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Lord McCarthy: My Lords, before my noble friend the Minister sits down, perhaps I may ask him to read again the recommendation of the task force that is to be found on page 28 of its report:

that is, ex parte mediation—

    "should be able to call upon mediation services".

That is exactly what I am asking for—ex parte mediation—and that is what the task force has recommended.

Lord McIntosh of Haringey: My Lords, that deals with the unilateral issue. The Better Regulation Task Force is entitled to its view in that respect. However, to me, it does not imply that it is compulsory.

Lord McCarthy: My Lords, I am sorry that the Government take this view. It is no good inventing herds of bogus arguments against third party intervention, as my noble friend seemed to do. Mediators do not mind wasting their time; indeed, that is their job. They do not suffer from doing their business—they prosper, as do the parties involved. You cannot keep inventing possible situations. You must have facts. I repeat, there is no research known to me that supports any of this nonsense.

Despite the recommendations of the task force, the Government may say that they are still stuck in the bunker. I remind them that they will have to answer the people who are asking them to come out of the bunker, and that they must do so by the end of the year. I hope that they come forward with something better than my noble friend's response. The

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fundamental point behind the amendment is something that is behind many of our amendments: we are not against statutory procedures, nor are we against trying to get people out of the tribunal habit and into the dispute settlement habit. We want that to happen—not because we want to get rid of 30,000 cases, but because we can see coming across the skyline an almost endless series of regulations from the EU, which, unless something is done to make dispute settlement outside the tribunals a real option for the worker, will place intolerable burdens upon tribunals.

There must be a real option for the worker, and it must be beneficial. As my noble friend Lord Wedderburn said, workers must know that they can get something other than the first and last word of the employer. The statutory procedures do not provide for anything but the employer's first and last word, which is why they will not work. That is why, sooner or later, the Government must think again. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Wedderburn of Charlton moved Amendment No. 46:

    Page 65, line 29, leave out from beginning to end of line 7 on page 66.

The noble Lord said: My Lords, in moving the amendment I shall also speak to Amendment No. 57 which is parallel to it.

The effect of these amendments would be to take out of Schedule 2 the "modified procedures". That does not mean that we are wholly satisfied with the standard procedures, and other amendments explain why we are not wholly satisfied. However, these modified procedures are unfair in their effect. They encourage not the best but the worst of practices. To cap it all, they are highly uncertain whereas the Government's primary claim for their statutory, obligatory procedures is that they must be certain. They are uncertain beyond redemption in any regulations. Moreover, the uncertainties and problems we have raised before are not cured by the government amendments elsewhere on the Marshalled List. Nor do the government amendments relieve the modified procedures of their unfairness—unfairness possibly as between different groups of employees, as I shall outline later.

I acknowledge that removal of the modified procedures might require some amendments to the standard procedures. The Government could easily do that on Third Reading. It would be a substantial change. However, it is worth noting the archaeology of the modified procedures. In the first government proposals, Routes to Resolution, the modified procedures were absent; we had only the standard procedures. They were suggested by someone in the consultation, but we have never been told who it was and we have never been told why it was. They appeared for the first time on page 14 of the Government's document Response to Consultation without any real explanation or justification. They were described there as modified standards in cases of gross misconduct justifying summary dismissal.

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Nothing substantial was said about the innovation in the House of Commons. Indeed, with the greatest respect to another place, partly because they were not provided with the details of the research on which the Government said they relied, very little was said about these procedures in another place. Since then, there has been no justification of any substance. Very little has ever been said about the modified grievance procedure; but then there is very little in it. It is the crudest, most elementary procedure of all. The employee must write setting out a grievance and, as we are now told, the basis for it, whatever that means. Subsequently the employer has only to send a response. That is it. There is no meeting, discussion or appeal. The employer's last and first word is the end of the matter. When and how this supplants the statutory procedure—with a meeting and an appeal—is not made clear anywhere.

The modified disciplinary procedure is in some ways even worse, and it remains so despite forthcoming government amendments. On behalf of the Government, my noble and learned friend Lord Falconer of Thoroton said of it:

    "The modified procedure is necessary. It deals with special cases where it may not be appropriate to follow the full procedure, requiring former employees to attend hearings".—[Official Report, 20/03/02; CWH col. 225.]

The employees in question are employees who have been thrown out of their jobs. What is appropriate when one has been thrown out on one's ear depends on the angle from which one looks at the situation.

One might have thought that one would be careful when preparing to impose in Schedule 2 such crude and unfair procedures as the implied terms of every contract of employment in the land. I pause to say that they may be implied terms in even more contracts. In Clause 29, the Government have power to extend these provisions to those who are not technically employees. It would be interesting to know whether they intend to use that power soon after the Bill becomes an Act. Regardless, no such care was taken to avoid what is unfairness and uncertainty. The line has never been drawn in a meaningful way between standard and modified procedures.

