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Earl Russell: My Lords, listening to this debate, I have been persuaded that the Government have introduced these regulations in the spirit in which the noble Lord, Lord Tebbit, introducing some regulations against racial discrimination in another place, is alleged to have said, "I move these regulations in the spirit of a wine waiter asked to serve a Coke". My Lords, I like my spirits a bit stronger than that.

10.30 p.m.

Lord Chesham: My Lords, we have had an interesting debate this evening on these complex regulations. I am conscious that this is not the first debate in this House on the important subject of the Government's response to the judgments of the European Court of Justice of 8th June 1994. The noble Baroness has, as before, argued her case forcefully and articulately and has been amply supported by noble Lords opposite. I must however oppose the Motion to annul the regulations.

As your Lordships are aware, these regulations have two purposes. First and foremost, they give effect to judgments of the European Court of Justice concerning the implementation in the United Kingdom of the 1975 Collective Redundancies Directive and the 1977 Acquired Rights Directive. However, Regulation 8 deals with a separate matter and reverses the effect of the judgment of the Employment Appeal Tribunal in Milligan and Bailey v. Securicor Cleaning Ltd in which the EAT had interpreted the Transfer of Undertakings (Protection of Employment) Regulations 1981 in a way which Parliament had not intended.

Before I turn to the detail of the regulations, I shall deal first with the question raised by the noble Lord, Lord Wedderburn, concerning the inclusion in an instrument made under Section 2(2) of the European Communities Act 1972 of Regulation 8 and the provisions of Regulation 3 which limit the obligation to consult about collective redundancies. I am grateful to the noble Lord for giving me notice of his question. It concerns a matter to which the Government have given careful consideration. Section 2(2)(a) of the 1972 Act enables regulations to be made for the purpose of implementing any Community obligation; Section 2(2)(b) of the Act enables regulations to be made for the purpose of dealing with matters arising out of or related to any such obligation.

Article 1 of the Collective Redundancies Directive defines collective redundancies. It allows member states to choose between two thresholds for the number of dismissals concerned, below which thresholds the directive does not apply. The Government have chosen the second of those options; that is where the employer proposes at least 20 dismissals over a period of 90 days. The amendment made by Regulation 3 is entirely consistent with Article 1 of the directive. As the proposed regulation has the purpose of implementing our Community obligation, albeit in different terms from the manner in which it is at present implemented, or alternatively arises out of or is related to that obligation, the use of Section 2(2) of the Act is entirely appropriate.

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With regard to Regulation 8, Article 4(1) of the Acquired Rights Directive permits member states to exclude specific categories of employees who are not covered by national law concerning protection against dismissal. That is what Regulation 8 provides for. Indeed, Regulation 8 is intended simply to restate the position intended by the 1981 regulations which, I would remind the House, were made under the 1972 Act. Regulation 8, therefore, concerns a matter which is clearly related to our obligation to implement the directive and again it is appropriate that it be included in regulations made under Section 2(2) of the 1972 Act.

I turn now to the substance of the regulations. As your Lordships are aware, both directives require an employer to consult, in the relevant circumstances, workers' representatives defined in each directive as,

    "the workers' representatives provided for by the laws or practices of the Member States".

In implementing the Collective Redundancies Directive in 1975 the then Labour Government required an employer to consult only where there was a recognised trade union. In 1981 the Government in implementing the Acquired Rights Directive followed the same approach. The ECJ ruled that by failing to provide for the designation of workers' representatives where an employer does not recognise a trade union the United Kingdom had not met its obligations under those directives. That is the history of the matter. The regulations now provide for consultation by an employer whether or not the employer voluntarily recognises a trade union. They therefore bring UK law into line with the directives as interpreted by the ECJ.

What we have done is to give effect to our Community obligations in a way which gives the maximum flexibility to employers in this country to decide how to meet their obligations. That has always been our intention. My noble friend Lord Inglewood told the House on 20th March (Official Report, col. 1095):

    "Our aim, consistent with the points I have made tonight, will be to bring forward proposals which, while fully implementing the requirements of the two directives, which have been clarified by the ECJ judgment, provide the maximum flexibility for employers to make arrangements consistent with their business circumstances and the particular needs of their employees. They must recognise the need to minimise the burden on business: they must not interfere with the delicate balance of industrial relations generally and must ensure proper consultation with employees' representatives."

My noble friend could not have stated our approach more clearly. The regulations which we are discussing tonight are fully consistent with what he said then. I ask the House to look closely at what the regulations actually do. They require an employer to inform and consult, in the relevant circumstances, either a recognised trade union or representatives elected by the employees themselves. I shall repeat the point, for it is an important one—representatives elected by the employees themselves. An employer may choose whether to consult a union or elected representatives, but he cannot choose not to consult anyone at all. That is a significant extension of the obligation to consult. There are those who will argue, as has been argued here

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tonight, that an employer who recognises a union should not be free to consult anyone other than that union. I ask simply, why not?

We must recognise that the extent and nature of union recognition has changed substantially over the past decade and the next decade may well see further changes as employers and unions have to adapt to ever more competitive markets and changing employment patterns. Many—probably most—employers who recognise a trade union will wish to continue to consult that trade union about redundancies and business transfers. These regulations provide no obstacle to that, and unions which are confident that they speak for the majority of the workforce and act responsibly in the best interests of both their members and the business should have nothing to fear from this measure.

However, the regulations also recognise that some employers have developed other channels for consultation with their employees, whether or not they recognise a trade union for particular groups of employees. We want employers to be able to use such machinery where it exists and where the employer judges it right to do so. An employer who recognises a union for some categories of employee but not others may well, for example, feel that it would be simpler and more appropriate to consult elected representatives for all the employees affected by a proposal, rather than a mixture of union and elected representatives. We believe that it is right, therefore, to offer that flexibility and freedom of choice. But let me repeat, it is a freedom of choice concerning who to consult, not whether to consult.

