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Lord Davies of Coity: I rise to support the amendment. The clause to which the amendment refers looks, on the face of it, to be extremely even-handed and it can apply to both applicants and the respondents in a case before a tribunal. However, in practical terms this clause undoubtedly is going to be of greater significance to an employer than it ever will be to an employee making an application. An employer will have a personnel department and an industrial relations department, and the costs that they incur can be considerable—I understand that. I do not think that that is so much the problem. The problem will perhaps involve intimidating the employee who has been unfairly dismissed, or claims that he is unfairly dismissed or wrongfully selected for redundancy. Indeed, he may be bullied to the extent that has to put in a resignation and then claim constructive dismissal. The employer will be saying, "All right, you take me to a tribunal, but you imagine what it is going to cost you if you lose". To that extent it will deter an applicant from putting forward an application, and that is the wrong way of dealing with it.

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In my experience of industrial tribunals, I have known many employers over the years—particularly if they did not know whether they were going to win or lose at an industrial tribunal—who took steps to reach a settlement on the grounds that those costs would be less than those that they would incur preparing to meet the application at an employment tribunal. Those are the facts and figures that arise from my practical experience in employment tribunals, and it seems to me that in practical terms this will be wholly loaded to the advantage of an employer. Agreeing to the amendment would at least go some way towards evening the practical balance that is required.

Baroness Miller of Hendon: As we have heard several times, Clause 22 seeks to give new power to tribunals to order one party to make payment to the other in respect of the time it has been taken preparing his or her case. The noble Lord, Lord Davies of Coity, said that the arrangement looks even-handed, but he went on to suggest that perhaps it was not so even-handed and that it was much more to the benefit of employers than employees. I do not agree. I think that it is even-handed. The Government are to be commended on that.

Amendment No. 75 seeks to modify the power in Clause 22 quite drastically by refusing such compensation for time expended to corporations where the time has been expended by a director or employee of the company who would be paid whatever work he was doing, or to a partner in a firm or a paid employee.

I believe that the amendment gives rise to four questions. Why do the proposers of the amendment discriminate against, for example, a small trader who perhaps operates his corner shop via a limited company rather than his personal name? The noble Lord, Lord Davies of Coity, said that employers will have personnel departments and so on. My experience from the employers' side is that most businesses are small businesses that employ people and there are many more small businesses than there are large businesses. I believe that the Government have been fair in taking note of that.

The second question that arises is: why is there the same discrimination against two people who are trading in partnership as distinct from a sole trader? One assumes that the tribunal will award such costs and expenses to the winner, so why should a small trader be penalised for the time and trouble that he has taken to prepare his successful case simply because he has not employed a lawyer?

Lord Davies of Coity: Perhaps I may suggest to the noble Baroness that a small trader probably will not incur the costs that would be incurred as a result of what is contained in the amendment. Consequently, the amendment would cater for that situation.

Baroness Miller of Hendon: I do not believe that the amendment would do so; the clause deals with that problem. The whole tenor of the amendment is to militate against employers who succeed in their case.

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My fourth question is: is this not an instance of anti-employer legislation, whereas the Government have commendably produced an even-handed proposal? That is where I started my comments.

4 p.m.

Lord McCarthy: Perhaps I may ask the Minister a question. I was worried about this provision when I first saw it. At page 32, the Bill refers to, "compensation for preparation time". One would think that that was going to be standard procedure; one would think that everybody could get back their preparation time. Employment tribunal procedure regulations may include provision for authorising an employment tribunal to order a party to proceedings before it to make a payment to any other party in respect of the time spent by that other party in preparing his case. In other words, if one knew nothing about anything else, one may think if one goes to an employment tribunal in future, one will have to pay the other party's preparation time. That is what it seems to say.

Where does it say something otherwise? If one reads the very short debate that took place in another place and what was said by the Minister, the situation is not clear; it becomes more confused. The Explanatory Notes state:

    "It is also intended that the new awards could be made"—

I do not like "could", I would rather have "will"—

    "only in the circumstances in which a costs award may be made at present".

That is nothing to do with losing or winning. The notes define what the circumstances are in which a costs award may be made; that is, where the party has behaved unreasonably in some way. In other words, if one reads this and nothing but this, it does not seem so bad because all that is being said is that this is another way of adding to costs. If one behaves unreasonably, one will not only get costs but will also be asked to pay for the other party's time spent in preparing his case.

My question is simple: is that government policy? Are the Government prepared to tell us that when we get the regulations, all that we will be asked to pay is a little bit extra—or rather, more extra—when costs are currently levied where the party has behaved unreasonably? As long as one does not behave unreasonably, one will never have to pay for preparing the other fellow's case.

Lord McIntosh of Haringey: Of course, I take seriously anything that comes from the sources that the noble Baroness, Lady Turner, quoted. I take seriously the views of the National Association of Citizens Advice Bureaux and of her union, which represents many low-paid and junior people and others. I understand the concern behind what the noble Baroness is saying. I understand the concern that applicants may suffer under a new system of case preparation compensation; that it may not operate evenly in practice as between employees and employers, although the noble Baroness, Lady Miller, thinks it will; and it may become a tool with which to intimidate genuine applications. I will say, baldly, that that is not what we intend.

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The introduction of case preparation is intended to reflect the fact that in employment tribunals, most parties are not legally represented. When a tribunal considers that a costs award is just, there may be no compensation for the injured party, because that injured party has not incurred costs or expenses, but may be justified in having compensation for preparation time.

We believe—for all the reasons we explained last week and which I shall not repeat—that the introduction of case preparation provides a fairer base for recompense which reflects the nature of employment tribunals. On the whole, costs and expenses—"expenses" being the Scottish word—are more likely to be incurred by the respondent, by the employer, than by the applicant. If there is any bias at all in subsection (2) of Clause 22, it is towards those who are not legally represented; on the whole, to the applicants.

I am not able to accept the amendment as it stands because it is not the best way of achieving a fairer costs regime. It seeks to limit awards made to employers to work which has been done on the case which is outside the ordinary duties of an employer of staff. In effect, it would mostly exclude employers from case preparation compensation, despite the fact that an employer may not be represented and may have spent time preparing the defence. The principle behind the amendment is to ensure that preparation time awards do not impact disproportionately on applicants. I have every sympathy with that aim, but I do not believe the amendment is the way to achieve it.

Perhaps I may go a little further. We have been developing our thinking on this and there may be merit in developing it further since, as I said, after all, this Bill is not set in stone. Let me say what are restrictions we intend, as things stand, on compensation for preparation time.

First, the noble Lord, Lord McCarthy, asked me whether compensation for preparation time would be standard procedure. The noble Lord answered his own question by quoting the Explanatory Notes.

    "It is also intended that the new awards could be made only in the circumstances in which a costs award may be made at present, that is, where the party has behaved unreasonably in some way".

That is what the regulations will say.

Lord Wedderburn of Charlton: Is it "could be made" or "will be made"?

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