In Committee, my noble and learned friend Lord Falconer stated:

    "The modified procedures will by regulations be applied in respect of cases where the dismissal has already occurred and therefore it is instant or near instant".

He went on to say:

    "by the time one gets to the modified procedure, the employee has already been instantly, or near instantly, dismissed".—[Official Report, 20/03/02; CWH cols. 239-40.]

At one point in the debate, he was concerned about preserving the right of summary dismissal and "instant" or "near-instant" dismissal.

The suggestion that paragraph 4 of the modified procedure applies only to cases of "instant" or "near-instant" dismissal, just because it arises from gross

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misconduct, may be thought to suffer from the logical defect of a defectively distributed middle in the argument. The modified procedure speaks of,

    "alleged misconduct which has led to the dismissal",

of the worker. We do not know what is meant by "misconduct". As we shall hear later, in Committee, the Minister explained that the regulations are not going to define misconduct. However, on the Pelion of an uncertain "misconduct" is piled the Ossa of "near-instant dismissal"—which is even less meaningful legally.

Dismissal from employment is defined and described in Sections 95 to 97 of the Employment Rights Act 1996. Dismissal includes any case—I summarise the three cases—where the employee is given notice of dismissal by the employer; or works out a fixed-term contract; or is summarily dismissed. So the words of paragraph 4 on modified disciplinary procedures on their face apply to cases of dismissal with notice, or to a case of non-renewal of a fixed-term employment, just as much as to instant or near-instant dismissal. When the employer says, "You've broken the works rules and that is misconduct. I am giving you three weeks' notice, to which you are perhaps entitled", what will apply—the modified procedure? On the face of it, it does apply. We should be told whether the regulations will make it clear whether it applies. So far, no one has told us whether it applies. One might think that, in introducing a whole new section of procedures, someone would have thought about when it will apply.

Moreover, three weeks' notice is not a near-instant dismissal. I ask my noble friend the Minister to answer the following example. Suppose that an employer dismisses for misconduct three employees. One he dismisses summarily, or instantly. To the second he gives one week's notice, which is less than the worker is entitled to. However, to the third he gives six weeks' notice, saying, "That's longer than you're entitled to but I like you. So you can have garden leave of absence for the period of the six weeks' notice". To which of these three examples does the standard procedure apply and the modified procedure apply? No one knows. And yet we shall be introducing this implied term into every contract of employment in the land.

The matter gets worse. Where the dismissal associates misconduct to another ground, life is not as simple as the authors of the Bill suggest. Suppose an employer says to a fourth employee, "You can get out now. You've been guilty of misconduct and you're also being made redundant. You can 'respond'"—the word in the Bill—"as much as you like, but you're out. Get off the premises". On Second Reading, my noble friend Lord McIntosh gave an example from his experience as an employer, when he had to say to an employee:

    "'Clear your desk and be out in half an hour'".—[Official Report, 26/02/02; col. 1407.]

If the employer in my example had not consulted properly about the individual redundancy, it would be an unfair dismissal. However, even if he has consulted in advance, the employee with two years' service is

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entitled to his redundancy payment. Why should he have to go through some further procedure if that payment is refused? Which procedure applies to him when he is told that he is redundant as well as otiose? Is it the modified procedure? When he complains of a lack of warning, is it a grievance, or is it in the disciplinary procedure? Paragraph 48 of the ACAS code makes it abundantly clear that, in the middle of a disciplinary procedure, a grievance can arise.

I quoted paragraph 48 in Grand Committee. I shall not do so again. But, as I understood it, Ministers agreed that a grievance can arise in the middle of a disciplinary procedure. I can see that one might argue for the standard procedures, but some procedure of that kind should apply. However, I find it very difficult to imagine that the modified grievance procedure should be made to apply when the employer is trying to exercise and use the modified disciplinary procedure.

The lack of clarity is compounded by the fact that the procedures are inadequate. As the Law Society pointed out in its briefing sent to your Lordships:

    "Where a sanction with the severity of summary dismissal is being contemplated, the highest standards of procedural fairness should be required".

That is not true under the modified procedure.

It gets worse. The Government Response to the consultation document stated three times that the modified procedure applied only to former employees. We asked them to use the words "former employees" in regard to the modified disciplinary procedure. However, they said, "Oh, no. We could not possibly do that". Yet, that is what was said in the response document. Does the procedure apply only to former employees? That question is important in relation to a point to which I shall come.

The Minister of State, my honourable friend Alan Johnson, said in another place:

    "We are trying to set down what is necessary and to frame the measure in such a way as to encourage the resolution of disputes in the workplace".—[Official Report, Commons Standing Committee F, 13/12/01; col. 167.]

How on earth does the modified procedure encourage resolution of disputes at the workplace? As my noble friend Lord McCarthy said, although misrepresented on this point several times, including in the Secretary of State's latest letter to the Joint Committee on Human Rights, we have never objected to the idea of settling disputes in the workplace. However, we do say that the modified procedure will not help to do so.

