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Lord McCarthy: The Minister misrepresents me and I must protest. I did not say that at all. Judge Prophet says that there are insignificant cases and there are significant cases. He says,

"In the insignificant cases we do not declare unfair dismissal".

However, he goes on to say,

"In the significant cases, we do declare unfair dismissal".

I do not believe the Minister wants to say that even in the significant case, where it made a real difference, Judge Prophet is wrong and that both significant and insignificant cases should go down the river. I think what he is trying to say is that most cases are insignificant. The overwhelming majority of cases are insignificant. There are very few significant cases which we would call an abuse. I say that that can be settled only by research.

Lord Sainsbury of Turville: The noble Lord is not focusing on the fact that there is the no-difference test here. That is used to determine whether these procedural issues are of importance and that seems a very good way to do it. I return to the point that if one does not have that situation, one will have a situation where many personnel directors will feel that they will

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not put in elaborate additional procedures. If on a small procedural matter they can fall foul of it, why should they put in the more elaborate procedures?

The argument that managers will, therefore, not follow procedures—because they will take the view that they can always fall back on the no-difference principle—is not one that people would take. They would then have to argue that it would have made no difference and it is for the tribunal to make that decision. My own view is that on that balance, one is more likely to have a situation where personnel directors say they will have the minimal kind of procedures, rather than one in which personnel managers say that they will just not bother about the procedures because they will rely on the no-difference test. That situation is unlikely to arise.

Lord Wedderburn of Charlton: I have tried to listen carefully to what the Minister is saying. I have two difficulties. First, as the Polkey case and hundreds of other cases show, this is not only about putting in extra procedures. It is about that and of course the effect of the clause will, arguably, cause people not to have elaborate procedures and just to rely on the minimum. But in the Polkey case, what was wrong was a failure to consult in line with what has become the ACAS code. The Minister's argument has to be addressed to that.

Secondly, the Minister appears to be saying something different from his honourable friend Mr Johnson in the other place. I quote what Mr Johnson said:

"In the great majority of such cases that we have looked at, the failure was in procedures that would have fallen within the new minimum standards and clause 34 will be in line with the Polkey judgment. Less frequently, the procedural breach relates to a procedure that would have gone beyond the new minimum procedures. It is only in such cases that we propose to allow employers to argue that following the procedure would have made no difference to their decision to dismiss".—[Official Report, Commons Standing Committee F, 18/12/01; col 211.]

He seems to be saying that there are very few such situations. What the Minister said was that there were quite a number of such situations, as in the case that he cited, where the employer failed to follow basic principles of—some people would say—natural justice, or a right to be heard, or a right to see the evidence. In all those cases, my noble friend says he would be happy to see the dismissals fair. I am not sure whether that is what the Minister said in another place at col. 211. He indicated that most of the cases they have looked at would be in line with the Polkey judgment after Clause 34. Which is it?

People want to know and they want to know because this is very uncertain. My case rests on the great uncertainty which will be injected into the law at this point because the Government are changing judgments which are fundamental in their attitude to the entire structure of the law. You cannot tinker about without taking a concluded view as to how far this change will go. The Minister seems to say it will go quite a way, but the Minister in another place did not seem to agree. What is this survey of the majority of

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cases? Can the Minister tell us something about it? As my noble friend said, the Government say they have looked at it, but can the Minister tell us what they looked at and what they concluded?

Lord Sainsbury of Turville: I was asked to give an example of the kind of situation we are talking about. I gave an example of that. I gave no view on their frequency and I am not differing in any way from what Alan Johnson said in the other place. He said that that was the judgment that had been formed from the ones that we have looked at.

I turn to the amendments. I understand that in tabling the amendments the noble Lords sought to shore up reasonableness and fairness in unfair dismissal cases where the employer presents a "no difference" defence. Similar concerns about whether the measure ensures that a decision must be fair in all other respects and whether it means that employers who successfully argue "no difference" will be found to have acted reasonably on that ground alone were raised in the other place.

