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Lord McCarthy: I call this the "hugger-mugger" clause. There is something secretive, clandestine and hugger-mugger about it. It is quite amazing that this clause has not been debated before. When I first began to look at the Bill, I thought, wrongly, that the most dangerous clause was Clause 25 because it operated directly upon the worker who would not get a chance because he or she would not come to a tribunal. Then I began to think that Clause 33 was even worse because it operated directly on the tribunals. It was designed to put a barrier between the applicants and the tribunals.

However, now I believe that Clause 39 is the most dangerous in the long run because it operates directly on the employer. It encourages the employer. My noble friend gave examples of what a bad employer might do and the sweeping way in which a bad employer might abolish, or offer the abolition of, all employment rights.

I want to suggest in a moment or two that even reasonably good employers might fall for that. They might consider it to be a rather clever way out of particular problems. There are possibly employers out there who do that, although it is not strictly legal now. There are possibly employers who do not bring in ACAS, or perhaps sometimes they do bring in ACAS. I believe that my noble friend is right—the conciliation officers would not want to do anything in front of a particular dispute. They would not want to reach an agreement in ways that they could not measure and evaluate, as my noble friend says. However, there may be employers who occasionally behave in such a manner, and I shall come to that in a moment.

Therefore, Clause 39 is insidious as well as being secretive, clandestine and amazingly undiscussed. I am not complaining about the fact that it was not discussed at Second Reading. We did not discuss it at Second Reading; in a way, it is not a Second Reading point. The first time one really notices it—the non-notice of it; the fact that it is not there—is on 18th December at col. 250 of the Official Report of the Committee in another place. I am not making this up. Just before the Christmas break, one Member said, in effect, "We've had a good day. Now we'll go off for Christmas". Just before the Christmas break the Committee kicked Clauses 39, 40 and 41 into place and they were all ordered to stand part of the Bill—all three of them together. Then the Members of the Committee went off for Christmas.

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Similarly, there was no reference to the matter on Report and no amendments were tabled at that stage. We are, in fact, the first body, up here on this floor, to consider this clause. That is amazing, considering its importance.

As my noble friend said, you can read Routes to Resolution, you can read the reply to Routes to Resolution—I shall go into that in a moment—and you can read the Explanatory Notes. You get very little guidance. Routes to Resolution, after suggesting various ways in which you could encourage conciliation, including making charges—which, I am glad to say, the Government have subsequently dropped—stated:

"Compromise agreements are another means of discharging legally a claim or potential claim. These can offer a fast and confidential route to settlement, but they are limited to a particular claim. Unlike ACAS-conciliated settlements, they cannot provide general, final settlement of all employment claims. This acts as a disincentive to using compromise agreements, as employees may retain a residual right to go to a tribunal. Ensuring the scope is the same will remove this disincentive".

You would have thought that at this point the Government might have told us what scope they envisaged would follow from taking out the particularism of particular employment Acts, how far the abolition would allow for generality and what they meant by generality, or even, as my noble friend has said, what use ACAS has made of these powers.

I cannot find anyone in ACAS who has ever used such forward-looking powers. What kind of powers do the Government want to believe are possible or are likely? We have no description whatever in Routes to Resolution and we have no descriptions in the response to Routes to Resolution. Here I want to say a little more about what was said about the opinions of those who were consulted.

My noble friend mentioned the TUC. The Government said that,

"the TUC considered the proposal unnecessary".

I must be careful about parliamentary language. At the very least that is a misleading statement of the TUC's position. What the TUC said in its first submission to the Government on the Bill is as follows:

"Some affiliated unions have found compromise agreements useful additions to the range of [possible] settlements. Others are less enthusiastic; much appears to depend on the nature of the business or undertaking and the attitude of the employer. The TUC supported the extension of the scope of compromise agreements to include trade union officers and advice centre workers. Such people clearly have sufficient expertise and the backing of their respective organisations to make this a viable solution".

