Employment Bill

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Alan Johnson: Will the hon. Gentleman give way?

Mr. Hammond: I would be glad to.

11.45 am

Alan Johnson: The hon. Gentleman should be wary about conversations in pubs with anyone, let alone taxing masters, now that he is a Member of Parliament.

Cost can be assessed in three ways. First, the tribunal can order a fixed sum to be paid. Secondly, the parties can agree the amount. Thirdly, the cost can be sent for detailed assessment or taxation by the civil courts.

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Mr. Hammond: I am grateful to the Minister for that explanation, which gives me substantially more understanding of how the Minister intends the system to work. I assume that detailed assessment would be the last resort if the parties failed to agree. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Brian Cotter: I beg to move amendment No. 2, in page 32, line 22, leave out subsection (2).

The Chairman: With this it will be convenient to take the following amendments: No. 8, in page 32, line 24, leave out 'may' and insert 'shall'.

No. 17, in page 32, line 25, after 'tribunal', insert 'in specified circumstances'.

No. 15, in page 32, line 27, at end add—

    'and such regulations shall make provision for taxing or otherwise settling the amount of payment to be made or for fixed sums to be payable by reference to criteria set out in the regulations.'.

Brian Cotter: Amendment No. 2 is intended to probe an important issue. The proposed new section would enable a tribunal procedure regulation to allow the awarding of costs to cover the preparation put into a case. Incidentally, in pub conversations, one can at least down a pint and rush out, but if one gets caught in conversation with a taxi driver, one has to wait until the end of the trip; it is advisable to consider the length of the trip before starting a conversation.

The reasoning behind the amendment is to ensure fairness in the calculation of the costs for both parties. As has been said, the DTI estimate from 1998 states that an employer can typically spend 47 hours of management time preparing a case, which is a long time. At the moment employers are unable to reclaim any of that money, even if the case is judged ill founded. Employers deserve a reasonable amount of protection, and the expense and difficulties that they may face in preparing a case can be considerable. We must recognise that. However, we must also ensure that the calculation of costs is fair to both parties. Although the new section will apply to both parties, there is concern that it will have a disproportionate impact on the applicant. We would like the Minister to clarify how the costs will be calculated and assessed to ensure the defence of both parties.

Mr. Hammond: I want to ensure that I have understood the hon. Gentleman. My understanding is that the amendment would delete the provision that allows costs to be awarded for preparation time. He has made a heartfelt case about the burden that preparation costs imposes on small businesses. Why, in that case, does he propose to delete the provision that would allow them to recover those costs?

Brian Cotter: In order to highlight the issue, we are deleting the provision without having something to put in its place. How would the employer calculate costs, for example? That is an important issue. Would the costs include time spent by other employees, such as human resources department managers, in preparing the case? Would the options include time

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spent by other employees such as the human resources department managers in preparing the case or an estimate of productivity lost, as can sometimes occur? That calls to mind an incident that happened in a bizarre company before I took over as managing director some years ago. Someone had been sent to get a stamp and had lost it in the grounds. Believe it or not, the previous managing director stopped the whole factory to look for that 10 shilling stamp. Perhaps that was considered a lot of money then, but a lot of time was wasted. If someone is not producing, how can one calculate staff productivity?

Would an employer include time spent by witnesses giving evidence in a fellow employee's case, for example? The scope of a claim could effectively be limitless for employers. It is always difficult to apportion costs in a company in a fair and reasonable manner. So many factors could be included; perhaps they should be, but perhaps not.

From an applicant's point of view, the potential to receive costs for preparatory work is much more limited—in many cases to the value of his or her time. How can such costs be assessed in a fair manner? How would the costs or time of someone who is unemployed be assessed?