I cannot stress too much what I have already said. Even when an employer is able to show that following a procedure beyond the statutory minimum would have made no difference to his decision to dismiss, for the tribunal to reach a finding for the employer the dismissal must be otherwise fair. The employer must still show that he dismissed the employee for one of the potentially fair reasons that are set out in the Employment Rights Act 1996—we are not changing that. And he must still act reasonably in all other respects in dismissing the employee, as Section 98(4) of the 1996 Act requires—we are not changing that either. The amendment we accepted to the clause in the other place has, I think, made this crystal clear. It spells out that a "no difference" line of defence where a procedure has not been followed does not by itself mean that the employer has acted reasonably.

To the extent that the amendments seek to clarify this point, they are unnecessary. Moreover, they introduce undefined concepts of fairness and reasonableness which would risk the development of a different test of these concepts for new Section 98A from that which the tribunals otherwise apply in dismissal cases. I do not think that that would be desirable.

Amendment No. 184 seems to go further, unless I mistake its purpose, by putting an obstacle in the way of ever successfully invoking a "no difference" defence. I take that to be the purpose of the words,

""having regard to procedures which he was obliged to, but did not, follow".

Their flavour seems to be that failing to follow a procedure which one is obliged to follow is intrinsically unfair and unreasonable. That is not our view. We believe that failure to follow the absolute letter of procedures beyond the minimum, no matter to how small a degree, should not be unfair if following it would have made no difference to the employer's decision to dismiss.

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Finally, the amendments all put the burden on the employer to demonstrate the fairness of the dismissal, or its reasonableness, or both, without defining those concepts. As Members of the Committee will be aware, once the employer has demonstrated that he has dismissed the employee for a potentially fair reason, it is neither for him to show that he acted reasonably nor for the employee to show that he did not. It is for the tribunal to make that judgment. That has been the position for more than 20 years and I see no reason to change it.

I ask my noble friends to accept my assurance that the effect of this measure will not be as far-reaching as they may fear, and to withdraw the amendment.

Lord Lea of Crondall: It is very clear that there remains the greatest anxiety about the consequence of this clause being left as it stands. It was put most vividly by my noble friend, Lord Gladwin. The issue of who is right and who is wrong about this interpretation—us or the Ministers—leads me to say that we do not want to come back in X years' time with various negative consequences for industrial relations and say, "We told you so". We want to take this debate forward. Between now and Report in particular we trust that Ministers will read very carefully what we have been saying; we will do the same.

In support of my noble friends, Lord Wedderburn and Lord McCarthy, we seem to have the paradox that we are looking at a case which has been going backwards and forwards where no compensation was awarded and that was thought to be a terrible thing. Of course, in one respect it can be put the other way round—here was a case where the result was that there was no compensation. Even if that is not a very satisfactory position, it has to be set against the first point that has been made very strongly—commensurately strongly—with the problem we are confronting. Moreover, I have to say that on the question of human resources directors thinking that they might as well get out from under the sophisticated procedure, I do not think that characterisation of most human resource managers is accurate, for the reasons that my noble friend Lord Gladwin gave earlier.

That is not what is being said by the people who are attempting to put in a quality benchmark—a kite mark—which is what we all want for the ACAS-type voluntary procedures; we also want improvement in the default procedures. We wish to ensure acceptable procedures but the main disincentive to the ACAS-type procedures involves whether there is a very much softer option in the default procedure. That is the area which I understand Ministers will take some time over Easter to look at. We understood from comments on the clauses concerning the examination of facts and so on in the default procedure—which of course has some procedural consequences—that there can be no doubt that there will be some procedural strengthening of the default procedure. This is what was said the other day. I trust that the indication from my noble friend Lord Sainsbury is that I am not totally wrong on that and that the matter is being considered.

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There is time straddling Easter; clearly we shall return to this matter, on which we have now spent an hour, at Report. That we shall do so is a racing certainty—easier than betting on a horse in the Grand National. We will come back to this at Report.

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