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Lord Sainsbury of Turville: The amendments before us propose alternative wording for the "no difference" element of Clause 34. It may be useful if we first remind ourselves of what Clause 34 does.

I am not seeking to hide the fact that this clause changes existing unfair dismissal law although I do not believe that the changes are quite as fundamental as some have suggested. I make no apologies for that. We are making changes to statute which we believe are right and necessary.

I believe that these changes contain two key elements of our package of measures which, taken together, will promote better procedures and core minimum standards in handling workplace disputes.

In the first place, as we have discussed, Clause 34 underpins the importance of the statutory minimum procedures by making it automatically unfair for employers to dismiss employees without following the procedures, thus reinforcing their central and escapable importance to all dispute resolution.

Secondly, of course, the clause provides for a partial return to what is known as the "no difference" test in unfair dismissal cases. I recognise that this in part reverses the Polkey judgment, and that it interacts in complex ways with various other judgments over the years which the noble Lord has mentioned. However, I want to focus on the substance of the new law which we are introducing. Is it fair? Will it contribute to better workplace relations? I believe that the answer to both those questions is yes.

As to the first question, the fundamental fairness, if, first, the employer can demonstrate a fair and substantial reason for the dismissal; if, secondly, he has followed all the relevant statutory procedures; if, thirdly, he has acted reasonably in all other respects; and if his only error is a procedural one which the tribunal is satisfied has made no difference to the outcome, then I believe it is right that the dismissal should be considered a fair one. That is what this clause provides for. I do not believe that it is a

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fundamental change to the principles of existing unfair dismissal law. It does not alter the basic tenets that there must be a fair reason for the dismissal and that the employer must act reasonably. But I believe that, taken for what it is, it is a sensible change and I make no apologies for it.

Will this change enhance dispute resolution in the workplace? I believe that it will. Many employees have expressed real concerns that tribunals currently place too much weight on minor procedural breaches. As a result—I make this point to my noble friend Lord Lea—many employers believe that introducing detailed in-house procedures is a losing game. Because they can never plead "no difference", they fear being caught out by a tribunal if they are found to have made the slightest error in following their own procedures.

Lord Wedderburn of Charlton: I am most grateful to my noble friend. I appreciate that that is what employers complain about, but can my noble friend cite a case where he believes that that is so? Will he tell us which of the cases decided in the reports would have fallen within that compass? And will he tell us the effect of the clause upon the law which will apply? The law here is trying to improve industrial relations. Is he confident that the effect on the legal principle will do what he says it will do? Which cases is he thinking of?

Lord Sainsbury of Turville: It is important to focus on practical realities here. Perhaps I may quote the well-known British Airways case. An employer who dismissed a number of employees for racially harassing their colleagues lost his case solely because of procedural error, even though the tribunal acknowledged that it would make no difference to the outcome and awarded no compensation to the employees.

Perhaps I may give the full facts of the case. Following investigation of an allegation, there was a full initial disciplinary hearing during which the employees were given the opportunity to comment on records of interviews with those who had complained about them. The manager charged with hearing the appeal held interviews with the dismissed employees but also decided to speak personally to those who had complained of harassment in order to gain a feel for their credibility. Because the dismissed employees did not see transcripts of the second interviews with the complainants, the tribunal found that the dismissals were unfair on procedural grounds. Under the new proposals, the tribunal would have discounted the procedural error since it made no difference to the dismissals, which were fair in every other way.

Lord Wedderburn of Charlton: In order to ensure that I have understood my noble friend the Minister, would that now be a fair dismissal?

Lord Sainsbury of Turville: Yes. As I said, the tribunal would have the ability to discount the procedural error since one could form the view that it made no judgment to the dismissals, which were fair in every other way. That is what we are talking about when we discuss these particular cases. If my noble

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friend considers that it would be fair to say that those people were unfairly dismissed in that particular case, of course he has the right to do so. However, I believe, and it is the Government's view, that it would not be a case of unfair dismissal because, if the tribunal had formed a view, it would have made no difference that that procedural error was not followed.

Lord Wedderburn of Charlton: I intervene in order to ensure that we understand what my noble friend is saying. In a case where employees have not been provided with transcripts of what they are alleged to have done wrong, that would now be a fair dismissal. The Government are happy that the clause would change the law in respect of the Polkey principle in that regard and in similar cases where employees have not been told what they are doing wrong and not given the details. The Polkey principle would be changed and they would all be fair dismissals. My noble friend is quite happy about that.

Lord Sainsbury of Turville: I believe that my noble friend should read what I have said in Hansard tomorrow. I was referring specifically to a procedural error. The error was that the transcripts of the interviews had not been given to the people in those circumstances. On that basis, which is regarded as a procedural error, the view is that the tribunal could find in those cases that it was not an unfair dismissal.

6.30 p.m.

Lord McCarthy: My noble friend reads one case. On the basis of what he says, I agree with my noble friend Lord Wedderburn, or I think I agree with what I think he thinks. It does not seem to me that that is proof of the need for a change. We do not know how significant, how important, that was, and we do not know what might have happened. No one knows; one makes guesses. An employer comes in and says, "I would not take any notice of it", but there you are, we do not know.

In any event, it is one isolated case. I want to know whether the Government have done any research or whether they intend to do any research in order to find out how frequent that has been. What are the cases where the existing law has resulted in people being declared unfairly dismissed exclusively on some failure of procedure? How often does that happen, what are the circumstances and what are the cases?

Other people say other things and I have read Judge Prophet many times in this Committee, and I do not apologise for doing so, because the man is the president of the tribunals service in England and Wales. He has an exemplary record of dealing with these problems. After saying this is a potentially disastrous clause, he says:

"It sends out the wrong message in that it suggests that disregarding internal procedures understood by employees, unions and employers is not important".

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I have made that point and he makes it too. This is the point I am trying to make to the Minister. This is what Judge Prophet says generally happens,

"tribunals every day accept that minor procedural lapses"—

and the Minister's position is that that was a minor procedural lapse,

"by employers do not necessarily cause a dismissal to be unfair. However, if the lapse is more serious"—

the Minister says his lapse was not serious—

"for example, in not showing the employee a proper hearing, it is sensible for the finding to be one of an unfair dismissal with the justice of the particular case . . . deciding the appropriate compensation".

Is it the case that most cases where the Polkey rule comes in are of the kind that Judge Prophet describes, or is the case that most of them are of the kind that the Minister says is exemplified? This is a matter for research. I ask, almost certain of the answer I shall receive, whether any research has been done into which is the typical case.

Lord Sainsbury of Turville: I think there is a rather more fundamental issue. The issue here is whether those cases are fair or not. We cannot have a situation where we say, "This is the situation. It does not happen very frequently, therefore we should pay no attention to it even though it is unfair". I find that an extraordinary argument.

The noble Lord said quite specifically that if this case is unfair, we should take action to tackle that. The fact that there may be a few or many cases like that is irrelevant to the issue that it should be tackled. I find it extraordinary that the noble Lord should argue that simply because it happens infrequently it should not be tackled.

However, when we turned to this issue, I was asking what impact that has on human resource managers or, as I also like to call them, personnel managers.

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