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The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville): Before I respond to the specific points raised by noble Lords, I should like to remind everyone of the Government's overall objective in this part of the Bill, which is to encourage alternatives to resolving disputes at tribunal. Compromise agreements have an important part to play in this objective, although it is a small one. Clause 39 needs to be seen in this context.

In their response to the consultation on Routes to Resolution, the Government stated that they would make the necessary arrangements to change the legal status of compromise agreements. The Government's

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objective in making this change is to ensure that compromise agreements are as effective and as wide in extent as ACAS-conciliated settlements.

The clause will achieve this by taking out the requirement in Section 203(3)(b) of the Employment Rights Act 1996 and other legislation which makes similar provisions that such agreements must relate to the particular proceedings or the particular complaint. This requirement has led to uncertainty about the extent to which all claims and potential claims to the employment tribunal can be contracted out via a compromise agreement.

The uncertainty that that produces was originally put forward by lawyers involved in this area, so that the original suggestion that there was uncertainty came from the legal profession. The change we are making will ensure that a compromise agreement does not have to be limited to agreement about the particular complaint. This widens the extent of compromise agreements to match the current extent of ACAS-conciliated agreements.

In this context, the widening of the potential extent of compromise agreements is entirely consistent with the general thrust of the Bill to encourage the settlement of disputes outside of the employment tribunal. It makes the option of settling claims and potential claims to the employment tribunal via a compromise agreement more akin to that available via ACAS-conciliated settlements. In so doing, it adds to the options for settlement of claims or potential claims.

I would stress that this remains a voluntary option that both the employer and employee need to agree to. Furthermore, and of exceptional importance, there is the inbuilt safeguard for the employee that he needs to receive independent advice before agreeing to a compromise agreement.

I turn now to the various points that have been raised. First, I would say to the noble Lord, Lord McCarthy, that none of the possibilities that he suggested as flowing from this are things that we want.

Lord McCarthy: Will the noble Lord give way? If the noble Lord is saying that the Government want none of these things—and I am very pleased to hear him say that—why are the Government legislating to make them possible?

Lord Sainsbury of Turville: I will come to the question of whether this does legislate to make them possible. I wanted to make the matter clear to the noble Lord, Lord McCarthy. He asked the specific question, "Are these things that the Government want?". I am making the very clear statement to him that these are things that the Government do not want. That is the first point.

The first substantive point is one that relates to the TUC position. I do not think that his statement about what the TUC said was an exact representation of it.

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It did not say that it was wrong; it said that it had some particular views about the ways in which it would work. At least, that is from what he—

Lord Wedderburn of Charlton: It's a lie. It's a lie.

Lord McCarthy: No, look, the TUC ends up by saying,

"The TUC would not support the extension of the scope of compromise agreements to provide a general settlement".

That is clear enough. It does not want it. It is asking the Government not to do it.

Lord Sainsbury of Turville: But it makes the very clear point, as was said, that there are certain cases where it is valuable and helpful to have these compromise settlements. Let me get on—

12.30 p.m.

Lord McCarthy: I am sorry, I will not do this again, but I must do it. This is all from the TUC. In the first five or six lines, it is talking about the existing situation. At one stage, it actually says that it supported the extension in the past. Therefore, it is talking about a quite separate situation when it says it has been helpful. De facto, that is the status quo: that is what it is talking about.

Then it says, "But you want to go further", and it says, "Don't do it".

Lord Wedderburn of Charlton: Absolutely.

Baroness O'Cathain: I thank the noble Lord for giving way. Is it right that even in Committee the words, "It's a lie. It's a lie", should be used?

Lord Sainsbury of Turville: Perhaps I may continue with the issue. If I misinterpreted what was said by the TUC, I apologise for that. I thought the noble Lord was making a point that in particular circumstances, it could see values for it. I accept that the noble Lord says that he puts that interpretation on it. I am happy to accept that.

The point I wanted to deal with was the point made by the TUC that it is wrong to disallow residual points from being heard at a tribunal. That is an important point.

If there is a possibility of residual points, that may influence whether a person would be prepared to sign up to a wide-ranging settlement. The scope of the settlement is of course something that has to be agreed by both parties. It is true to say, however, that one of the purposes of the clause is to provide certainty as to what can be settled by a compromise agreement.

The second key issue is whether there is any protection for people inadvertently signing away their rights to, for example, a personal injury claim. This will be covered by the general case law relating to the scope of settlements. In general terms, if an employee's personal injury claim against his employer is in the

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minds of both parties to an agreement, when they sign a "full and final settlement" of all or any claims, the settlement is likely to have the legal effect of preventing the employee later succeeding in suing the employer for damages in respect of that personal injury.

If, however, such a personal claim was not in the minds of parties when they signed the settlement in those terms, the settlement is unlikely to have the legal effect of preventing a future claim. Such issues require professional advice and it is for this reason that a requirement of a compromise agreement is that the employee or worker must have received advice as to the terms and effect of the proposed agreement.

The third substantive point is the one which has been raised by the GMB and the Law Society which argued that employers will now be able to make it a condition of employment that an employee signs a compromise agreement undertaking to refrain from instituting any tribunal proceedings. That is obviously a legitimate concern.

Case law has established that the court will not uphold general exclusion of legal rights that could not possibly have been in the minds of the parties when they signed the settlement. If an employer demanded that an employee signed such an agreement as "a condition of employment", the courts would be unlikely to consider that the claims were contemplated by the parties at the time of signing, and so the agreement would have no legal effect.

Lord Wedderburn of Charlton: Does my noble friend have any authority or case that he can cite which shows that the court will take precisely the attitude he has taken, which is contrary to that which the Law Lords state in the BCCI v Ali case?

Lord Sainsbury of Turville: I do not have a detailed brief on that point, but it seemed to me that from what the noble Lord was saying that was exactly the point which was being made as regards what was in the minds of the people signing the agreement.

Also, reference was made to the fact that the requirement that an employee cannot sign the agreement until he receives advice from an "independent adviser" (which since 1998 includes authorised trade union officers) will deter any employer from such behaviour. The noble Lord's remark about, "We're just popping round to get CAB advice and clearance on this", is not an appropriate way to deal with the work of the CAB, which I am sure would take this issue very seriously.

Given what I have said—and that can be briefly summarised by saying that there is the safeguard of people having to get independent advice, in addition to the other points I have made about case law in this case—I hope that the noble Lords will feel able to agree that Clause 39 stand part of the Bill.

Lord Gladwin of Clee: Before my noble friend sits down, can I be clear? The answer to the question that I posed is that a trade union officer being faced with the situation that I described should say to the employee, "Sign it, because you're not being damaged

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by signing it. You keep your job but it's worthless; if you feel you have reason to go to a tribunal then that is okay because the Law Lords have said that your contract is worthless".

Lord Sainsbury of Turville: I believe that very simple advice can be given in this regard. First, if there is any debate about what is covered, that can be specified very clearly. The advice can be, "Do not sign this, other than in relation to the very specific points that you want to have covered by the proposal".

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