The Cadbury Report was also anxious to ensure that some directors should not be totally reliant upon the company for their employment and living. In this case, we have trustees with liabilities every bit as serious as those for directors of public companies, many of whom will owe their entire standard of living to the employer concerned. Therefore, I believe that the provision is extremely important. We shall come to the liabilities on trustees in general later. In those circumstances, it is difficult to conceive of any situation in which the trustees could be more at risk.

Reference has been made to very large companies, the numbers of employee trustees, and even pensioners. Those large companies have literally hundreds of people as executives in every conceivable discipline. Medium-sized housebuilding companies do not. Many of those people will find themselves for the first time in a situation where they have to challenge people sitting on the other side of the room who have education, sometimes in quite technical areas. If those people seriously intend to do their job, they will sometimes make mistakes and it is possible that a bad employer

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will seek either to threaten or actually ensure that those persons lose their jobs as a result. Therefore, why does the existing law not protect them?

The law does not do so because we all know what will happen in the real world in an unfair dismissal case. First, the employer hires counsel. Secondly, the employer spins the matter out for as long as he can in the run-up to attending court; and unless that employee is defended by a trade union or has some legal liability insurance, which is unlikely, he will have to give up because he cannot afford to go on—he will lose his job—or have second thoughts and not raise the issue anyhow.

Therefore, I believe that the amendment is important. The provision is crucial if people are not to be faced with running the risk of losing their employment when seeking to discharge their duties, or caving in and sitting quiet. If that occurs, as I believe it will in some circumstances without such a provision, it strikes at a major protection of pensioners in the Bill. I therefore support the amendment.

Lord Boyd-Carpenter: On the face of it, the amendment seems reasonable. There may well be an answer and I await the Minister's reply with interest. However, I say to the Minister that on the face of it, as matters now stand, it certainly looks a reasonable proposition. If the Minister decides to reject it, the onus is on him to demonstrate what is the matter with the provision.

Baroness Seear: The amendment stands in my name, too. However, with such powerful support from the noble Lords, Lord Marsh, and Lord Boyd-Carpenter, there is little for me to add. That support has come from quarters from which one might not expect it. I made this point on the previous amendment, but I did not notice either of those noble Lords in the Lobby supporting that amendment. However, that is water under the bridge.

This is plainly one area in which the Government can show that they have second thoughts. I beg the Minister to take on board this most important amendment if he wishes the whole scheme to be taken seriously, with member participation a real and effective part of the scheme.

Lord Finsberg: I speak as trustee of a large pension fund. I have not experienced this problem but I agree very much with my noble friend Lord Boyd-Carpenter and the noble Lord, Lord Marsh, that there is a real danger. It is an even more subtle danger. Somewhere down the line someone may quietly say, not necessarily with the authority of the directors, "Watch out for your promotion". One can never take such a subtle statement to court. The Minister is bound to say—I have said it myself when I was a Minister—that the amendment is technically deficient. However, if he says that, I hope that he will undertake to come back at the next stage with a provision which covers this important issue.

Lord McCarthy: With such degree of support throughout the Chamber, one hesitates to enter into the debate in case one queers the pitch. However, I seek to anticipate the Minister's answer because no one else seems able to do so.

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We seek to put a trustee in the position of an employee who is dismissed on the ground of trade union activity, or because he is not a trade unionist, or on grounds of race or sex. In effect, we seek to make the dismissal of a trustee an unfair reason. Whenever one seeks to put an "unfair reason" into the unfair dismissal legislation, it is always said, "You do not need to put in another unfair reason because there is a residual. You can dismiss someone for some other substantial reason". It may well be said—I hope that it will because if not I am giving the Minister an argument—then why do we not have that protection already? Any tribunal considering a case of someone dismissed for action as a trustee could hear that that is the reason why it happened. If the tribunal agreed, it would say, "It is not sex, it is not race, it is not indiscipline. It is none of those things but we can find some other substantial reason. There is a residual". But that will not do, for many of the reasons already given, not least by the noble Lord, Lord Marsh.

In the first place, it will not do because it does not cover the two-year rule. Anyone who acts as a trustee in the newly established system and who has not been an employee for two years is not covered by the present unfair dismissal legislation. That is why we have special provisions for sex, race and trade union activities, to cover them completely. Secondly, once one can show that it is an unfair dismissal for a particular reason, such as sex or race, the onus of proof moves to the employer. The employer has to prove that he has not carried out the dismissal for those reasons.