It has been argued that the regulations should set out detailed rules for the conduct of elections and require standing machinery to be established. It is a fact that the regulations do not provide for such matters; we have deliberately chosen not to do so. Again, our watchword is flexibility. There are good reasons for not dealing with such matters by statute. The circumstances surrounding the employers' obligation to consult will vary considerably. This would inevitably lead to complex statutory rules designed to cover all possible circumstances. Such complexity benefits neither employers nor employees. Nor do we see any reason why employers with perfectly acceptable existing machinery should have to adapt it to fit with rigid bureaucratic requirements. Rather, we believe it is right to set out the purpose of the consultation and the necessary safeguards and leave it to those who know the particular business circumstances best to determine detailed arrangements. That is what we have done.

As to whether ad hoc arrangements are acceptable, we believe that they are, subject to certain safeguards. Of course an argument can be made for standing arrangements, and some larger employers may well wish to establish such arrangements. That is a judgment which they must make. But many employers will never, or very rarely, be faced with having to make collective redundancies or be involved in a business transfer. It would be absurd for us to require those employers to establish and maintain some machinery which might never be used. That would be bureaucracy gone mad.

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But I made clear that there must be some safeguard to prevent abuse and we have provided that. An employer cannot leave it to the last moment to begin consultation. Consultation must be in good time and, in the case of redundancies, the legislation prescribes a minimum time before the first dismissal takes effect. Regulation 3(8) requires that where there is no standing machinery and the employer therefore invites the employees to elect representatives, he must allow sufficient time for them to do so and for the consultations to take place. A similar provision is made in respect of transfers by Regulation 9(10).

The Government entirely accept that simply to provide for consultation with elected representatives where there is no recognised trade union would, without more, be inadequate protection. But we have provided substantially more than that. The regulations provide protection for elected representatives against dismissal or detriment short of dismissal on the grounds of their status or activities as a representative. Those protections have been drafted so as to provide protection not only to those who are presently representatives but also to those who have ceased to operate in that capacity and to candidates for election. They provide a right to time off with pay to carry out representative duties and a right to appropriate access to the affected employees and to facilities such as telephones. The regulations also amend the provisions concerning who may bring a complaint to an industrial tribunal. These are extended to include not only elected representatives but also in appropriate cases individual employees who have been affected by the proposal. Those are substantial rights and protections and I trust that the House will recognise their importance as part of a coherent package of measures.

We have spoken tonight of the deregulatory element of the proposal on redundancies. The Government considered very carefully what measures should be taken to ensure that the burden on employers resulting from these additional measures should be minimised. I would not expect some noble Lords opposite to accept that any deregulation can ever be a good thing, but the Government believe firmly that to hamstring employers with unnecessary regulations is to damage the ability of our businesses to compete, to grow and therefore to provide jobs for people in this country. In drawing up the package of measures in response to the ECJ judgments we believed it was right therefore to look for ways of balancing the additional obligations which would be imposed on employers. Restricting the statutory obligation to consult through representatives to collective redundancies, as defined in the directive, is just such a measure. We believe that it is vital to ensuring the coherence of the package of measures.

The directive imposes very specific and detailed requirements on an employer. By setting a threshold below which these requirements do not apply, the Council of Ministers recognised that these would not necessarily be appropriate to small firms or to small numbers of redundancies. That must surely be right.

Limiting the obligation to consult through representatives about collective redundancies will provide substantial relief for small and medium-sized employers in particular. But let me make it quite clear.

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It does not absolve employers from the obligation to act fairly and reasonably in handling individual redundancies, including informing and consulting employees individually as appropriate. There is ample case law showing the importance which industrial tribunals attach to such matters in considering whether or not a dismissal is unfair. It is simply not the case, as some may suggest, that our regulations now give employers a free hand to dismiss without any fear of sanction.

I return now to the change made by Regulation 8 of these regulations concerning the right to bring a claim of unfair dismissal in connection with a business transfer. When the draft TUPE regulations were debated in this House in 1981, my noble friend Lord Lyell stated (Official Report 10th December 1981; col. 1483) that the normal provisions governing unfair dismissal—for example, the qualifying period necessary to bring a claim—would continue to apply where employees were dismissed because of a transfer. That is how the regulations were understood to operate until earlier this year when the Employment Appeal Tribunal held, in the case of Milligan and Bailey v. Securicor Cleaning Ltd, that the 1981 regulations did not prevent an employee with less than the normal qualifying service from bringing such a claim. The EAT noted that member states were entitled under the Acquired Rights Directive to exclude categories of employees who do not qualify for dismissal protection. But it held that, as drafted, the regulations did not exclude such employees from bringing a claim.

The effect of that judgment would be to give employees greater rights on transfer than they enjoyed if there was no transfer. We do not believe that to be consistent with the purpose of the directive or, in light of what was said in the 1981 debate in this House, with the wishes of Parliament. Regulation 8 therefore seeks to clarify beyond any doubt that the normal qualifying conditions for unfair dismissal apply in these circumstances.

In conclusion, I wish to thank all noble Lords who have taken part for their contributions to tonight's debate and also for their approval of certain things that we have done, if not everything. There is much on which we do not and cannot agree, but I hope that the House will recognise that the package of measures contained in these regulations is a coherent and proper response to the ECJ judgment of 8th June 1994. It is one which provides for the maximum flexibility in approach consistent with an employer's obligation to consult in the relevant circumstances.

I repeat that, though we are providing flexibility and freedom of choice, it is a choice about how to meet the obligation to consult rather than whether to do so. The obligation is clear and the necessary safeguards are there. I commend the regulations to the House.

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