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Lord Sainsbury of Turville: I speak to the group which comprises Amendments Nos. 181, 185, 187, 188 and 189. Most of these amendments deal with the part of Clause 34 which will make it automatically unfair to dismiss an employee without following the new statutory procedures. An important aspect of it is that an employee who is dismissed in these circumstances will generally receive four weeks' pay, whereas at present an employee whose dismissal is unfair on purely procedural grounds may receive no compensation at all. The mechanism for achieving this in most cases is that the tribunals must increase the employee's basic award to four weeks' pay if it would otherwise be less. Where the tribunal orders his reinstatement or his re-engagement in a comparable job, and there is therefore no financial compensation on which that lower limit of four weeks' pay can be set, the tribunal must make a separate award of four weeks' pay.
One of these amendments, Amendment No. 185, would increase the award where a dismissal was found to be unfair because the minimum procedures had not been followed, and the employer was ordered to reinstate or re-engage the employee, from four weeks' pay to 12. I consider this excessive, especially since another amendment, Amendment No. 186, which we are debating separately appears, if I am right in thinking that it inadvertently refers to Section 112(6) of the 1996 Act instead of Section 112(5), to provide tribunals with the power to increase compensation from 12 weeks' pay to as much as they see fit. We believe that employers should generally incur a penalty for not following the new procedures; we believe that a "one size fits all" penalty is right, and we believe that four weeks' pay is a reasonable amount.
I should point out, of course, that this is the minimum for dismissal simply because the procedures are not being followed. I believe that it is right and proper to adopt our figure rather than trying to seek a deterrent.
At the moment, a tribunal does not order both a financial award and reinstatement; it is one or the other. In future, because we are introducing a minimum four-week penalty for an automatically unfair dismissal under Clause 34, it will be possible for a reinstatement order to be accompanied by a four-week penalty. Amendment No. 187 relates to the circumstances where an employer then fails to comply with an order for reinstatement or re-engagement. In those circumstances, the 1996 Act provides for the tribunal to award the employee both compensation for his loss as a result of that failure and compensation for unfair dismissal in the normal way. In other words, the tribunal considers what level of financial penalty is appropriate in the light of all the circumstances.
Under our proposals, the penalty could never be less than four weeks' pay if the dismissal was unfair on procedural grounds, although in practice it is almost certain to be more. The reason that it cannot be less than four weeks' pay is because we are providing a minimum award for dismissals in breach of the statutory procedure. But that is the same reason why the employee will already have received his four weeks' pay. Therefore, we propose that the four weeks' pay that he has already received should be deducted from the compensation that he now receives. The employee in this particular set of circumstances would otherwise benefit twice from the four-week minimum, whereas employees in the generality of unfair dismissal cases would not. That deduction therefore strikes me as entirely right but Amendment No. 187 would prevent it, and that, by the same token, must be wrong.
In cases where reinstatement or re-engagement is not ordered—in other words, in the great majority of cases where financial compensation is awarded—the mechanism that we have chosen for awarding four weeks' pay where the dismissal was in breach of statutory procedures is that the tribunals must increase the employee's basic award to four weeks' pay if it would otherwise be less, as I mentioned at the beginning. Amendment No. 188 would change that to at least four weeks' pay, while Amendment No. 189 would remove the discretion given to the tribunals not to make an award if it would result in injustice to the employer.
To give the tribunals discretion to vary the size of the award would risk complicating their proceedings while they attempted to delve into the extent or nature of the employer's failure or the motives which lay beneath it, which might be far from easy to discern. As to removing the tribunals' ability not to make an award if it resulted in an injustice to the employer, I do not believe that it would be right to fetter their discretion in that way.
The Deputy Chairman of Committees (Lord Murton of Lindisfarne): A Division has been called on the Floor of the House. The Committee stands adjourned.
[The Sitting was suspended for a Division in the House from 5.18 to 5.30 p.m.]
Lord Sainsbury of Turville: I assume that Members of the Committee were following me every step of the
way in my earlier argument, so I shall go back to the beginning of the paragraph that I was in the middle of, rather than right to the beginning of the whole speech.In cases where reinstatement or re-engagement is not ordered—in other words, in that great majority of cases where financial compensation is awarded—the mechanism we have chosen for awarding four weeks' pay where the dismissal was in breach of statutory procedures is that the tribunals must increase the employee's basic award to four weeks' pay if it would otherwise be less, as I began by mentioning.
Amendment No. 188 would change that to at least four weeks' pay, while Amendment No. 189 would remove the discretion given to the tribunals not to make an award if it would result in injustice to the employer. To give the tribunals discretion to vary the size of the award would risk complicating their proceedings while they attempted to delve into the extent or nature of the employer's failure or the motives which lay beneath it, which might be far from easy to discern.
As to removing the tribunals' ability not to make an award if it would result in injustice to the employer, I do not think it would be right to fetter their discretion in this way. However, we expect an award to be made in the vast majority of cases. This provision is certainly not a get-out for employers who plead ignorance or poverty, if that is what Members of the Committee fear. "Injustice" is a tough test, and we do not expect it to be met in many cases.
Finally, Amendment No. 181 addresses the second part of Clause 34. The clause currently refers to,
- "a procedure in relation to the dismissal of an employee",
The procedures that are relevant in this context seem to be procedures "in relation to" the dismissal, and that is what the Bill says. It may be that Members of the Committee feel that the phrase "connected with" would somehow narrow down those procedures to which a "no difference" argument could be applied but, even if that were true, I do not think it would be helpful.
What is important, for the clarity of all concerned, is that the "no difference" argument should clearly be available in respect of all those procedures that go beyond the statutory minima, which may be relevant to the outcome. I believe that that is what the Bill does and, therefore, no amendment is needed. I ask the noble Lords to withdraw the amendment.
Lord Wedderburn of Charlton: I am grateful to my noble friend for his explanation of—or, at any rate, his attention to—the amendments. Dealing with his last
point first, there is some reason to believe that a procedure "connected with" the dismissal of an employee would be a little wider than a procedure "in relation to" the dismissal of an employee, and that is why we moved the amendment; "in relation to" is somewhat circumscribed, but I leave it there.So far as concerns the other amendments, the proposed deletion of what I might call the deduction subsections— that is, new subsections (4) and (5) in the new Section 98A of the Employment Rights Act, which are printed on page 39 of the Bill—about the way in which deductions should be made from a compensatory award, might well, we think, operate unfairly as against the employee. Compensatory award is for his actual loss and these amounts are to be deducted from his actual loss compensation. We do not believe that that is fair; that is why we proposed their removal.
So far as the other matters are concerned, once again we felt that the sanctions that were proposed are inadequate to provide any deterrent effect against an employer taking part in dismissals which, on any showing, cannot possibly be justified and would, in fact, automatically be unfair under the Bill. Our sitting was suspended, so I hope that my noble friends will forgive me if I am wrong, but I do not believe that the Minister advanced any real justification for particular sanctions, such as four weeks and the like. Our proposal is that this should lie, as it were, on the table, to be addressed perhaps on some other occasion. In that regard, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
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