Most important, I should have thought that the Government would wish to declare to all those who might be trustees that they have some protection. It is not much protection to tell someone, "Be a trustee of this kind of scheme and you will be protected because I happen to know that, although there is nothing in the statute and nothing in the law, if you were actually dismissed and went along to an as yet unnamed, unspecified tribunal, it would be bound to say that there was some other substantial reason". It is not much protection, not much encouragement. That is why, if the Government believe in trustees, they should give them this minimal protection.

Lord Mackay of Ardbrecknish: The noble Lord, Lord McCarthy started by trying to work out what the Minister might say in reply. I noticed that the one outcome he did not envisage was the Minister saying: "I surrender". The noble Lord is probably quite right not to have done that. However, given the number of speeches on the amendment, I feel just a tinge beleaguered as I stand at the Despatch Box. I say that especially because although on two occasions we all agreed that scheme members should be able to have member-nominated trustees and we all agreed that if a pensioner was selected and elected by the active and pensioner members it was a good thing we then had an argument leading to a Division on both the numbers and the specific place of the pensioner member.

So it is with some trepidation that I start by saying that I very much support the purpose of the amendment but do not believe that such provisions are necessary. We are satisfied that the existing provisions in the

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employment protection legislation, together with further measures provided in the Pensions Bill, will afford adequate protection for member-nominated trustees against unfair treatment by the employer. It is on that basis that I urge the Committee not to accept the amendment.

The provisions of the employment protection legislation making it unlawful to dismiss or to take action short of dismissal on trade union grounds constitute a strictly limited enhancement of the rights generally available to employees under the employment protection legislation. They were established in recognition of the fact that there are certain types of behaviour by employers which are so unacceptable that special protections were merited.

I should certainly not wish to understate how serious a matter it would be for an employer to victimise an employee because of his or her functions as a pension scheme trustee. But I do not believe that this would generally fall into the same category as infringements of a fundamental right, such as discrimination on grounds of sex or race.

In any event, I believe that provisions already in the Bill make the amendment unnecessary. Paragraph 2 of Schedule 3 amends the Employment Protection (Consolidation) Act 1978 and makes it automatically unfair for an employer to dismiss an employee trustee, regardless of the employee's length of service, on the grounds that he or she has sought to exercise the new statutory right to reasonable time off for training or performance of duties. Except in relation to such fundamental rights as I mentioned earlier, we are convinced that the general employment protection legislation affords a sufficient safeguard for employees against unreasonable treatment by their employers. Pension scheme trustees who are dismissed for carrying out their functions can, of course, complain of unfair dismissal, provided they have completed the normal two-year qualifying period of continuous service, as the noble Lord, Lord McCarthy, pointed out. I believe that in the case of employee trustees it will invariably be the situation that they have served for at least two years before they could possibly be elected or selected as trustees.

In the same way, employee trustees who have action short of dismissal taken against them in those circumstances may be entitled to resign and make a complaint of constructive unfair dismissal, again subject to having completed the normal two years' service, or may be able to claim damages for breach of contract.

Industrial tribunals in such cases would consider all the circumstances in reaching their decision. Dismissal solely on the grounds that an employee had carried out, or proposed to carry out, functions as an employee trustee would almost certainly be found to be unfair.

The Pensions Bill itself contains a number of additional protections for member-nominated trustees. Clause 14(3) (c) prevents member-nominated trustees from being removed from the trustee board except by unanimous agreement of all the other trustees. Clause 14(10) provides that a member-nominated trustee who ceases to be a member of the pension scheme will cease to be a trustee. However, if he merely ceases to be

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employed by the sponsoring company but leaves his pension rights in the scheme—that is, he continues to be a deferred member—he will be able to remain as a trustee. So, at its bluntest, the simple act of sacking someone does not necessarily remove him from the board of the trust fund if he remains in the pension scheme as a deferred pensioner. The noble Baroness, Lady Hollis, is making interruptions from a sedentary position. I am considering a number of examples of what Members of the Committee say might happen. I am now examining the case of an employee who has been dismissed because of what he is doing. I suggest that that would not remove him from the trust fund. Under the provisions of Clause 14—

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