Here we come to it:

"These advisors and employers' advisors will generally be clear over what is being compromised. Sometimes though residual points emerge after a settlement and it would be wrong to disallow these points to be heard separately if they have not been addressed in the agreement. There should also be an express prohibition on excluding claims which have not yet arisen"—

this is the TUC's position; they are not indifferent—

"and on excluding personal injury claims. The TUC would not support the extension of the scope of compromise agreements to provide a general settlement".

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That is the position of the TUC. They did not think it was unnecessary; they thought it was wrong. They thought it was unfair and they did not think it should be put on the face of the Bill.

So I turn to the Explanatory Notes. Paragraph 90 does its best to explain why we need Clause 39. It says the change will offer an opportunity,

"to change the legal status of compromise agreements".

I am not quite sure what that means or how it changes the legal status. One of my questions to the Government is to tell me how it changes the legal status. Presumably, it does not make it criminal but it must change the legal status in some way. How will it ensure that these measures are as effective and wide as ACAS settlements? The Explanatory Notes also state that the clause will achieve that by taking out the requirement in Section 203(b) of the Employment Rights Act. That has been mentioned already.

Apart from repetition, the only thing added at this point is the alleged change in the legal status. One might think that we might find out from ACAS itself. ACAS is not prepared to discuss what happened in the past in any detail. All we know is that Section 18(1) of the Employment Tribunals Act 1996 states:

"This section applies in the case of industrial tribunal proceedings and claims which could be the subject of industrial tribunal proceedings".

Therefore, in principle, as my noble friend has said, in the ACAS settlement situation as a result of Section 18 there is a general right to go forward and deal with future issues. My question to the Government is: is that what they want? They have not really said so. They have not specifically said that they want all employers, as a way of reducing the demands on tribunals—and by God it would do that—to be able to offer a partial or total washing away, or cancelling out of employer rights, perhaps for some consideration.

I give a few examples. Do the Government want to see a situation in which an employer might offer a compromise agreement which removes all restrictions on hours, overtime and holidays in exchange for job security? An employer might come along and say, "We want to put certain of our workers in a particular category but they will get job security. If you look at the small details, it will not be total job security but they will get preference as regards redundancy. However, in exchange for that we cannot have all these other rights so we have a special category of workers who may get a little more money. They are going into a separate grade. They have total job security but they do not have any restrictions, they are more flexible". The employer might call them the "flexible brigade" and say that they have no restrictions as regards hours, overtime, holidays and so on and that he can call on them to do whatever he likes. Are the Government saying to me this morning that they want to facilitate that? Are they saying that is good industrial relations? Is this being done in the workers' interests?

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Let us take the example of another employer. An employer might say, "I have had terrible trouble with this man or this woman who keeps considering that they are somehow being picked on on grounds of sex or race or disability, so in this case this person is going to be given a one-off amount of £2,000 and they undertake never to bring this kind of series of cases before me again". Or he might be better than that. He might say, "We want you to contract out of your unfair dismissal rights. We do not want to get involved in the unfair dismissal procedures of going to tribunals. We have another procedure; it even has arbitration in it. It may not be independent arbitration but it is arbitration. Why not sign up, come out of the statutory unfair dismissal rights and go into our special grievance and disciplinary procedures"?

Are the Government telling me that this is good industrial relations that they would like to see and that they would encourage? Perhaps they would have seminars on how to contract out of employees' rights while you give them something in exchange. Is that what the Government are saying? We are entitled to have answers to these questions. We are entitled to know why this particular clause has been so little discussed. We are bound to say, as Claudius said, that the Government have "done but greenly" in hugger-mugger to inter this clause. It is time to bring it out in the air and it is time to defend it. I want to hear what the Minister says.

12.15 p.m.

Lord Gladwin of Clee: I was going to describe this as a nightmare but that is too fanciful because it is a real situation. I know of cases where employees who start work without a contract of employment are subsequently offered one that has in it the requirement that they do not take the employer to an employment tribunal.

Let us suppose that a worker who has been in employment, perhaps for the first time for several months, gets a job and then a week or two later is offered a contract of employment with that clause in it. He then goes to one of my officers for guidance and advice as to what he should do. The alternative is to sign it or, if he does not sign, it will be, "Thank you and good night" because he will have lost his job. Will the Minister comment on that situation?

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