The Law Society is held in high repute, as my hon. Friend the Member for North Norfolk can attest. His constructive contributions demonstrate how much we need to take note of what it has to say. It identified the lack of experience that employment tribunals have in awarding costs. Out of 27,000 cases, costs were awarded in only 247. Despite the small number of awards, costs must be awarded in a reasonable manner. In addition, costs are currently awarded on legal grounds, on the basis of civil jurisdiction established by the civil courts. Tribunals will now be asked to award costs on a non-legal basis, without that framework. That is a further change.

The concerns raised by the Law Society, the legal action group and the TUC must be addressed if we are to ensure that the system benefits both parties. I ask the Minister to clarify the system that will be specified in the regulations to calculate such awards and to say how it will safeguard the rights of both the applicant and the respondent.

Judy Mallaber (Amber Valley): I should begin by saying that I am a member of Unison and that the union has made financial contributions to my constituency party.

My hon. Friend the Minister knows of my concerns about the clause. I, too, would appreciate some clarification and reassurances on exactly what will be included in the guidelines. I am aware that costs are awarded in only a few cases; I am sure that my hon. Friend will say that that will continue and that there will not be many vexatious or frivolous cases that will have costs awarded. I also appreciate that litigants in the third of cases in which costs are awarded to the litigant will be able to apply for costs, even if they are not legally represented.

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Mr. Hammond: Would the hon. Lady help me by explaining why she thinks that new section 13A applies only to vexatious litigants? I see nothing in the Bill to indicate that.

Judy Mallaber: The guidance notes refer to vexatious cases or cases in which the parties have behaved unreasonably in some way. I am sure that the Minister can clarify that in his response.

I am concerned about the examples of cases I have received, especially from the Legal Action Group, in which costs have been awarded against applicants even when it has been perfectly reasonable for them to assume that they did not have a weak, frivolous or vexatious case. Therefore, even if the provision is limited only to such cases, there remains a danger that costs will be awarded against the litigant. I am also concerned that employers may make the threat of potential costs to intimidate litigants into not pursuing cases or to encourage them to drop their cases before they reach a conclusion that might be advantageous to the litigants. I have examples of such cases. I remain concerned, even if costs would be awarded against people only in cases that were vexatious or litigious or where there had been unreasonable behaviour.

Will the Minister assure us on the content of the guidelines? A threat of costs up to £10,000 would be extremely intimidating to litigants, who would not necessarily want to pursue their cases in such circumstances. There are two issues. First, if costs are awarded to the applicant, they may be low if they are allocated in relation to the hourly pay rate of a low-paid employee or someone who is unemployed. Can something be inserted into the regulations to ensure that those people receive a reasonable amount in costs? I am not a lawyer, so I do not know how that could be phrased, but I would be grateful for some guidance.

Secondly, how can we ensure that costs to employers are limited, so that if they claim that they have high-ceiling staff costs, including legal costs, the applicants do not face the prospect of being told that up to £10,000 in costs may be awarded against them, when in fact that would not be the case in practice? Employees should not be intimidated into withdrawing cases that would be perfectly reasonable.

Norman Lamb: I have similar concerns to those expressed by the hon. Member for Amber Valley (Judy Mallaber). I appreciate that the explanatory notes make it clear that a party will not be required to prove how much time has been spent in preparation and that that will be set out in the employment tribunal rules of procedure. However, I would be grateful if the Minister would clarify how he will limit the potential for awarding costs. If the respondent suggested that substantial costs were being incurred in the preparation of a case, costs could act as a powerful disincentive against applicants pursuing proceedings or an incentive to withdraw from proceedings. The explanatory notes say that the award would be made only in the same circumstances as an award for costs is made generally—in other words,

    ''where the party has behaved unreasonably''.

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Mr. Hammond: I was going to raise a point with the Minister to which the hon. Member for Amber Valley has already drawn attention. The Bill says not that an award would be made in the same circumstances as an award for costs would be made generally, but that

    ''an award could be made only in the circumstances in which a costs award may be made at present.''

The situation at present is different from the circumstances in which a costs award may be made under the Bill. When the clause becomes law, it will no longer be a requirement that vexatious or other misconduct will have occurred.

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