The case against forcing an employee, on pain of limited access to a tribunal or on pain of reducing compensation even if he eventually wins a case, into the modified procedure is that it will not contribute to that goal and will work against it. The employer is able to say, "This is my answer. That is my first and last word. You can't have mediation because the Government have now said that they will not agree to it", despite the report to which my noble friend referred. Both the TUC and the National Association of Citizens Advice Bureaux were very concerned about such a move away from the ACAS code in statutorily imposed procedures. The modified procedure moves furthest from the ACAS code.

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There is a proper place in regulations for making clear what is unclear in statute so long as the statute sets out the broad framework of the principles. But there are no principles in the Bill to say when the modified or standard procedures will apply. It is the legislation of a madhouse run by janitors who are either lazy or obsessive in pursuit of objectives to which they insist their procedures will contribute when they will not.

It gets worse. The proposition that a summary dismissal or near-instant dismissal always terminates the contract of employment—it seems that that is what is involved in the Government's position—assumes an answer to a problem which, as the law stands, is currently of great complexity. The moment of termination of the employment contract has been affected by two competing principles. The old master-and-servant principle of automatic dismissal says that whenever the employer dismisses, the contract of employment comes to an end.

A different principle from the law of contract, often dubbed the "elective" principle of termination, holds that termination of employment arises when the employee accepts, or elects within a reasonable time to accept, the repudiation of the employer or, in a sense, to resign. Recently, on 28th May, the Court of Appeal said:

    "The right of an employee to resign when faced with repudiation of his contract by the employer",

is important. Lord Justice Sedley pointed out in the case of Cerberus Software v. Rowley in 2001 that the issue had not yet been finally resolved as to exactly when each principle applied to termination of employment contracts. It was what Lord Justice Ward called "murky waters".

For the Government to settle that the automatic principle applies, which, it seems, is what is meant by the modified procedure, in the schedule to the Bill, which does not face up, and has never done so, to the problems which exist in the law as it stands, is an extraordinary method of promoting sensible law reform, whichever of the principles applies. And there are other, equally difficult issues. I make no excuse for saying to your Lordships that they have to be faced today. If they are not faced today, they will never be faced. They were not faced in Grand Committee by the Government.

I shall take just one example, although I could quote many; that is, the problem of group dismissals. After the decision in Parr v. Whitbread & Co in 1990, where an employer dismisses a group of employees in circumstances in which all the employees could have committed the misconduct in question, and where each member of the group was capable of having committed the misconduct and the employer cannot identify the individual perpetrator, as the law stands, the employer is entitled, if he has solid grounds for his belief, to dismiss each and every member of the group. That will not be an unfair dismissal.

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The principle is not limited to summary dismissals, but it arises most often where the employer has made investigations but despairs of ever finding the culprit and decides to get all of them off the premises. Does the modified procedure apply to group dismissals?

That is the last of my questions, which I shall summarise in this form. Does the modified procedure apply to group dismissals? Will the Government tell us whether the modified procedure applies only to summary dismissals or, as the noble and learned Lord, Lord Falconer, said more than twice, to near-instant dismissals? If it applies to near-instant dismissals, what length of notice makes it "near instant" and what length of notice places it in another category so that the standard procedure applies? It is no good to tell me that we shall find out when we read the regulations. The Government will have to tell us when they give notice of the regulations and they must have some idea now. If they do not, they should take the provision out of the Bill.

In addition, are the Government deciding the difference between the elective and automatic principles of termination of employment contracts? Will they tell us why, in all cases where an employer decides to use the modified procedure, it is necessary to allow him to use that privilege in a manoeuvre by saying that this is a dismissal for misconduct, which is more than likely to unbalance industrial relations at the workplace between different groups of work people, especially if he gives different notice to different groups where he alleges misconduct?

Why is that procedure, in which the employee has no right of appeal, no right to a meeting and no right to discussion but must accept the first and last word of the employer, appropriate? Whatever the employer's ultimate right to effect a summary dismissal, there is no need to encourage it in the way that the modified procedure does.

It would serve the Government's aims much better to swallow pride on this matter, whoever first thought of the modified procedure in the middle of the formulation of their Bill—it came in late—and to recognise that these unfair modified procedures are likely to cause more disruption and bad feeling at the place of work than almost anything else in the Bill, let alone causing many preliminary reviews in the tribunals. There will be argument as to whether the employer was entitled to apply the modified procedure. Do the Government believe that that will save tribunal hearings?

The need to investigate by the employer, which my noble friends have pressed, is totally lacking in the modified procedure. The best move that the Government could make to restore confidence in their approach to workers' rights and to save them from the charge that there is inherent in Schedule 2 an inroad upon the enforcement of employment rights in an unfair modified procedure would be to drop those procedures from the Bill. I beg the Government to reconsider this matter between now and Third

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Reading and to consider seriously dispensing with this unnecessary provision—one which did not arise during their first thoughts on the Bill. I beg to move.

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